AMG wraps up property acquisition from directors' companies
Published:Friday | February 17, 2012 | 12:00 AM
Marcella Scarlett, Business Reporter
AMG Packaging and Paper Company has finalised purchase of an adjacent property to be used as warehouse space.
AMG is also expanding its production base as it positions to go after additional market share in the Jamaican market and expects to finalise the programme in about seven months.
The company will also be adding new products to its portfolio - including paper towels, toilet paper and napkins - towards the end of this year, once it acquires the necessary equipment, according to AMG chairman Mark Chin.
Its plans for exports will come later.
"We are not looking to go to the export market, but what we want to do is run away the imports," said Chin.
"We want to remain focused on fulfilling demand in the local market," he said at the company's annual general meeting on Monday, hours after a 1 a.m. fire that destroyed a section of AMG's current operating base at 10 Retirement Crescent in Kingston.
The company lost some inventory housed outside of the factory in the fire, and the front façade of its existing factory was also damaged. At this point, the directors of the company do not consider the resulting losses to be material," said AMG on Monday.
The property is insured. Chin said Wednesday that damage was estimated at J$11 million. The plant is back in operation but was being powered by generator.
Chin said AMG currently fills 40 per cent of market demand, supplying more than 200 clients with corrugated carton boxes.
"Until we satisfy the local market, we will not be looking to get into export," he said
At 40 per cent market share, and even with identified inefficiencies at the plant, AMG earned revenue of J$309 million and reported after-tax profit of J$31 million at last year ending August 31, 2011.
The company went public last July through an initial public offering (IPO) which raised J$57.8 million.
The proceeds from the IPO financed the acquisition of new machinery and improvement of some equipment and additional storage space at 9 Retirement Crescent, which houses the offices of Islandwide Construction Limited and Islandwide Concrete Limited "being entities controlled by certain of the directors" of AMG, the box maker disclosed in a market filing after the AGM.
Islandwide Construction is owned by Mark, Nicholas and Paul Chin, while Islandwide Concrete is held by Mark Chin, George Hugh, Trevor Roberts and Metry Seaga, according to the most current Companies Office records.
"The purchase was concluded on arm's length terms, at a price of J$58 million, supported by an independent valuation," AMG said.
The property gives AMG an additional a 10,000 square foot of space, which will provide storage to house its inventory indoors.
The immediate expansion plans will create a 6,000-square-foot warehouse. Financing for the warehouse is being finalised, the company disclosed in its first-quarter financials for the period ending November 2011 in which profit was up by 46 per cent to J$12 million.
The structure is to be imported from overseas but Chin declined to disclose the arrival time and cost. The company has advised the market that its expansion programme is to be finalised by September 2012.
The new property has an existing 2,600-square-foot building that is to be used as a warehouse, as well as another 1,400-square-foot building.
Some of the inefficiencies at the factory have been corrected through the procurement of a new machinery that will reduce wastage of paper in the manufacture of the corrugated boxes.
"This one cuts the paper precisely," Chin told the Financial Gleaner. "This will reduce waste which is very important to our company," he said.
General Manager Michael Chin, who is Mark's brother-in-law, added that some of the machinery acquired were already fully installed.
"Additional ones are to arrive by the end of the month," he said.
The diversification into other paper products will happen after the current programme is wrapped up in September, said chairman Mark Chin.
Acknowledging that the new paper products will enter a crowded market, the chairman said he plans to compete on quality.
"The manufacturers in Jamaica now are not targeting everybody. They are doing mainly commercial-grade napkins, commercial-grade paper towels," he said. "We will be producing high-quality products."