Paramount doubles first-quarter earnings after ‘tough’ cuts
Lubricants company Paramount Trading has doubled profits in the first quarter ending August, a performance that comes six months after the company put the brakes on spending and began reconsidering some of its new hires.
Paramount made $16.7 million in the quarter, up from $8 million in the comparative 2018 period.
Profits increased despite a decline in revenues, from $417 million to $360.6 million, down 14 per cent.
Chief executive officer Hugh Graham says that critical to the out-turn was a cost-cutting and restructuring exercise just prior to the first quarter. He says Paramount took a long, hard look at spending, especially around its new recruits, which led to job cuts.
“‘Tough’ is probably overused but it would be correct. We made certain decisions in the past expecting a particular outcome, and when that did not happen, we had to make the adjustments. It was tough from the human stand-point, but that is what we had to do,” Graham said.
“What we did was to right-size our staff, redeploy where necessary, and hire the right people. The net effect is that we had about eight persons less,” he added about the reorganisation.
Paramount now has 93 permanent staff and another 50-60 persons as contract or seasonal workers, Graham said.
The cost rationalisations led to an 11 per cent reduction in expenses, which helped to boost its bottom line, but the company also benefited from foreign-exchange gains.
Turning the previous year’s forex losses into gains was based on timing; specifically, the company sought to pay its bills in periods when the local currency was appreciating.
“Last year, we took a $12-million hit; this year, we had a net gain since we learned from the previous experience by doing the reverse of what we did then so as not to suffer that loss,” Graham said of the forex gains.
Meanwhile, the Paramount boss is forecasting that the company will recover from the 14 per cent drop in revenue. The industrial chemicals division, the largest segment of the company’s business, was particularly affected since there were price increases that initially affected business.
“In trying to insulate ourselves from the foreign exchange losses there, we lost some business because of increased pricing -- in that some of our clients would have pulled back,” Graham said.
However, the situation is normalising as competitors also adjusted their prices due to movement of the US dollar, he told the Financial Gleaner.
Additionally, the numbers at the end of the second quarter will reflect contracts that the company closed but not in time to be booked for the August quarter under review, he said.
For the full year ending May 2020, the company is also expecting its numbers to reflect gains from its new lubricants-blending plant that became operational this calendar year and from the filling line for consumer lubricants that is soon to be commissioned.
“What we’re seeing is that there are a lot of conversations we were not a part of before that we are now in the middle of. The interest is there, and Jim’s words are proving true: ‘Build the plant, and the customers will come’,” Graham said, quoting Jim Kudis, CEO of Alleghany Petroleum, Paramount’s joint-venture partner in the lubricants plant.