Millat & Al-Ghazi

Clearly it’s a great time to be a tractor manufacturer in Pakistan! The country’s leading tractor duopoly – Millat Tractors Limited (PSX: MTL) and Al-Ghazi Tractors Limited (PSX: AGTL) – reported their respective quarterly results yesterday, posting tremendous growth all around. The latter announced a dividend of Rs12.5 per share.

For Al-Ghazi, the top line grew by a whopping 76 percent year-on-year during the quarter, while gross profit and net profit doubled. But Millat’s quarter makes this enormous growth seem tepid by comparison, which is really saying something! For the three months ended, Millat Tractors’ top line doubled year-on-year, while gross profit was up by 137 percent and the bottom-line more than tripled. Its other income was also significantly higher over the period, though other operating expenses offset some of that impact. Moreover, the company has tapped foreign markets for exports – something Al-Ghazi is lagging behind in. However’ Al-Ghazi has the better margins.

The tractor industry has seen a major turnaround in FY17 since the disastrous FY16. The sales tax was brought down to five percent as against the previous 10 percent; faulty tractor schemes by the provincial governments did not come into play during the year; and purchasing power of the farmers has improved thanks to various measures such as fertilizer subsidy and Kisan package.

According to the latest numbers from PAMA, tractor sales during the first quarter of 2017 were up 81 percent over last year. As per its last Directors’ Report, Al-Ghazi had 39 percent of this market share, while Millat held 61 percent as of FY16.