Jan 22, 2007 (LBO) – Plantation companies are likely to post sizeable profits this year, though a recent wage hike will eat into earnings, analysts say. The price of a kilo of rubber, which was at 175 rupees in November, has crept up steadily to 190 rupees this January.
Rubber prices moved up on top of increased demand and production shortfalls. Prices for Latex-1X, RSS-1 and Scrap Crepe reflected an upward trend in 2006, with further hikes expected in 2007, analysts from Asia Securities said.
The upward price movement also helped lower production costs, which includes an 18 percent increase in labour costs, following a recent wage hike.
In a round of wage talks held in December, employers and trade unions agreed to a basic wage of 170 rupees a day, a guaranteed price share supplement of 20 rupees and an attendance incentive of 70 rupees.
The Variable Price Share Supplement on the price of RSS sheet rubber has been taken off to lessen the impact on rubber plantation as opposed to the tea plantations, where the labour cost has gone up by 44 percent.
Analysts say each one-rupee increase will cost companies an additional 50 million