Al-Ghazi: Plowing ahead

A subsidiary of the Al-Futtaim group of Dubai, Al-Ghazi Tractors Limited is a manufacturer of New Holland tractors in technical co-operation with Case New Holland, the foremost manufacturer of agricultural tractors in the world. Being a household name amongst the farming community, AGTL has a widespread presence across Pakistan, with as many as 82 dealers and 3,000 mechanical workshops spread all over the country. Following the fiasco that was last year, AGTLs half-yearly records show that the company is on the much firmer ground this time around. While 2011 started out on a great note -with Al-Ghazi managing to post a record profit of Rs972.8 million during 1QFY11, which was incidentally the highest since its inception- the following quarters saw a crash in the market following the sudden imposition of a 16 percent sales tax on agricultural equipment.

In the months to follow, AGTL, along with other tractor manufacturers, witnessed tractor sales plummet dangerously and had to suffer long stretches of the plant closure. Fast forward nearly a year, and the second quarter ended sales of nearly Rs4.6 billion- jumping 29 percent from the same period last year – are a testament to the fact that the company is back on track following its previous trajectory of success. Whereas a comparison with sales figures from the same period last year reveals unnaturally flattering growth statistics due to the low-base effect, a comparison of sales against the same period in 2010 reveals a healthy increase of 4 percent during the 2QFY12. However, a similar comparison between FY11 and FY12 at half-year draws negatives for 2012, mainly because of the exceptional first quarter that AGTL had in FY11 which saw them selling 8,602 tractors as compared to 6,004 that were delivered during the first quarter of FY12. Following the company’s initiative to engage pro-actively with farmers and introduce a newer version of agricultural implements, sales have gone up to Rs 7.9 billion at the half year-mark and the pent-up demand from last year means that they are likely to go up higher in the coming quarters.

With profit after taxation going up to Rs596 million versus Rs510 million that was recorded during the second quarter, earnings have climbed up to Rs13.88 per share as compared to an EPS of Rs 11.89 per share recorded at the close of 2QFY11. Looking forward, production and demand for the locally manufactured agricultural implements are likely to remain strong. During the first quarter, AGTL recorded bookings for 9,234 tractors, out of which it could produce only 4,350 units. Similarly, the Sindh government has also announced the launch of the 3rd leg of its rural incentive scheme which will see the distribution of 6,000 tractors among farmers at a subsidized rate. Subsequently, the backlog of orders and demand glut for tractors is therefore likely to keep the industry steady on its feet and AGTL thriving in the coming months.