2 months ago
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After posting its first loss in company history, Paramount Trading Jamaica Limited has embarked on a programme of retrenchment even as it continues headhunting fresh talent.
CEO Hugh Graham said the dual track, that is, job separations amid new hires, was necessary to counter a $14.36-million loss. It’s the distribution and manufacturing company’s first-ever descent into the red since Graham registered it in 1991, having started out trading in chemicals from the back of his beat-up Toyota pickup.
While acknowledging that the numbers are “not looking good at all”, he said much of the fall-off is on the trading side of the operation, which is currently the bread and butter of the business. Across the board, manufacturing activity contributes less than a third of total revenue.
However, Graham expects the that the investments currently being made in manufacturing will eventually pay off in terms of revenue generation. The capital spend is also expected to position manufacturing for growth, to the extent that it becomes the dominant revenue contributor, with a targeted delivery of around 70 per cent of top-line flows.
The company, which went public and listed on the junior stock exchange in December 2012, trades in a range of products for household and industrial use, inclusive of lubricants, construction and adhesives, and chemicals. Paramount is a distributor of SIKA construction products, and a manufacturer of Allegheny Petroleum’s lubricant, which it produces under licence at a blending plant in Kingston. It also holds exclusive regional distribution rights for Allegheny’s lubricants.
“We’ve never had a bad year in all our history. In the scheme of things, this is one in 33. Our shareholders have grown to expect profit every year, but there will be lean years,” Graham said, drawing reference to Jamaica’s Olympic campaigns, where many looking on have come to expect gold medals as a matter of course.
A billion dollars of Paramount’s revenue evaporated over the course of one year.
In an interview with the Financial Gleaner, Graham said the revenue loss emanated from the conclusion of large orders that the company filled in 2023, for which there was no repeat or replacement business. Case in point: a large construction adhesives contract for a major hotel construction project came to an end.
Recruiting talent
Consequently, the annual sales generated by Paramount plunged 34 per cent, from $2.46 billion at year ending May 2023 to $1.62 billion as at May 2024.
In the midst of the fall-out, the company turned its focus to recruiting talent to boost manufacturing and revenue generation. However, the process has not been a smooth one.
Graham said that after careful assessment, Paramount decided it had to part ways with some personnel “since there was the real challenge with deliverables”.
“We took on some people that didn’t deliver. There was a cost to that engagement and subsequent separation,” he said.
The company’s payroll climbed from $143.60 million in 2023 to $162.42 million. Executive management remuneration remained at just over $62 million in both years.
Despite the additional cost of its workforce, the company was still intent on bringing onboard the right-fit talent to drive the manufacturing operations.
“We still see manufacturing as the way of the future,” Graham said.
Finding qualified persons to fill technical positions has been challenging, but the company has so far snagged an engineer with manufacturing and lubes industry experience.
“We’ve been looking for persons who are more closely aligned with the industries that we’re involved in. It’s not been easy, but this will help us along,” Graham said of that hire.
Referencing the lack of trained, experienced personnel in manufacturing – a long-standing lament of the manufacturing sector – Graham said many of those with the necessary experience are either retired or heading for retirement.
“There is almost nobody new around,” he said.
“The people fresh out of university have to be trained. Yes, they know chemistry and physics” but they lack experience, he added.
“How many mechanical engineers are you going to get with 20 years’ experience to come and run your plant? You literally have to take them from somebody else,” Graham declared.
Paramount’s operation is split into five segments: chemicals, which incorporates the distribution of products utilised as food and pharmaceutical additives and ingredients; construction and adhesive; manufacturing; transportation, which relates to its haulage operation; and lubricants.
Chemicals and sanitisation products account for over 72 per cent of Paramount’s business.
The construction and adhesives segment encompasses distribution of the SIKA-branded products and adhesives, and hardware supplies, and accounts for 10 per cent of company revenue.
The manufacturing of food-grade inputs such as leavening agents, super-sweeteners and stabilisers, as well as technical and industrial-grade chemicals for direct use or as raw materials, solvents, disinfectants, germicides, household laundry and cleaning products, and paint resin contributes another seven per cent of total revenue.
And other manufacturing and distribution of oils and lubricants, engine oils and fluids, industrial oils and greases, hydraulic, transmission and other fluids accounts for another 10 per cent.
The other one per cent comes from the transport operation.
Graham said manufacturing offers the most headroom for growth, and that his intent is to make it the dominant side of the operation.
To make the pivot, Paramount recently secured a $700-million bond facility with NCB Capital Markets for investing in repairs and upgrades to the company’s bleach plant and sanitisation and food-grade production equipment, as well as debt refinancing.
Manufacturing presently accounts for about 30 per cent of overall revenue, with the other 70 per cent coming from trading and distribution. Graham wants to flip that around and although there is no definite time horizon, he said he wants to do so as soon as possible
“All I’ll say is that it’s a work in progress,” said Graham.
“So far, we’re talking about 30 per cent. Maybe in another year we could be talking about another 30 per cent, as we push to flip it around for 30 per cent trading and 70 per cent manufacturing,” he said.
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