Revenues rose a strong 36.56 percent for the year to August 2014 for junior market listed, AMG Packaging, hitting $607 million but it increased by a much slower pace of 28 percent in the final quarter of the financial year, to $165 million.
Those strong gains may have cannibalized sales in the November quarter with flat sales compared with 2013 quarter, with revenues of $151 million. But the performance comes against the back ground of volumes sold, climbing a very strong 19 percent for the year. The fall in volume started from the August quarter as units sold increased by 23.4 percent, management stated in a release accompanying the May results.
While sales increased impressively in 2014 fiscal year margins came under pressure with only 23.7 percent for the year to August down from 33 percent in 2013. For the latest quarter gross profit margin comes out at 25.9 percent but could end up at 31.5 percent for the current year if sales volumes increase by 10 percent for the rest of the fiscal year. Gross profit for the quarter amounted to $34.4 million up from $33.3 million in 2013 but increase mainly administrative cost that rose 28.4 percent eroded profit slightly by 15 percent to $15.4 million from $18 million in 2013. The company got a double whammy, with the Jamaican dollar losing value, resulting in a 28 percent more Jamaican dollars having to be found to purchase a US dollar since September 2012, and the price of paper on the world market moving 22 percent from US$720 per tonnes at September 2012 to US$830 in August 2013 and now US$875, which it has been since June last year.
Receivables are down by $12.7 million from the amount at the end of August last year and so too is amounts in payables by $26 million. Cash funds grew to $33 million from $22 million while inventories is down from to $118 million at August to $113 million, which is nearly 4 months supplies based on sales in the quarter and is up from just two and a half months back in 2013 and seems to be a hedge against devaluation of the Jamaican dollar. But that is only a part of the story. A check on world prices for pulp shows a pretty sharp increase since 2012.
AMG has to continue to grow its business by continued strong volume growth to become a more cost competitive producer with lower unit cost. The company needs to put strategies in place to return volume sales to growth and needs to continue cost containment measures to ensure profit improvement going forward. With increase through put, unit cost of production will fall allowing more growth in gross to flow into overall profits. A bright spot for the company is the fall in the cost of fuel and electricity will help in keeping cost down for the rest of the fiscal year.
IC Insider’s forecast for 2015 is 90 cents per share and $1.50 for 2016 on the assumption that volume sales return reasonable growth.
AMG flat sales push profit down 15%
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[…] AMG Packaging, managed a 35 percent growth in profits of $31.7 million for the six months to February this year, the company’s latest financial report shows, thanks to a 194 percent jump in second quarter profit that reached $16 million up from only $5.5 million in 2014. IC Insider’s forecast, is for profit of $85 million or 85 cents per share for this year and $1.50 for 2016. While profit surged, revenues rose a modest 8 percent in the February quarter and only 4 percent for the six months with sales volume having declined by 9 percent for the half year. The volume decline comes against the background of a 24 percent increase in units sold for the period to February 2014, resulting in a 42 percent jump in revenues. Helping to boost profit, was an improvement in the gross profit margin for the latest quarter to 24 percent versus only 16 percent in 2014 and 23 percent for the six months, compared to 19 percent in 2014. Gross profit for the quarter amounting to $35.5 million, increased by a very strong 63 percent from 2014 and 27 percent for the six months, to near $70 million. Flat inventory cost and a reduction in other direct cost laid the foundation for the improvement in direct input cost and a swelling of the profit margins. Administrative cost rose 30 percent for the quarter and 29 percent for the year to date period well ahead of revenue growth, thus negating some of the top line improvement. Cost got hit, with the Jamaican dollar losing value, resulting in 28 percent more Jamaican dollars having to be found to purchase one US dollar, since September 2012. The price of paper on the world market, increased by 22 percent, from US$720 per tonne at September 2012, to US$830 in August 2013 and to US$875, which it has been since June last year. Receivables are down by $13 million from the amount of $81 million at the end of August last year and so too is amounts in payables by $10 million from $71 million. Cash funds fell slightly to $19 million from $22 million while inventory is up from to $118 million at August to $120 million, which is nearly 4 months supplies based on sales in the quarter and is up from just two and a half months back in 2013 and seems to be a hedge against devaluation of the Jamaican dollar. Borrowings fell from $97 million at February 2014 to $58 million with $14 million to be repaid during the next twelve months, the decline will help reduce cost with lower interest payments going forward. […]