Paramount nears deal to build lubricant blending facility in Jamaica
Paramount Trading Limited is close to finalising a deal with Pittsburgh-based Allegheny Petroleum to establish a lubricant blending facility in Kingston.
The joint-venture arrangement represents the next step in a relationship between the two companies which began last year, when the local chemical company started selling Allegheny's petroleum products.
Hugh Graham would not disclose too many details about the upcoming investment, opting to wait until the ink dries on a final agreement before saying more.
However, the CEO of Paramount said that the greenfield project would require constructing a state-of-the-art facility which would make lubricants not yet commercially available to the market.
"We will be making new generation of oils," Graham told the Financial Gleaner in a telephone interview yesterday.
For example, he explained that while the conventional view of lubricants used for industrial applications in Jamaica holds that oils which lubricate at lower temperatures are not necessary because the Caribbean island does not experience cold to freezing climates, most engine wear takes place at start-up.
"We are looking at testing oils that cover engine better from a cold-start position," he said.
He also said that the standard of oil blends to be delivered will be high quality given the standard set by Allegheny, which is the third-largest independent lubricant manufacturer in the US.
Paramount's first year in lubricants generated just $9 million of the $870 million in sales the company posted for the 12 months to May 2015. However, the $6.7 million it grossed in profit represented a 73 per cent margin on sales.
This compared with an average gross margin of 32 per cent across all its divisions. The construction and adhesive division, which posted $27 million gross profit from $51 million in revenue, had the second-highest margin at 52 per cent, whereas its haulage business realised the smallest margin at 11 per cent.
The company's core business - the distribution of chemical products used by various industries ranging from food and pharmaceuticals to cosmetics and paints - contributed to 87 per cent of Paramount's sales, or $753 million in revenue, and 83 per cent of gross profit, or $231 million.
The chemical division was also responsible for most of the growth realised by the company in the year ending May 2015. Its revenue jumped by 22 per cent, of $136 million.
Improved sales was partly attributed to the acquisition of Tradewell Limited from J. Wray and Nephew, as the company made its way into the agro-chemicals market in the latest financial year.
The purchase gave Paramount equipment and the capacity to product agricultural products, such as growth enhancers which help crops recover from events such as storms.