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Fewer boxes sold but profit up at AMG Packaging

Published:Friday | April 24, 2015 | 12:00 AMNeville Graham
General Manager of AMG Packaging & Paper Company, Michael Chin.

AMG Packaging & Paper Company tripled its profits to $16.2 million from $150.1 million in sales for the second quarter ending February.

AMG's cardboard box inventory also grew by one-third year-on-year to $120 million due to lower sales volumes over the period.

AMG increased box prices by five per cent on January 1, which contributed to growth in revenues from $138 million to $150 million in the second quarter and from $291 million to $302 million at half-year.

AMG Packaging's General Manager, Michael Chin, concedes that there was a slight decrease in units sold on account of the price increase. He also feels that the adverse effects of the slow economy caused a decrease in order volumes from customers.

Within the reporting period, units sold declined by 9.3 per cent to 9.8 million pieces, compared to 10.7 million pieces for the same period in 2014.

Net profit at half-year rose to $31.7 million or 31 cents per share, compared to profit of $23.5 million, or 23 cents per share, at HY2014.

Total assets down

AMG's total assets for the period declined marginally by $3 million to $448.4 million year-to-year. Chin attributes the decrease in assets to a reduction in receivables and cash flows. Compared to 2014, the box-maker's cash holdings were down by $10 million to $19 million

Following investments of $4 million over the course of one year, the company also gained International Standards Organization (ISO) 9001 certification on January 23. The certification covers the 'design and manufacture of paperboard - corrugated containers and sheets - including printing and conversion'.

"With this achievement, we gain global and local recognition as it reflects the high quality that is being produced by AMG. This should encourage more of our local manufacturers to confidently come on board and dramatically cut down on the importation of corrugated products that are already being manufactured locally," Chin said in a statement accompanying the company's quarterly earnings report.

He told the Financial Gleaner that the certification aligns with AMG's market strategy.

"At AMG, we provide high-quality products to all customers. We have to focus on increasing our client base locally and making sure to cut costs in every way possible," he said. "The benefits of our realignment will be more impactful as soon as the economy gains momentum."

AMG Packaging was incorporated in September 2005 as a local manufacturer of boxes. The company went public and listed on the JSE Junior Exchange in 2011. The stock currently trades at $2.26 per share, valuing the company at $231 million or 0.7 times its book value of $239 million.