The second-largest tractor manufacturer in Pakistan, Al-Ghazi Tractors Limited (PSX: AGTL) is picking up the pace. Although the 9MCY16 figures reflect lower sales and net profit, the third quarter showed something of a turnaround, with sales up by 18 percent year-on-year and bottom-line increasing by 21 percent.
As announced in the federal budget 2016/17, the sales tax on tractors has been reduced from 10 percent to 5 percent, and took effect at the start of FY17. This has been the main reason behind increased demand for tractors, and hence significantly higher sales in the third quarter.
As per the half-yearly Directors Report, lean management and rigorous cost discipline have helped Al-Ghazi improve its gross margins. However, the company has seen a decline in other income, mainly due to payment of additional dividends out of its accumulated reserves, which ultimately resulted in reduced investments in the financial market. This ended up eroding the net margins.
During the year, the company launched a new model - NH Dabung - in the high horsepower category. Moreover, various aesthetic and technical improvements were made to the existing low horsepower models, which helped strengthen the companys market position.
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