Business

Devaluation, paper costs hit AMG Packaging

BY JULIAN RICHARDSON Assistant Business Co-ordinator richardsonj@jamaicaobserver.com

Wednesday, April 16, 2014    

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AMG Packaging Paper Company reported a 50 per cent decline in second quarter profits, the corrugated box manufacturer's bottom line dragged down by devaluation of the Jamaican dollar and rising paper costs. according to the firm.

The company's net profit for the three—month—period ending February 28, 2014, was $5.8 million compared to $11.6 million for the corresponding period last year. Revenue for the period under review was $138.9 million or 41 per cent higher over year-earlier levels, but it was negated by a nearly 60 per cent increase in total manufacturing costs — cost of inventories and direct expenses — to $113.3 million. Additionally, operating expenses jumped by 23 per cent to $16.2 million.

"The company's performance was negatively affected by the rapid devaluation of the Jamaican dollar as well as the continuous rise of the cost of paper on the world market as compared to the similar period (in) 2013," Michael Chin, AMG's general manager, said in a statement accompanying the financials.

AMG produces corrugated cardboxes and trays for local entities engaged in a wide variety of businesses. In order to produce its products, the company imports paper and cardboard from overseas raw material suppliers.

The Jamaican dollar has depreciated by double digits over the past year, now hovering at some $109.80 to US$1. Many local businesses in recent weeks have reported being negatively impacted by the exchange rate slide, including hardware manufacturer and steel importer Arc Systems and international retail chain PriceSmart. Despite concerns over the exchange rate, the Bank of Jamaica and the Finance Ministry note that the economic conditions in the country continue to improve.

AMG's Chin added that "electrical issues" at the factory on Retirement Crescent in Kingston also impacted expenditures, while severe weather conditions in the US adversely affected paper supplies.

"To meet our customers' demand, we were forced into excessive working hours," Chin said.

Despite the challenging market conditions, Chin has a positive outlook for the third quarter. He noted that the installation of two new machines will help boost production and increase efficiencies. What's more is that liquefied petroleum gas conversion will "show positive returns" on fuel costs, he said.

"Throughout the challenging economic environment, the team remains optimistic and focused to increase sales and manage our expenditures," Chin said. "We look forward to a positive third quarter."

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