Net profits down by 43% for last three quarters

Listed company Paramount Trading saw its profits plummet over the last three quarters and blames the contraction in the Jamaican economy for the poor financial showing.

Pre-tax profit for the nine-month period ended February 2021 totaled $31.71 million, 43 per cent less than the $55.75 million reported in the prior corresponding period. Taxes were charged amounting to $3.96 million relative to $6.97 million in 2020.

As such, net profit closed at $27.74 million, a 43 per cent decline coming from $48.78  million for the comparable period in 2020. For the third quarter, net profit was down 13 per cent to $8.05 million, coming from the 2020 posting of $9.24 million.

Paramount Trading, which is in the business of selling and marketing lubricants and chemicals, registered a three per cent decline in total revenues to $1.02 billion during the three quarters, down from $1.15 billion reported in 2020. For the last quarter, revenues declined by nine per cent to close at $347.24 million compared to $381.51 million for the comparable period in 2020.

Economic contraction plaguing income

According to Paramount Trading, “the economic contraction continued to plague our income. However, we were able to extract a higher gross profit percentage from the reduced sales levels”.

The company explained that, “the period ending February 28, 2021, was very challenging as the company continued to battle the negative impact of the COVID-19 pandemic. Our lubricant division was directly impacted by the general decrease in the transportation sector, while our food-grade division suffered from the closure of educational institutions and the lockdown of the entertainment industry”.

Revenues for the third quarter declined nine per cent to close at $347.24 million coming from a year ago when it amounted to $381.51 million. Other operating income amounted to $18.78 million for the nine-month period compared to $39.62 million booked for the previous year’s corresponding period.

For the third quarter, other operating income closed at $6.03 million (2020: $16.72 million). Interest income amounted to $1.24 million while finance cost increased to total $37.28 million.

For the last quarter, interest income and finance cost closed at $54,878 (2020: $335,933) and $11.53 million (2020: $10.86 million), respectively.

Pandemic cost restructuring exercise is bearing fruits

Paramount is reporting that its pandemic cost restructuring exercise is bearing fruit, highlighting that, “the cost restructuring exercise the company undertook early in the pandemic is bearing some fruits on the expense side of the business”.

Direct expenses closed the nine-month period ended February 28, 2021 at $691.79 million, a decline of 14 per cent relative to the $807.30 million booked a year ago.

Administrative expenses declined by six per cent to $266.77 million, down from the $284.03 million recorded for 2020 while selling and distribution expenses fell by 41 per cent for the nine months to close at $8.34. The company says this contraction in expenses is due to the cost restructuring exercise undertaken early in the pandemic.

Operating profit for the three quarters managed to reach $67.74 million, which even though commendable in a pandemic year, fell well short of the $83.95 million for the comparable period in 2020. For the third quarter, operating profit fell two per cent to close at $20.67 million coming from $21.08 million posted in the comparable period in 2020.

Paramount Trading recorded a three per cent decline in total revenues to $1.02 billion coming from $1.15 billion reported in 2020.

Balance Sheet Highlights

As at February 28, 2021, Paramount total assets totaled $1.61 billion, seven per cent less than the $1.73 billion quoted a year ago. The main contributors to this were the decline in ‘Inventories’ and ‘Receivables’ which closed at $440.03 million (2020: $583.16 million) and $293.15 million (2020: $357.93 million), respectively.

This was tempered by an increase in ‘right of use assets’ which closed at $76.34 million (2020: nil). Shareholders’ equity as at February 2021 stood at $760.43 million (2020: $790.15 million), resulting in a book value per share of $0.49 (2020: $0.51).