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Al-Ghazi Tractors declares 150% cash dividend

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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 income

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.

OUTLOOK

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.