Paramount Q2 profits soft but management positive
Second-quarter profits at junior market listed company Paramount Trading showed a 16.27 per cent increase, but this was not enough to overcome a six-month year-on-year slump. The $3.86-million increase in net profit to November 2018 compared with $23.7 million earned during the corresponding period in 2017. However, Paramount earned $34.63 million during the six months to November 2018, down from $57.61 million for the similar period in 2017.
The mixed performance comes despite a 1.5 per cent increase in six-month revenues, which moved by $10.1 million from $687.2 at the end of November 2017 to $697.3 million for the similar period in 2018. The increased revenue was gobbled up by an increase in administrative expenses, which moved from $135.6 million in November to $177.59 million for the similar period in 2018.
CEO at Paramount Trading Hugh Graham said the company used up a lot more cash for strategic reasons.
"Yes, we spent a bit more on hiring the right people so that we could get a mix that can work for our teams," Graham confirmed, noting that Paramount Trading had essentially transformed its business model over the last two years from just trading to a mix of trading and manufacturing.
"Remember that before this we weren't manufacturers, so it's a matter of having to do things differently with new people. It is a lot different than buying and selling, in that you know your profit right away, but manufacturing is quite a different animal," Graham said.
The last two years have seen Paramount forging a partnership with American lubricants outfit Allegheny and the purchase of the bleach manufacturing plant formerly operated by Seprod. The lubricants plant is new and has been up and running since the end of March 2018. The bleach plant is not yet up to full speed, according to the CEO.
"We're still working out the kinks. Recall that we bought a used plant, so we have to spend some time and resources in getting it to be fully operational and efficient. In addition, we have to do repairs, get our people up to speed through training, and so on," Graham said.
He lamented that Paramount, in changing its business model, has been hamstrung by the
lack of suitable talent in manufacturing in Jamaica. In that regard, he says that in pursuing manufacturing, Paramount has had to learn some hard lessons.
"One of the things I've come to realise is that for Jamaica, when the likes of Colgate and Gillette Caribbean went away, what we ended up losing as well was the industry or institutional memory that could only come from those persons having been involved in manufacturing. In essence, we lost the industry and supplanted it with a service-oriented ethos," Graham said.
He says with the re-emergence of manufacturing, his company does not have a large pool of talent to draw from, as Jamaica no longer has persons with manufacturing experience that are still around in industry and are still in Jamaica, but he was optimistic that better days are ahead.
"We believe so, but if we meet with further challenges then we have to keep making the adjustments," Graham said.
He hinted at further expansion of the lubricants plant.
"The plant is doing fine, but we need to spend a little bit more to expand it so that we can meet the demands of our customers. It is good that we have made that level of investment and we're not losing money but, rather, getting a return on our investment, especially since we didn't borrow to execute the project," he said.