Paramount Trading Limited and Lumber Depot Report Improved Twelve Months Net Profit

  • Paramount Trading Limited (PTL) and Lumber Depot (Lumber) which are a part of the local distribution sector, both reported higher net profit in their most recent twelve months. PTL reported a net profit of J$174.57Mn (EPS$0.113) for the year ended May 31, 2022, a 174.3% improvement over 2021. Lumber Depot Limited (LUMBER) recorded a net profit of J$183.89Mn (EPS $0.26) for its financial year ending April 2022 versus J$144.99 (+26.8%) in 2021.
  • Both PTL (19.4%) and Lumber (10.1%) saw double-digit increases in revenues driven by increased business activity as the economy reopened following lockdowns in 2021. The improvement in revenues for both companies outpaced the noticeable increase in cost of sales which jumped by 17.4% and 8.6% for PTL and LUMBER, respectively, as evidenced by higher gross margins.
  • The distribution companies experienced commodity price increases and logistics challenges that were made worse by the outbreak of war in Europe, which weighed on their cost of sales. Despite this, gross margins increased slightly for both companies, with PTL moving from 31.6% to 32.8% while LUMBER moved from 20.5% to 21.6%. This means that both companies were able to retain more of each dollar of revenue generated after covering input costs.
  • Operating expenses also increased by 11.8% and 7.2% for both companies respectively.
  • The distribution companies will look to build on their FY2022 improvement as the economy continues to recover. It is expected that both companies will continue to push revenue generation and cost containment measures to limit the effects of the high inflationary environment on the company’s bottom line. Lumber’s management plans to sustain competitive pricing, and manage cash flow and inventory availability to drive profitability this year. It also plans to seize opportunities for investment and growth that are expected to arise in Jamaica when economic normalcy returns.
  • PTL’s stock price has increased by 44.3% since the start of the calendar year while LUMBER decreased by 5.8%. PTL and Lumber closed Friday’s trading session at $1.80 and $2.85, respectively. Both stocks currently trade below the Junior Market Distribution Sector Average of 18.8x at a P/E of 15.9x (PTL) and 11.0x (Lumber).

(Sources: JSE & NCBCM Research)