Tue | Dec 11, 2018

AMG Packaging hurt by inventory cost

Published:Wednesday | July 18, 2018 | 12:00 AM
In this February 20, 2018 photo, a shareholder pores over AMG Packaging & Paper Company's annual report. In the quarter ending May 2018, AMG's profits sharank by nearly one-half.

Revenue from AMG Packaging & Paper Limited's core cardboard box operations grew by double-digit levels in the third quarter ending May, but higher costs led to lower profit.

To offset the rising cost of inputs, AMG is alerting the market that it will soon be increasing the price of its products.

The company accumulated six times more cash over nine months ending May, due to increased business activity but also reduced capital investments and dividend payouts.

"The management team continues the drive and contain costs in these challenging times," said the company that last year unwound its short-lived tissue paper venture, which turned out to be a loss-maker.

In the current quarter, AMG's net profit shrank by nearly half to $12.76 million on revenue of $195 million. Comparatively, sales in the May 2017 quarter was lower at $166 million, but profit higher at $23 million.


Dip in performance


The main reason for the dip in the performance of continuing operations related to the cost of inventory which grew by 37 per cent during the quarter to $121 million, or double the percentage growth of revenues.

"The increased cost of paper continues to affect our performance. There will be price adjustments on our products in short order," the company said.

AMG has not responded to requests for comment on the inventory build-up. It comes as the company disposed of the bulk of its toilet tissue assets which incurred a $34-million loss on disposal for the quarter and $87 million over nine months.

"The closing down of the toilet paper factory has significantly affected our performance year to date," stated the company in its preface to the financials, adding that the majority of these costs are now booked.

Earnings per share from continuing operations equated to $0.025 for three months and $0.077 for the nine months, down 44 per cent and 42 per cent, respectively, when compared with year earlier levels. But when continuing and discontinued operations are combined, AMG made a loss $0.042 per share and a loss of $0.060 per share for the respective periods.

Over nine months, the continuing operations at the company made $38 million net profit on revenues of $539 million. This equated to 14 per cent more revenues but 48 per cent less profit than a year earlier.

The company held $76 million cash at the end of May, compared to $13 million the previous year.