Paramount to pry new growth from lubes, manufacturing
SMARTING FROM a loss of business occasioned by a dip in construction project starts and lower demand for food-grade inputs, chemicals and lubes supplier Paramount Trading is looking to lubricants and growth in manufacturing to get to its stated goal of ‘eight in four’.
The company aims to grow its revenue to $8 billion and its bottom line to $800 million by year ending May 2027, a goal it set last year.
With nine months of t he current financial year gone, Managing Director Hugh Graham acknowledges that Paramount may be off target, but says it can get back on track once it recalibrates.
“From a straight-line graph, it is not looking so good, but if we use a different metric that measures, say, the amount of effort that is put in on the groundwork, then the revenue flows will come. It is not necessarily a linear projection, neither is it incremental. We have to first lay the foundation ,” Graham said, adding that he has been working closely with the sales and marketing staff to ensure the end goal is realised.
“It is just constant work. We do our bids on projects, whether it’s a road or hotel or another commercial building. To the extent that those projects go up, then that’s when we get an outlet for our products,” he said.
Paramount Trading Jamaica Limited’s eight-in-four target was set around the time the company delivered its best-ever top-line performance, $2.46 billion, and a net profit of nearly a quarter-billion dollars. Graham attributed the performance to Paramount having “encountered favourable developments, especially as the local economy rebounded”, adding that “these tailwinds played a crucial role in our successful sales growth”, in a statement to shareholders in the company’s annual report.
There was a surge in sales for construction and core chemicals segments, driven by increased economic activity, but a change in the tide in the construction sector came back to bite Paramount, sending sales in the distribution division down by 31.2 per cent, or about $417 million, a year later.
“The food grade and SIKA-construction segments were the primary contributors to this division’s downward trajectory, due to completion of a large project in 2023 and market factors,” the company said in its thirdquarter report to shareholders.
Revenue for the nine-month period ended February 2024 was just under $1.27 billion. That’s down 22.5 per cent from $1.63 billion in the year prior. Profit also fell by 44 per cent to $99.9 million.
With just weeks left to go in its financial year, Paramount would have to double the nine-month revenue in the fourth quarter just to match the record 2023 revenue of $2.46 billion.
The trajectory is not in its favour, however, as both nine-month and third-quarter profit were on the downswing, the new report shows. Over three months, revenue of $400.9 million was 8.5 per cent below the prior year due to the downturn in the food-grade and construction segments. After-tax profit also fell to $18.35 million from $30.36 million.
Graham says Paramount is looking past the soft performance of 2024 and laying the groundwork for when the company will be able to enjoy better revenues from other contracts that are in the pipeline.
Lubricants, he added, is a particularly attractive prospect. Revenue from that division was $122.9 million, but its growth year to date was around 30.5 per cent. The company’s $700-million lubricants blending facility has been largely underutilised since the coronavirus pandemic dealt a setback to motor lubricants when travel all but dried up in the early stages of the crisis.
“Our big anchor for ‘eight in four’ is the manufacturing side of the business, which is the lubes and the industrial chemicals, such as bleach, soaps, along with water treatment cleaning agents,” Graham said.
He adds that the Paramount team has been getting positive signals from prospective clients, who are waiting out the clock on their contracts before engaging with his company.
“They are in a contract that they can’t break right now,” Graham asserted. “It is a question of positioning for the opportune time.”
Paramount is also waiting out the expiration of contracts at major petroleum marketing companies for business opportunities to emerge, saying manufacturing lubes locally can deliver the product cheaper to consumers.
The annual imports of lubes into Jamaica is about US$120 million, he says. That converts to nearly $19 billion in Jamaican currency.
Paramount has the capacity to substitute around US$30 million of that business, Graham noted.
The Kingston-based company presently co-manufactures lubricants for marketing company Fesco under the Futuroil brand. Graham is looking to put his company’s oil analysis lab, mixing facilities and bottling lines to greater work by scoring more contract manufacturing deals.