Originally Posted by
Beagle
I assumed power and any other direct raw materials are included in the 50% cost of raw materials and I think 50% is an extremely generous guess. If its less, and I think it is, the effect on EBIT of sales reducing by $44m could be considerably more than $22m. e.g. if direct raw materials costs are 33%, a $44m loss of sales and other costs remaining the same would reduce EBIT by ~ $29.5m.
The cost of most commercial leases have ratchet clauses so they go up by a minimum of the inflation rate, usually more, most I have seen are a minimum of 2 or 2.5% per annum reviewed at least biannually.
Most staff want annual increases in their remuneration at least in line with the inflation rate. When was the last time management of any company didn't keep raising their salaries at least in line with the inflation rate ?
I suggest you have a very close look at how their Australian operations turned toxic. Key operational staff leaving, key customers lost and margin pressure were the 3 key reasons going purely off memory. What makes you think that won't happen here ?