Millat Tractors FY25 Profit Falls 38% on Sharp Sales Decline

Millat Tractors Limited (MTL) reported a 38 percent year-on-year decline in annual profit to Rs6.4 billion for the financial year ending June 30, 2025, with earnings per share (EPS) at Rs31.94. The drop came as tractor sales plunged nearly 40 percent during the year, though margins improved and dividend payouts remained robust.

The Lahore-based company, Pakistan’s largest tractor manufacturer, sold 18,580 units in FY25 compared to 30,620 units in FY24, representing a 39 percent decline. Management noted that the Punjab Government’s Green Tractor Scheme provided a one-off boost to sales during the year; without this intervention, volumes would have been even lower.

Despite weak sales, gross margins improved by 320 basis points to 26.61 percent from 23.42 percent a year earlier, reflecting better pricing and cost efficiencies. The company announced a final dividend of Rs15 per share for the fourth quarter, taking the full-year payout to Rs60 per share, equivalent to a payout ratio of 188 percent.

Quarterly results also reflected the sales slump. For the fourth quarter of FY25, Millat Tractors posted a profit after tax of Rs1.4 billion, down 25 percent year-on-year and 1 percent quarter-on-quarter. EPS stood at Rs6.89 for the quarter. Net sales dropped 44 percent year-on-year and 2 percent sequentially, as tractor sales fell to 4,062 units in the quarter, compared to 7,110 units in the same period last year and 4,411 units in the third quarter.

Gross margins in the fourth quarter came in at 25.83 percent, up 110 basis points from last year but down 250 basis points from the previous quarter. Distribution expenses fell 2 percent year-on-year and 25 percent quarter-on-quarter, in line with weaker sales volumes. Finance costs rose 14 percent due to higher short-term borrowings, while the effective tax rate dropped to 21 percent in FY25 from 39 percent the prior year, easing pressure on bottom-line earnings.

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The company’s cash returns remained strong despite the earnings contraction. The dividend yield for FY25 stands at around 9 percent based on current share prices. Looking ahead, MTL is trading at forecasted price-to-earnings multiples of 11.2 times for FY26 and 9.1 times for FY27, with expected dividend yields of 8–9 percent, according to market estimates.

The steep fall in tractor sales reflects broader weakness in Pakistan’s agriculture and rural machinery market, driven by high input costs, fluctuating farmer incomes, and adverse weather conditions. Industry observers point out that the 2022 floods had already depressed demand, and while recent flooding has been less severe, overall agricultural purchasing power remains constrained.

Millat’s improved margins provide some relief, suggesting the company has been able to partially offset volume pressures through cost control and pricing discipline. However, with annual volumes less than two-thirds of the previous year’s tally, recovery in tractor sales will be crucial for earnings stability going forward.

Analysts note that the continuation or expansion of subsidy programs like Punjab’s Green Tractor Scheme could play a key role in lifting demand. At the same time, efforts to reduce borrowing costs and manage working capital will remain vital amid elevated financing expenses.

Millat Tractors has historically been a bellwether for Pakistan’s farm mechanization drive, supplying affordable machinery to small and medium-sized farmers. The FY25 results underscore both the vulnerability of the sector to economic and climate shocks and the importance of policy support to sustain long-term demand. With earnings under pressure but dividends still attractive, investors are expected to closely watch government measures and the pace of agricultural recovery in the coming quarters.