Trade union representatives voiced their demand for a 7% average wage increase in the company in 2007, according to today’s ‘Puls Biznesu’ daily. Moreover, they demand that 30% of the workforce would be upgraded into a higher wage bracket.
Our view: We view the news as negative. We view the union demand as excessive and unfounded in the light of a 1-2% inflation expectation and anticipated 7% drop in copper prices in 2007. In our earnings forecasts, we assumed a fall in variable cost and freeze on wages in the years when we expect copper prices to retreat. We would cut our earnings estimates, if the management gives in to the union pressure.