Millat Tractors plans producing a 100 HP tractor locally (currently being imported from Brazil)

-Net profit for the period stood at Rs. 5.78 billion (EPS Rs. 103.12) as against Rs. 2.15 billion (EPS Rs. 43.16) in the previous year, a growth of 40%. The increase is due to significant increase in sales revenue, other income and considerable decrease in finance cost for the year.

-A volumetric growth of 72% was recorded (increasing MTL’s market share to 70%) on account of improved farm economics in the FY21 causing the purchasing power of farmers to increase, as well as increased construction activity in the country and overall economic recovery.

-Exports grew to a record high of Rs. 2.86 billion as compared to Rs. 1.27 billion in the preceding year. However, these exports are expected to decline significantly as worsening political situation in Afghanistan coupled with the security issues in Africa will have a huge impact on the volumes.

-MTL has increased the localization level to around 92% but since the base raw material is mostly imported, exposure to foreign exchange risk and the rising commodity prices has had an adverse effect on the gross margin, which is expected to decline further in FY22.

-The increase of GST to 17% will have a major impact on the volumetric sales of the tractor industry. However, the farming output is expected to be at record high in FY22 and accordingly the management is confident that following the improved affordability of the farmers, most of the impact will be absorbed.

-The company is working on producing a 100 HP tractor locally (currently being imported from Brazil), making it affordable for the local industry. Currently the 100 HP imported tractors are used by the dairy industry but after the start of local production, reduced retail prices will help penetrate into other sectors as well, with main focus on the construction sector. Production in this regard is expected to begin by the end of CY22.

-MTL has recently added 2 retail outlets in Lahore and Multan in the spare parts and aftermarket segment to cater to the spare parts requirement of their tractors.

-Continuous delay in releasing of sales tax refunds has deeply impacted the liquidity position of the company as the pending sales tax refunds have accumulated up to Rs. 5.93 billion despite decision in their favor by the Federal Tax Ombudsman.

Courtesy – Cedar Research

Share:
Posted in Article & Features.

Leave a Reply

Your email address will not be published. Required fields are marked *