Paramount grows profit 68%

Paramount Trading Company enjoyed strong gains in 2013 as profit before tax jumped an attractive 68 percent from revenues that are up 10 percent year over year but it was partly aided by an increase in other income growing by 87 percent to $7.6 million.

As of November 2013, gross profit margin increased to 46 percent from 43 percent for the same period in 2012. This improvement contributed $10 million to profit and is aided by slower growth in cost of sales of $227.8 million that increased by 8 percent at slower pace than revenue, while administration cost moved up by only 6 percent. The various areas of improvement, profit margin and cost containment enabled the company to make a profit of $35.2 million for the six month period, up from just $21 million in 2012, while sales grew to $339.5 million from $300.8 million. There was no major reduction in finance cost which came in at $10.6 million compared to $11.2 million in 2012 even as borrowings declined by just over $20 million. Movement in foreign exchange would have been a factor in pushing the cost in this area.

For the November quarter, revenues grew by 9.2 percent but profit before tax increased by 85 percent as gross margin climbed to an attractive 50 percent up from 43 percent in 2012, while administrative cost fell from $31 million to $28 million and finance cost slipped slightly to $4.8 from $5.1 million resulting in profit before tax of $19 million versus $10.3 million in the 2012 quarter.

During the November quarter, the company indicated that it expanded the food chemical product range and this should add to revenues and profit going forward.

The company seems set to earn $90 million in profit or around 60 cents per share and should go on to earn around 80-85 cents per share for 2015. Based on this projection, the stock is priced at 5 times 2013 earnings, well below the 8 times that many junior market stocks are priced at currently, leaving room for a good potential gain in the months ahead.

Balance Sheet | Receivables climbed to $130 million at the end of the quarter from $89 million at the end of November 2012 but is down from $146 million at the end of May (the company’s financial year end) but inventories climbed to $229 million from $172 million at both November 2012 and May 2013.

Payables, on the other hand, was up from $75 million at the end of November 2012 to $107 million in November 2013 but it is slightly better than the $110 million owing at the end of May 2013. These changes result in cash falling from $60 million at the end of the fiscal year to $37 million. The increased inventory is expected to fill increased demand for the goods during the high demand third quarter. At the end of the November, shareholders’ equity stood at $278 million or $1.88 per share after setting aside $21 million for a dividend payment.