AMG’s Net Profit Grows YoY Due to Lower Costs

• Driven by a reduction in direct expenses incurred, AMG Packaging & Paper reported a 7.8% increase in net profit to $60.59Mn (EPS: $0.12) for the year ended August 31, 2021. The company’s revenues declined marginally during the year. 
• Direct costs fell 7.1% (or $37.51Mn) due in part to lower spending on salaries and related expenses, cost of materials used and repairs and maintenance. 
• However, the performance was tempered by 2.0% (or $14.54Mn) fall off in revenue and a 2.1% (or $2.01Mn) rise in admin expenses given an increase in management remuneration, sanitation and motor vehicle costs. Operations were adversely impacted by lockdowns and curfew hours, which resulted in the decline in revenues. 
• A 95.3% reduction in other revenue influenced by a realised loss on foreign exchange translation and a loss on disposal of assets also tempered the growth in the bottom-line. 
• AMG is currently constructing a new plant, which will produce packaging products made from recycled paper. The company plans to double production capacity and management has indicated that the new plans will enable it to cut costs, as the shortage of paper on the world market continues to drive up the cost of paper. This strategy should support revenue growth, help the company pivot from the effects of the ongoing supply chain challenges, lower costs, and bolster the bottom-line. 
• AMG’s stock price has appreciated by 44.5% since the start of the year and closed Thursday’s trading session at $2.28 per share. This implies a P/E multiple of 19.0x, which is above the junior market manufacturing sector average of 18.7x.

(Source: AMG Financials & NCBCM Research)