Millat Tractors’ Profits Plunge 38% Amidst Declining Sales

Islamabad: Millat Tractors Limited (MTL) reported a significant 38% year-on-year drop in its unconsolidated profit for the fiscal year 2025, reaching Rs6.4 billion (earnings per share of Rs31.94). This decline comes as tractor sales plummeted by 39% compared to the previous fiscal year, from 30,620 units to 18,580 units.

The company’s performance was somewhat cushioned by the Punjab Government’s Green Tractor Scheme, which provided a temporary sales boost. Without this intervention, the sales figures would have been even lower. Despite the drop in revenue, gross margins saw an improvement, rising by 320 basis points year-on-year to 26.61%.

The fourth quarter of FY25 also reflected the downward trend. MTL posted a profit after tax of Rs1.4 billion (EPS of Rs6.89), marking a 25% decrease year-on-year and a slight 1% decline quarter-on-quarter. Net sales in the fourth quarter mirrored the overall annual performance, dropping by 44% year-on-year and 2% quarter-on-quarter. Tractor sales specifically experienced a substantial 43% yearly decline and an 8% quarterly decline, reaching only 4,062 units in 4QFY25.

Despite the lower sales volume, gross margins in 4QFY25 improved by 110 basis points year-on-year to 25.83%, although they decreased by 250 basis points compared to the previous quarter. Distribution expenditures were also down 2% year-on-year and 25% quarter-on-quarter due to the reduced sales activity. However, finance costs rose by 14% year-on-year due to increased short-term borrowing.

The company’s effective tax rate for FY25 was 21%, significantly lower than the 39% recorded in FY24. In 4QFY25, the effective tax rate was 28%, down from 38% in 3QFY25 and 46% in 4QFY24. MTL announced a dividend of Rs15 per share in 4QFY25, bringing the total dividend for FY25 to Rs60 per share, representing a payout ratio of 188%.

Currently, MTL is trading at a FY26E/27F price-to-earnings ratio of 11.2/9.1x and a dividend yield of 8/9%, respectively.