Paramount to enter consumer lubricants market
Published:Friday | October 4, 2019 | 12:15 AM
Paramount Trading Limited officially commissioned its lubricants blending plant this week, but the joint-venture facility developed with American partner Allegheny has been operational for more than a year, since March 2018.
Since then, the revenue from Paramount’s lubricants operation, inclusive of distribution, has grown and now accounts for 24 per cent of sales, compared with six per cent in 2018.
“We believe that we’re on to something and we’re doing the right thing,” said Paramount CEO Hugh Graham after the commissioning ceremony on Tuesday.
The company’s focus, as distributor and now as processor of lubricants, has been on the industrial side of the market, But Graham, who sees scope for more business in the consumer segment, says in two weeks Paramount will set a small-container filling line that will take care of the needs of retail customers.
“There is a great demand among the motoring public for the product, so I feel that we should go in that direction, once we have put in the new line, and based on needs of the market we will supply,” Graham said.
Paramount distributes a range of lubricants, including engine oils for fleet, passenger and railroad applications; hydraulic oils, gear and circulating oils, along with marine oils and transmission fluids.
The 200,000-gallon joint-venture plant, developed at a cost of more than $600 million, produces blends under the Allegheny-owned Altra brand, as well as white label or special-order formulations for the industrial market. The new consumer product will also be marketed under the Altra brand.
The smallest oil-containing unit sold by Paramount to clients, such as Jamalco, Jamaica Public Service Company and bus company JUTC, is the five-gallon pail, but the 55-gallon drum, and even larger containers of between 200 and 350 gallons, are more in demand.
Graham says even as Paramount will be pitching to the retail market, its large clients will hold primacy.
“We’re not planning to push Altra at the expense of contract or toll manufacturing. Our main focus is making lubes for persons who need them. The Altra brand is something that will come along, it will always be there, but we will not be loading up a lot of resources behind it, so to speak,” Graham said.
Until the filling line is up and running, Allegheny will supply Paramount with finished products, said the American company’s CEO, Jim Kudis.
“Some of the lower-volume products that are not up and running as yet … we’ll send the finished goods down, but when it grows, we’ll have it manufactured here,” he said.
Kudis said that while both Allegheny and Paramount will jointly operate the new blending plant, Paramount is manufacturing the Altra products under licence.
“They do so with all the formulas and raw materials that we provide. Along with that comes all the technology that Allegheny has, which is deep,” Kudis said.
There is also a separate distribution agreement that covers greases that are not manufactured in Jamaica, he added.
Although Paramount is known for lubricants, the majority of its revenue comes from chemicals, which accounted for about $1.1 billion amid total sales of $1.6 billion for year ending May 2019.
Over the past two to three years, Paramount has pursued three big projects, representing a total investment of nearly $1.1 billion: the lubricants blending plant that vaulted it into manufacturing; installation of a second-hand bleach plant that was acquired from Seprod; and a chlorination plant.
“Given the level of investment that we did – and we never took a loss – I would say we’re doing pretty well. We actually ran three projects simultaneously,” Graham said.
Paramount made a profit of $75 million in 2019, up 13 per cent from $67 million last year, but still less than half the profit high of $173 million reported in 2016.