Millat Tractors bounces back in Q2FY23, half year earnings still trail year on year

LAHORE: Millat Tractors released its earnings for Q2FY23 to the Pakistan Stock Exchange on February 17. On its own, the company ended the quarter with a profit of Rs 714 million to increase its half year earnings to Rs 1.14 billion. Looking at its consolidated statement, Millat ended the quarter with a profit of Rs 551.18 million for a total half year earning of Rs 1.016 billion. 

Unconsolidated Earnings – Q2FY23

Millat’s sales revenue for Q2FY23 fell by 4.46% quarter-on-quarter (QoQ) from Rs 6.839 billion to Rs 6.535 billion. The dip in revenue coincides with Millat recording a 2.72 QoQ sales decline based on the data released by the Pakistan Automotive Manufacturers Association (PAMA). However, despite Millat’s gross profit dropping by 3.02% QoQ, its gross profit margin (GPM) improved QoQ from 17.21% to 18.56%. On a year-on-year (YoY) basis, MIllat’s revenue fell by 55.4% for a whopping decrease of Rs 8.1 billion. Its  gross profit contracted 51%. However, MIllat’s GPM improved YoY from 16.9% to 18.56%. 

The most significant QoQ that Millat saw was a 1421.21% increase in its other income which managed to counteract the dip in gross profit, and increase its operating profit QoQ by 21.95%. Millat’s other income and operating profit still lagged YoY, with both seeing contractions of 11.56% and 59.89% respectively. 

Finally, Millat’s effective tax rate grew QoQ from 24.87% to 32.27%. This is also higher YoY from the 25.15% it saw in Q2FY22. Finally, Millat managed to increase its total earnings for Q2FY23 by 65.69% QoQ from Rs 430 million to Rs 714 million. As with the theme of the earnings report, Millat’s final earnings for Q2FY23 were 53.42% lower YoY. 

Unconsolidated Earnings – 6MFY23

In terms of Millats 6MFY23 earnings, Millat’s sales revenue, gross profit, and GPM all fell. Its sales revenue shrank by 45.61% YoY to Rs 13.375 billion from Rs 24.59 billion. Similarly, its gross profit dipped YoY by 47.42% from Rs 4.5 billion to Rs 2.39 billion. Its GPM went from 18.49% to 17.87%. 

Other notable indicators were Millat’s other income and operating profit falling by 45.45% and 58.96% YoY respectively. The two fell to Rs 315 million and Rs 1.675 billion respectively. Millat’s effective tax rate grew from 25.77% to 28.53%. Finally, Millat’s standalone 6MFY23 earnings fell by 59.72% from Rs 2.8 billion to Rs 1.4 billion. 

Consolidated Earnings – Q2FY23

Millat’s subsidiaries based on its Q1FY23 earnings report include Millat Industrial Products Limited, Tipeg Intertrade DMCC, Millat Equipment Limited, and Bolan Castings Limited. 

Looking at the group’s activities, sales revenue fell QoQ by 8.05% to 6.956 billion. This also amounted to a YoY decline of 52.48%. GPM for Q2FY23 clocked in at 19.1% compared to 19.53% in Q1FY23, and 20.09% in Q2FY22. Gross profit as a whole fell to Rs 1.3 billion. This was a QoQ decline of 10.07%, and a YoY decline of 54.83%. 

Other income rose QoQ by 65.81% to Rs 102 million. However, this was a 27.94% YoY decline. Unlike Millat’s standalone earnings, other income was unable to edge the group’s operating profit beyond what they recorded in Q1FY23. Operating profit fell by 22.91% QoQ to Rs 728 million. This also amounted to a YoY decline of 69.81%. Finally, the effective tax rate reached a whopping 60.04% compared to Q1FY23’s 262.58%, and Q2FY22’s 28.44%. The imposition of a super tax across Millat’s subsidiaries is the most likely conclusion. The individual tax rates levied will be made evident once Millat files the segment breakdown of its consolidated earnings. 

Finally, the group ended Q2FY23 with a final earning of Rs 551 million. This was a 18.4% QoQ decline, and a 63.86% YoY decline. 

Consolidated Earnings – 6MFY23

Looking at the group’s 6MFY23 earnings. Millat and its subsidiaries saw a 42% decline in their sales revenue YoY from Rs 25 billion to Rs 14 billion. Gross profit similarly declined by 49% from Rs 5.485 billion to Rs 2.8 billion, with GPM declining YoY from 21.91% to 19.32%. 

The suffering continues across the board, with other income falling to Rs 164 million from Rs 322 million for a YoY contraction of 49.1%. Gross profit also dipped YoY by 62.44% to Rs 1.67 billion. The group’s 6MFY23 effective tax rate is lower than its Q2FY23 effective tax rate as it clocks in at 36.46%. However, this is still higher YoY from the 28.39% it saw in its 6MFY22 earnings. Finally, Millat and its subsidiaries saw their final 6MFY23 earnings fall by 65.92% from Rs 2.98 billion to Rs 1.016 billion.