Paramount Q3 profits drop despite strong nine-month performance

DESPITE A strong nine-month performance, manufacturing and distribution company Paramount realised less profit for the third quarter ended February 2023. Third quarters are typically weaker at Paramount.

The company has seen year-on-year declines in third-quarter profits except for Q3 2020 and Q3 2022. For Q3 2023, Paramount registered just over $30.36 million in profits, a $17-million, or 36 per cent, decline.

CEO Hugh Graham attributes this typical third-quarter decline to the seasonality of revenue flows which feed in to profits. He says coming out of the second quarter, most of Paramount’s clients have sufficient stock that they rely on for the September-December period, with significantly reduced business in December.

Even as the company did marginally less business for the third quarter, it was aggressive in pumping more into its equipment. Cash flow statements for the nine-month period indicate that Paramount spent $39.9 million, or nearly $19 million dollars more than the $11.08 million, on the purchase of property, plant and equipment.

Graham says some of the company’s machines are getting major overhauls so as to comply with modern standards.

“We’re upgrading the plant to include both the bleach plant and the old Diversey plant that covers institutional and industrial chemicals. We’re bringing those plants up to First-World standards,” Graham said.

Paramount Trading started life as a distributor of industrial, institutional and precursor manufacturing chemicals for both food and heavy industry. The company bought a bleach manufacturing plant from Seprod Limited in 2018, having previously acquired the Diversey chemicals manufacturing plant around 2010.

Its business is organised under five operating segments: chemicals, construction and adhesive, manufacturing, transportation, and lubricants. Graham says the company’s growth strategy is hinged on extracting efficiency from its manufacturing side, while equipping team members with the tools that will allow them to produce at higher levels.

Paramount booked $438.11 million in third-quarter revenues. This was $24.85 million, or five per cent, less than the similar period in 2022. The decreased revenues and increased spending affected profits, which showed up in the dip, Graham said. At the same time, he is emphasising that the situation is temporary.

He says the lacklustre showing for the third quarter was made brighter by the nine-month performance. For the nine-month period which ended in February 2023, Paramount booked revenue of just over $1.63 billion. This was about $400 million, or 32.4 per cent, more than the $1.23 billion for the similar period in 2022. This drove net profit to $179 million, $84 million, or 88 per cent, more than the $95-million profit for the similar period in 2022.

The nine-month revenues are just $400 million shy of the stated two-billion target for the 2022-2023 financial year.

Graham says he wants to double present revenues every year, to achieve $8 billion in another four years. He says revenues for 2023 are projected at $2 billion, and the company has to move aggressively in equipping its manufacturing processes and team members with the necessary tools to hit the targets.

neville.graham@gleanerjm.com