AMG to expand factory, staying out of paper bag market
Published:Wednesday | February 20, 2019 | 12:00 AM
Cardboard maker AMG Packaging & Paper Company Limited is sticking with its core activity for now, despite being pressed by shareholders four times about new ventures, in particular, plans to take advantage of the Government’s ban on single-use plastic bags and plastic straws.
The ban came into effect last month and is already spurring new demand for paper bags and paper straws.
But AMG, which was burned by its last venture, toilet paper, is not inclined to jump into a new market, which would require investment in equipment.
“Maybe in the future, but not right now,” said Chairman Peter Chin at the company’s annual general meeting, held at its Retirement Road, Kingston head office on Tuesday.
AMG recently divested its household paper assets at a loss. Consequently, for the ensuing financial year, the company wants to “consolidate” its core business and focus on managing its margins in order to grow its bottom line for the 2019 financial year.
So far it’s working. AMG increased revenue by 11 per cent to $214 million in the November 2018 first quarter, while profit after tax improved from $11 million to $18 million.
Under current conditions in the foreign exchange market that is characterised by swings in the value of the Jamaican dollar, Chin said imported raw material prices have largely stabilised but that, going forward, AMG would incrementally adjust the prices of its products with movements in the dollar and raw paper prices in China.
“Prices on the world market were on an upward trend, but now it is much better and now we are getting a break – and so, too, our customers,” the chairman said.
The company also booked a $10-million deposit on the acquisition of property at 12 Retirement Road. The property will allow AMG to expand its factory and warehouse operations.
“We have all that space now, and we are going to reconfigure the factory operations,” he said. ‘’People are basically sitting on top of one another and it’s not the best layout, and we are planning to improve that.”
The company holds some $46 million as cash and equivalents at the end of the year which it plans to utilise, in part, to develop that improved factory layout.
In its last financial year ending August 2018, the company sales grew by double digits to $719 million, but was negatively affected by rising raw material costs along with the depreciation of the dollar. Consequently, it made lower gross profit at $151 million versus $154 million a year earlier. Additionally, the company divested its toilet tissue operation, which resulted in the company recording a net loss of $23.3 million versus a profit of $36.6 million a year earlier.
“Last year was an anomaly,” said Chin. “We are back on a path of increased earnings and profit, and the likelihood of a dividend is far more certain,” he said.
AMG also acknowledged that an investor acquired more than 60 million AMG shares from a large shareholder – which amounts to around 11.8 per cent of the company – but declined to name the parties involved.