After facing a $39.7 million loss in 2017 from its toilet paper business, AMG Packaging and Paper Limited has decided to discontinue tissue production and use 2018 to focus on its box business. This it says should help the business to grow by 2019.
The underperformance of the toilet paper segment significantly affected the bottom line of the company due to slow sales. Initially, AMG Packaging‘s hope was to capture at least 10 percent of the tissue market in Jamaica as the country has a high tissue import bill annually. However, several factors affected that plan and the company struggled to achieve their target share of the market. After investing in a tissue factory in Downtown, Kingston in 2015, a fire destroyed the distributor’s warehouse thus thwarting sales and pushing AMG Packaging a few steps back.
Even though AMG diversified their tissue product line, from manufacturing the brand Tishoo to adding specialty options plush and cottony, the company still struggled to achieve their financial goals with lower sales as consumers supported the competition both local and international.
Nevertheless, AMG is looking to improve its market performance with the expansion of its box business. When asked where capital would be sourced from as the company is currently working through financial challenges, AMG responded by stating their intention to seek funds from shareholders. They hope to reenter the market but currently did not state if they would be doing this using bonds or rights issue.
We do not recommend for investors to purchase shares in AMG Packaging at this moment. We expect to see improvements over the next few months as the company recovers from this challenging period.The stock currently trades at $2.05.