AMG Packaging and Paper Company Limited is exploring the possibility of expanding in 2023 as business picks up at a rapid pace.

This was confirmed at the company’s annual general meeting held last week Thursday at its 9 Retirement Road head office. AMG produces corrugated cardboard packaging used for storing and transporting goods.

It spent $153.47 million in 2022 on capital expenditure related to its two locations on Retirement Road with the bulk of it spent evenly between equipment and land, buildings and leasehold improvements. This was sextuple the $21.49 million spent in 2021.

“The board took a fundamental decision this year that there may be some expansion projects that we want to look at and I can’t go into any detail at this point, but needless to say that the company, we feel, is at an inflection point. If we’re going to do the expansion, we’re going to need all the cash that we can get. So, you have our assurance at the board level that it’s a matter that continues to come up and if you do not see a dividend payment come up in short order, you will see the expansion component,” said Chairman Metry Seaga in response to a shareholder query.

He highlighted that the discussions are currently at the embryonic stages, but the company needs all the cash it earns to facilitate these possibilities. He referenced the purchase of a new Flexo-Folder, Flexo-Slotter and Auto-Folder gluer along with a new 10,000-square-foot building.

The company also benefited from the revaluation of its property, plant and equipment (PP&E) to the tune of $606.40 million. When combined with the increase in current assets from existing and new business, the company’s asset base almost doubled, up from $906.11 million to $1.73 billion.

“All of those cost a lot of money and that could have gone to dividends, but we felt it was important to make sure that we put AMG Packaging as an industry leader and ensure that we can produce high-quality products at the best possible price,” Seaga added on the company’s decision to invest in its PP&E during its 2022 financial year ending August 31, 2022.

However, shareholders were unaware that AMG did not declare a dividend from its November 15 board meeting as the subsequent notice was not posted to the Jamaica Stock Exchange’s (JSE) website. AMG last paid a dividend of $0.02 in January 2020. This is one of the most recent events of missing dividend information not posted by the JSE for listed companies.

“The board discussed it at length, and we made the submission to the Jamaica Stock Exchange for them to put it on their website. I understand that it was not sent out. What we have learned from that, we’re going to be much more vigilant from this point onwards to ensure when we have a discussion around dividends and we send it to the Jamaica Stock Exchange, we follow up to make sure that it is sent out to everyone,” Seaga said in response to shareholder Orette Staple.

AMG nearly cracked the $1-billion sales mark for 2022 as it earned $995.70 million. This assisted with the company’s net profit climbing 73 per cent to $104.93 million despite its tax remission expiring in June 2021. With economies of scale and the rebound in customer demand, AMG is expecting the business to continue growing in Jamaica.

When asked about the potential of exports for AMG, Seaga explained, “Firstly, we don’t do any exports and it’s one of the areas that the board has charged the management with looking at. If we import the raw material, add value to it and export it, you’d earn more money. So we have to build capacity and looking at other markets.”

AMG like many other manufacturers faced the impact of supply chain disruptions, which at one point saw the company sourcing paper from anywhere it could get it. This also reflected in its inventory balance spiking 78 per cent to $393.73 million in 2022 before declining to $317.67 million in the first quarter (September to November).

“We’re not buying anything right now as we’ve stocked up so much, but we still want to make sure that we have some inventory in case of any supply issues. It will go down, but we’re going to make sure that we keep enough stock in case of any issues. The cost of raw materials has definitely come down and we’ve been asking our suppliers who don’t see any increases for this year. Let’s hope it stays that way,” said General Manager Michael Chin.

AMG’s first-quarter sales slipped six per cent to $254.27 million with its net profit declining 35 per cent from $45.60 million to $29.61 million. When asked what accounted for the decline in first-quarter sales, Chin responded, “One of our largest customers would have normally taken all their supplies, but because they had a space issue, they didn’t take all of their boxes at that time. So we had kept them here for them and once we keep them, it would not reflect on sales.”

AMG’s total assets for the first quarter declined nine per cent to $1.58 billion as the company’s balance declined by half to $60.99 million due to a reduction in its payables during the period. Total liabilities and shareholders equity closed the period at $372.21 million and $1.21 billion, respectively.

AMG’s share price declined 13 per cent on Tuesday to $2.30, which left it with a market capitalisation of $1.18 billion.

“Once we have a clear direction and path as to where we’re going and how we’re going [to get] there, what going there will look like for the company and you as an investor, we will be coming to you to make it crystal clear and to lay out our plans for doing this thing,” Seaga closed.