Acme Printing & Packaging Limited has repudiated a long-running collective agreement with a union effective since the late 1960s as galloping inflation of recent years had made cost of living based increments impractical, the company’s annual report revealed.

This agreement provided for annual increments for workers to be worked out under a formula based on the cost of living index in line with the practice adopted by many good employers at that time.

Acme’s Chairman, Mr. S.T. Nagendra, said that this formula worked on the premise that automatic adjustments to compensate increases in the cost of living were a reasonable approach to guarantee industrial peace.

"However, in the last few years, the unprecedented surge in the cost of living has made this formula a threat to the financial viability of employers," he said in the company’s annual report.

This had led to wage rates and benefits paid to their labour force to be the highest in their industry and the company had begun discussions with the union in November last year to explore the possibility of freezing the wage/salary increases at the December 2007 index level.

This was to be accompanied by a one-off substantial wage increment with a revised bonus scheme linked to productivity, he explained.

"The union rejected this proposal and was not prepared to see the sense in our arguments despite the fact that it is clear that our wage costs price us out of the market in a significant way," Nagendra said.

It was in this context that they had decided to repudiate the collective agreement and negotiate a new one. The union had not changed it position to date and this had affected production to some extent although there has been no directs confrontation.

But the white collar and technical cadres have resigned from this union and accepted the terms offered by the company signing a three-year collective agreement favourable on long-term basis.

"The company has the support of the technical categories which gives it the strength to engage the union if necessary," Nagendra said.

The year under review had seen Acme completing a new flexible packaging material factory costing Rs.236 million at Pannala. Rs.62.6 million of this investment was funded through a rights issue and the balance with a long-term loan from the DFCC Bank.

The company had also offered a voluntary retirement scheme (VRS) to employees, 34 of whom had accepted this offer. A sum of Rs.24.9 million was expended on this account which was charged to the year’s profit.

Largely on account of this, the group posted a loss of Rs.6.1 million against the previous year’s profit of Rs.41.3 million. The VRS cost and the finance cost up by Rs.33.8 million and led to the negative bottom line.

The finance cost grew due to the increase in interest rates and interest on bank borrowings for the new project at Pannala, Nagendra said.

He announced that no dividend could be paid for the year on account of the loss.

Acme has a stated capital of Rs.162.3 million, capital reserves of Rs.57.6 million and revenue reserves of Rs.25.3 million. Interest bearing borrowings were running at Rs.182.7 million.

Net assets per share for the year were down to Rs.11.76 from Rs.13.10 the previous year with the share trading at a high of Rs.26.75 and a low of Rs.11.50 during the year under review.

Clovis Co. Ltd. with 75.13% followed by Lanka Aluminium Industries Ltd (7.171%) and Galleon International Master Fund SPC Ltd (2.08) are the main shareholders.