Paramount Trading continues to struggle to return to its glory days in netting profit of $15 million for the August quarter, just four percent more than the $14.7 million generated corresponding period in 2019, from revenues that inched up to $362 million from $360.5 million in 2019.
Paramount lubricant factory.
The company is involved in the importation and distribution of chemicals, lubricants and other related products and processes chlorine, bleaches and lubricants.
Direct expenses fell 3 percent from $254 million in 2019 to $246 million resulting in gross profit growing nine percent to $116 million from $106 million in 2019.
Other income dropped from $10 million to $5 million, a reduction the Chairman attributed to exchange rate movement. Administrative, selling and distribution expenses grew marginally, from $88.9 million in 2019 to $89.3 million in 2020. The effect, profit before finance cost climbed 20 percent from $25.3 million in 2019 to $30.3 million. Net finance costs also jumped 51 percent for the period, moving from $8.6 million in 2019 to $12.9 million as the company increased borrowings.
Profit peaked in 2017 and declining since, as costs incurred in anticipation of expanded revenues from new business outpaced revenue increases. While the business has expanded into the manufacturing of lubricants, chlorine processing into smaller packages and bleach, revenues have not kept pace with cost increase, resulting in depressed profit and ultimately pushing borrowings upward to help with funding expansion.
Paramount Lubricant plant.
The situation is compounded by the closure of the Alpart Alumina plant and sugar factories, entities that consume produce sold by the company.
Gross cash flow from operating activities brought in $29 million. Inventories fell by $149 million compared to May year-end to $535 million, but amounts provided by creditors fell $147 million, while credit provided to customers rose by $22 million. Current assets ended the period at $901 million, including receivables of $292 million and cash and bank balances of $71 million as well as inventories. Current liabilities rounded out at $413 million. The company also held investments of $138 million at the end of the quarter. At the end of August, shareholders’ equity stood at $810 million, with borrowings at $524 million.
The company reported earnings per share came of a mere one cent for the quarter compared to 0.9 of a cent for the corresponding quarter in 2019. For the fiscal year to May 2020 and EPS was just 3.4 cents. ICInsider.com forecasts 8 cents per share for the full year resulting in a PE Ratio of 21 times 2021 earnings based on the price of $1.70 the stock last traded at on the Junior Market of the Jamaica Stock Exchange.
In its annual report for the just concluded financial year, the company reported that “during the new financial year, the Company will continue to build out its productive capacity. We have capitalized our lubricant plant and installed the packaging line. Renovation activities already started on the bleach and chlorine plants will continue in the new financial year. We have also expanded into manufacturing sanitation products and will widen the product base over time. Our main drivers in the short term will be the revenue we will derive from our new products, the expansion of our offerings in the Bleach division, and our continued pursuit of contract manufacturing in our Lubricant division”.
