Millat Tractors Limited after reaching new heights in FY15 has witnessed a very sharp decline in its fortunes during the first quarter of FY 16. The tractor maker could only manage to achieve a sales volume of 4,360 as against 6,085 tractors sold in the corresponding period last year.
The agricultural sector of Pakistan similar to global is facing the effects of low commodity prices. The decrease in commodity prices has severely hampered the purchasing power of the farmer that in turn has cascaded in all sectors related to agriculture.
The market was expecting that the historic low fuel prices would have made tractors and related equipment more attractive to farmers because all these factors contribute to improving the farmers purchasing power, which is what the entire industry hinges on. The situation further deteriorated with the long delay of subsidy schemes announced in the provincial budgets resulting in the cash-strapped farming community to remain on hold since the announcement.
On the other hand, the decrease in currency value has severely impacted the cost of imported components for the tractors. However, in general, Millat took advantage of low inflation and depressed fuel prices to keep all its cost under control.
Nevertheless, Millat has the dominating share of more than 60 percent in Pakistan's tractor industry, and the company is well poised for growth. The company is keeping its fingers crossed and expecting that in the second half of the financial year much-awaited tractor subsidy schemes will materialize, which will certainly give the push the company needs at the moment.
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