Paramount Trading pivots to offset impact of COVID-19

…records $1.52 billion in revenue for financial year ended May 31, 2020

In an effort to blunt the impact of the novel coronavirus, chemical company Paramount Trading Jamaica Limited says it was able to take advantage of the window of opportunity created by the pandemic by pivoting its business into manufacturing sanitisation-related products.

In the last quarter of its financial year ended May 31, 2020, Paramount indicated in its financial report to shareholders that the onset of novel coronavirus presented new challenges, as its revenue growth strategy and profit were stymied due to the adverse market conditions.

Nonetheless, the company recovered some lost ground as it adapted to the operating environment and generated revenue of $1.52 billion, which was five per cent below the previous corresponding year’s earnings of $1.60 billion.

“We are pleased to report that the food grade and technical grade portfolios enjoyed revenue growth of two per cent and two per cent respectively. Paramount Trading, being well positioned, was able to capitalise on opportunities during the pandemic and seamlessly pivoted into manufacturing sanitation products, such as hand sanitiser and surface cleaners. These generated revenue of over $43 million for the technical grade division during the last quarter,” the report stated.

Paramount Trading also recorded an after-tax profit of $53 million for the financial year, $9.6 million less than the $62.6 million reported in the previous corresponding year.

The company said that the lubricant division — although still poised to be its main growth driver — suffered some setback due to the country-wide closure of non-essential service businesses during the fourth quarter. This resulted in a 20 per cent reduction in divisional revenue year on year.

Operating expenses of $385.7 million showed a positive variance of nine per cent over the prior year, driven primarily by a decrease in the company’s administrative costs which decreased from $401.8 million in the prior year to $366.9 million. Concurrently, Paramount Trading saw an increase in its finance costs by over 107 per cent. This it said, was as a result of capacity buildout funded mainly by preference shares and increase in debt. “While our investment reduced by $217.4 million, inventory of $683.6 million reflected an increase of $135.8 million. Receivables improved significantly moving from $373.0 million to $270.1 million. As we strive to improve our foreign exchange holding and effectively match our foreign assets with our foreign liabilities, cash and cash equivalent showed an increase of $133.0 million, which bolstered our liquidity,” the company stated. Paramount assured that although long-term borrowings now stands at $126.2 million, an increase of $77.9 million, Paramount Trading is “well within its capital adequacy requirements and conventional gearing ratio”.

Earnings per share for the period under review ended at $0.034, down from the $0.040 recorded for the previous corresponding year.

NEW OUTLOOK:

According to the company, during the new financial year, it will continue to build out its productive capacity.

“COVID-19 created sudden and unexpected changes in Paramount’s operating environment, and we anticipate that this situation will remain with us in the short to medium term. We have already capitalised our lubricant plant and installed the packaging line. Renovation activities already started on the bleach, and chlorine plants will continue in the new financial year. We have also expanded into manufacturing sanitation products and will widen the product base over time”.

It further said that the main drivers in the short term will be the revenue derived from new products, the expansion of its offerings in the bleach division, and its continued pursuit of contract manufacturing in the lubricant division.