Hutchison Port Holdings’ earnings are expected to struggle in fiscal year 2013, as labor disruption at the Port of Hong Kong is likely to drive up wages and limit Hongkong International Terminals’ subcontracted labor flexibility, according to a report by Citi Research.
Revenue at Hutchison Port Holding’s Port of Hong Kong has been impacted by about HK$100 million (about US$12.9 million) since dockworkers and crane operators at the port began striking on March 28. The revenue impact represents less than 1 percent of the total estimated fiscal year 2013 earnings before interest, taxes, depreciation and amortization, assuming a 50 percent-type margin. Handling capacity at the port is now back to 80 percent, up from 50 percent when the labor action first began, but a resolution has yet to be reached.
Annual wage rate inflation could be closer to 10 percent at HIT this year, as each of its subcontractors comes to the table to negotiate terms, versus the 5 percent annual wage rate inflation built into HIT’s current model, Citi Research said in a written statement. HIT’s current subcontractor labor structure, pertaining to about two-thirds of its operational staff, could also be in jeopardy.
Meanwhile, labor talks have been scheduled for April 16, involving three unions in two separate sessions, according to Matthew Cheung Kin-chung, Hong Kong’s secretary for labor and welfare, in a separate brief.
“I am pretty optimistic that, provided all sides take part in the negotiation in a pragmatic manner, in a rational manner, through rational dialogue, all differences can be resolved and ironed out at the end of the day,” he said. “I am optimistic that at the end of the day this dispute will be resolved.”
Striking workers say they are prepared to escalate the action if talks break down, South China Morning Post reports.