KARACHI (March 22 2004): The profits of Al-Ghazi Tractors Ltd, manufacturer of Fiat brand of tractors in Pakistan, registered a massive improvement of 127 percent on back of higher demand from farmers in 2003.

The profit between January and December 2003 increased to Rs 909 million, against Rs400 million in 2002.

Earnings depicted a significant upsurge resulting from higher sales volume on the back of improved farmer cash flow position (good crop output and prices), renewed penetration by the largest financing participant of the agrarian economy ie Zarai Taraqiati Bank (ZTBL) and other banks and higher water availability that gave pace to agricultural activity and thus the demand for agricultural inputs.

Gross margins resulted in 130 percent improvement in gross profits to Rs 1.507 billion. Other income and financial charges declined by 20 percent and 15 percent, respectively.

As per market punters' expectations, Al-Ghazi declared Rs 10 per share as final cash dividend resulting in a cumulative Rs 15 per share total payout during FY2003 compared to Rs 10 per share during 2002.

According to Jahangir Siddiqui Capital Market head of research Tanivr Abid, tractor sales during July-February 2004 stood at 22,420 units compared to 14,260 units during the same period of FY2003.

The impressive 57 percent growth in tractor sales is attributable to improved returns to the farmers resulting from better availability of irrigation water, increase in production of crops like rice, cotton, sugarcane and improved market price of most of the crops.

Furthermore, enhanced lending by ZTBL and other banks also supported the increase in tractors demand during the period. Agricultural prospects going forward appear extremely sanguine on account of higher water availability and favourable crop outlook.

According to a news report, the Bank of Punjab (BoP) disbursed Rs 430 million to farmers for the purchase of tractors. Furthermore, the bank offered around 8 types of lending schemes to the farming community.

On the other hand, ZTBL disbursed Rs 29 billion during 2002-03 as against Rs 28 billion during 2001-02. Going forward, tractor demand and volumes are to remain strong with different banks expected to play a key role in forwarding loans to farmers.

According to another news report, Rs 65.5 billion has been allocated for agricultural loaning during FY04 of which a total of Rs 33 billion will be disbursed by ZTBL as against Rs 29 billion disbursed during 2002-03.

The major five local banks including National Bank, United Bank, Habib Bank, Muslim Commercial Bank and Allied Bank would reportedly disburse around Rs 22 billion. Furthermore, the Punjab Provincial Co-operative Bank will provide Rs 8 billion and local private banks would disburse the remaining amount.

The following is the full-year earnings report of the company (in millions of rupees).
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2002 2003 Change
(%)
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Sales 3,587 5,460 52
Cost of Good Sold 2,932 3,953 35
Operating Expenses 124 121 3
Other Income 140 119 -15
Profit Before Taxation 617 1,396 126
Profit After Taxation 400 909 127
EPS (Rs) 10.26 23.29 127
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Courtesy Business Recorder