New learning curve for Paramount - Lubricants blender forecasting ‘slow but steady’ market build-up
Published:Friday | January 31, 2020 | 12:15 AM
Paramount Trading Jamaica is pausing capital expansions in the short term to focus on extracting earnings from recent buildouts and upgrades at the Waltham Park Road, Kingston plant.
The manufacturing and trading company recorded net profit of $39.55 million at half-year ending November 2019, which was $2.05 million or a modest five per cent increase year-on-year. This was despite a three per cent decrease in revenues, which downshifted to $768 from $795 million.
CEO Hugh Graham is projecting a rebound in sales in the second half of the year, sufficient to reverse the decline in year-to-date revenue. Already, second-quarter revenue has outperformed the 2018 period by eight per cent, at nearly $408 million compared with $378 million.
Paramount trades in lubricants, initially as a distributor only. But last year, the company commissioned a blending plant and became a producer of the Altria brand owned by American company Allegheny Petroleum. And, now, the company is looking for payback – and more clientele.
“The revenues for us are trending in the right direction. We continue to learn that manufacturing is not the same as trading, because in addition to getting your product into a company they have to develop a level of comfort with it and use more,” Graham told the Financial Gleaner.
The optimism comes on the back end of $268 million in capex, the bulk of which was spent on the installation of a filling line for the newly commissioned lubricants blending plant, which itself cost about $700 million to develop.
“It is a slow but steady buildup. After commissioning the oil plant, we can’t expect to be doing two million gallons per year,” said Graham. “The nature of the business dictates that people have to use the product and get comfortable with it.”
In addition to building the oil facility, Paramount carried out a restructuring exercise in the latter part of 2018, which appears to have been good for the company’s bottom line. With fewer expenses, Paramount achieved higher profit of 2.6 cents per share in November, compared to 2.4 cents in the 2018 period.
Graham expects that trend to continue, citing a pending deal to produce another lubricants brand at the Kingston plant.
“We continue to make the necessary adjustments as we communicate with our customers. They are seeing what we can do, and we are very close to that point of signing and announcement,” he said.
The recent trend in the lubricants market is for established brands to utilise existing facilities in Jamaica, where the base oil is imported and various additives are blended in to produce proprietary products that are unique to each brand of lubricant and for specialist applications.
Having positioned for business through the capex programme, Graham says Paramount is ready to take on clients with different needs.
“We are confident going forward. The interest from the market is certainly there. We know that we are well placed in the manufacturing sector, in that not many can claim to have the sort of facility that we have,” he said.