Total demand for tractors remained high due to government policies
By SHABBIR H. KAZMI
Nov 22 - 28, 1999
For the year ending June 30, 1999 Al-Ghazi Tractors Limited (AGTL) has
posted after tax profit of Rs 362 million as compared to a profit of Rs 207 million for
the previous year. This improvement in profit was mainly due to nearly double the sales
for the year under review. This enabled the Company to pay over 150 per cent cash
dividend. The dividend payout was 60 per cent for the previous year.
During 1999 AGTL produced total 12,200 tractors comprising of 10,012 of
Model 480 and 2,188 of Model 640. The number of tractors sold by the Company was 12,260.
Whereas the total sales, by all the assemblers put together, was 27,702 units. AGTL's
share came to 44.26 per cent. This was lower than its share in the previous year's sales
exceeding 47 per cent.
According to AGTL sources the year 1999 was a challenging year due to
economic sanctions, stringent banking regulations and price reduction imposed by the
government. But, due to the positive attention of the GoP, liberal lending for tractors,
the total demand and deliveries improved. As against a total production of 26,885
tractors, the actual deliveries were 27,702.
The gross profit percentage of the Company came down to 13 per cent for
1999 as opposed to over 15 per cent for the previous year. While the administrative and
general expenses increased, selling and distribution expenses remained at the previous
level. Financial charges came down from Rs 5 million in 1998 to Rs 3.2 million in 1999.
Profit for the year 1999 further improved due to nearly three fold increase in other
AGTL has been posting constant growth in pre-tax profit since 1993
except for the year 1996. From 1985 to 1991 it posted rather low profit. !992 was the only
year in which it posted pre-tax loss amounting to Rs 77 million. In the year 1993
the Company made a complete turnaround and posted Rs 108 million profit.
The Company's "work Smart" culture has further enhanced its
competitiveness. Working closely with component suppliers, procurement management has
significantly reduced the related costs. Additional cost reductions have also been
achieved in manufacturing, logistics, administration and marketing. Despite enforced price
reduction these cost efficiencies have resulted in improvement in profit margin. These
measures have helped the Company in establishing itself as the lowest cost but highest
quality producer of tractors in the country.
AGTL has been a regular recipient of Corporate Excellence Certificate
of Management Association of Pakistan for the overall excellence. It has also received
"The American International Quality Award". The Company has also been recipient
of Top 25 Companies Award by Karachi Stock Exchange. AGTL has also received awards from
other prestigious organizations.
According to 8th five-year plan mechanization has become necessary for
intensifying production and increasing the speed of pre and post harvest farm operations.
The use of agricultural machinery for cultivation, deep ploughing, ridging, sowing and
harvesting of crops will be promoted through induction of over 150,000 tractors and modern
implements under the productivity enhancement programme.
However, the major concern is the inability of Agriculture Development
Bank of Pakistan (ADBP) to meet the commitment to encash demand drafts for tractors
already delivered to its clients. According to AGTL's annual report the ADBP currently
owes the company Rs 550 million.
For quantum leap and to attain self-sufficiency in foodgrains, there is
an urgent need to increase farm growth through the induction of tractors. Tractor is the
essential prime mover, the bulwark of agriculture.