Millat Tractor starts year with Rs430m in profit 

LAHORE: Millat Tractors Limited (MTL) released their financial results for Q1FY23 on Wednesday. The company has started the year with Rs430 million as its total comprehensive income for the year which is a 67 per cent year-on-year (YoY) reduction. 

Millat’s total sales revenue declined YoY by 31.2 per cent from Rs9.9 billion in Q1FY22 to Rs6.8 billion in Q1FY23. The dip in sales revenue is likely on account of the 55.6 per cent contraction it saw in its sales over the same period as sales dipped from 7,197 units to 3,194 units. The company’s gross profit margin (GPM) also dipped from 20.8 per cent to 17.2 per cent. This is most likely on account of the increase in the cost of goods sold increasing from 80 per cent of the sales revenue to to 83 per cent of the sales over the same period. 

Other notable YoY changes include a 92 per cent contraction in its other income from Rs248 million to Rs19.4 million. The dip is likely on account of Millat having fewer investable funds on-hand, likely on account of it being part of the consortium that will be bailing out Hyundai Nishat. Millat has not disclosed the amount that it will be allocating towards the bailout, however, Hassan Mansha, CEO Hyundai Nishat, had told Profit that “The amounts (by other shareholders) will depend on their shareholding percentage”. Millat holds an 18% share in Hyundai Nishat. 

Millat’s cost of finance is another notable change with it seeing a 65288.28 per cent increase. The increase is likely a result of the increase in the interest rate, however, it is likely that Millat may have also engaged in additional lending to finance expansion or other initiatives due to the increase in its cost of financing relative to its other operational costs. Debt financed expansion seems unlikely due to the economic climate and the cost of financing, however, it cannot be ruled out until Millat releases its more detailed statements for Q1FY23 in the coming weeks.

The absence of the Super Tax is also evident, as Millat’s effective tax rate fell from last quarter’s 38 per cent to 25 per cent this quarter. This is in line with the 26 per cent for the same period last year. 

The quarter ahead is likely to be similarly difficult for Millat. The company has not disclosed any non-production days as of yet for the foreseeable future, however, demand is likely to be dampened on account of rural markets still reeling from the impacts of the devastating floods across the country. September also saw Al-Ghazi Tractors overtake Millat in terms of sales for the first time ever as it chose not to suspend production despite heavy flooding in its key market of Dera Ghazi Khan. It remains to be seen whether Al-Ghazi will be able to maintain this lead over Millat or if the two will return to the status quo.