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Tractors: MILLAT TRACTORS LIMITED - Analysis of Financial Statements - Financial Year 2004 - Financial Year 2010 July 27, 2011

Millat Tractors Limited (MTL) was established in 1964 to introduce and market Massey Ferguson (MF) Tractors in Pakistan.

An assembly plant was set up in 1967 to assemble tractors in semi-knocked down (SKD) condition. The company was nationalized under Economic Reforms Order in 1972 and started assembling and marketing tractors on behalf of Pakistan Tractor Corporation (PTC), which was formed by the Government for import of tractors in SKD condition.

In 1980, the Government decided to produce indigenous tractors and entrusted this task to PTC.

In 1981, the MTL took over this task.

This was the turning point in the company's history and it went about the task methodically and rapidly.

Just in one year's time, the company took a giant step towards self-reliance by setting up the first engine assembly plant in Pakistan.

The MTL made a strategic decision right in the beginning to bring those manufacturing facilities in-house for which capabilities did not exist in the country and for parts, which required high precision and investment.

Therefore, in 1984, sophisticated manufacturing facilities for the machining of intricate components were set up.

Currently, critical components like engine blocks, sump, transmission case, axle housing, hydraulic lift cover, front axle support and centre housing are all being machined most successfully in-house at MTL from local sourced castings. In 1992, the company was privatised.

The employees joined hands and took over the management by winning an open bid.

To maintain its leadership role in tractor manufacturing in the country, the MTL continues to look towards future, to identify and exploit new opportunities and to consolidate existing ones.

The Tractor Assembly Plant is part of this philosophy.

The plant started its production in 1992.

The establishment of this modern plant not only increased production capacity to 16,000 tractors per year on a single shift basis, but also provided a quantum jump to the quality of the assembled tractors and pushed the MTL into the ranks of the major tractor manufacturing companies of the world.

In 1993, MTL also acquired the management control of Bolan Castings Limited (a Public Limited Company specializing in intricate automotive castings) in partnership with employees of the company, in 1993. The company established a new company named Millat Industrial Products (Pvt) Limited to manufacture quality automotive batteries, thus enabling the Millat Group to capture the efficiencies associated with vertical integration.

In addition, the Millat Group comprises of Bolan Castings Ltd., which produces thin walled castings such as engine block, cylinder head, centre housing etc.

Also, Millat Equipment Ltd.

produces gears and shafts of international standard for tractors.

However, these subsidiaries contributed 1.18% to MTL's consolidated net sales and 8.15% to consolidated profit after taxation in FY10 (1.14% and 6.50% respectively in FY09).

Due to low contribution to consolidated MTL performance, the financial analysis in this report is based on MTL's standalone tractor operations. Recent results (1Q11)
The company achieved a sales volume of 29,718 Tractors in these nine months as against 28,939 tractors for the corresponding period of last year, showing an increase of 2.7%.

During current period, 30,638 Tractors were produced as compared to 29,865 tractors for corresponding period last year, showing an increase of 2.6%.

distribution and marketing expenses actually declined to Rs 431 million as compared to Rs 500 million, while the administrative expenses increased.

Operating profit was slightly higher at Rs 2.3 billion as compared to Rs 2.2 billion in the same period last year.

Other operating income was however higher by 60.8%, thus...
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