Al-Ghazi Tractors’ ratings reaffirmed by VIS, outlook remains stable

October 10, 2024 (MLN): The VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Al-Ghazi Tractors Limited (PSX: AGTL) at ‘A+’ for long-term and ‘A-1’ for short term with a stable future outlook, latest press release issued by VIS showed.

Medium to long term rating of ‘A+’ reflects good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy.

Whereas, short term rating of ‘A-1’ signifies strong likelihood of timely repayment of short-term obligations with excellent short-term liquidity factors.

To recall, the previous rating action was announced on September 18, 2023.

The assigned ratings incorporate strong sponsors’ profile of AGTL where majority shares are held by the two multinational conglomerates; Al Futtaim Industries Company LLC and CNH Industrial (CNHI).

AGTL is the sole manufacturer of “New Holland” tractors in Pakistan having technical collaboration with CNHI. The company’s registered office is located in Karachi while the corporate office is in Lahore.

The assigned ratings reflect AGTL’s competitive position as one of the two major players in Pakistan’s tractor market.

However, AGTL’s market share eroded during the period under review on account of increasing preference for competitor’s higher horsepower tractors. To recapture the market share, the Company intends to introduce a higher horsepower tractor model in 4QCY24.

The company registered sound growth in revenue with increased unit prices despite lower volumetric off-take.

Gross margin increased as a result of improvement in material procurement process and partial cost-pass to customers.

Net profit recorded double-digit growth driven by higher revenue, strong gross margin and notable decrease in financial charges in the period under review.

Moreover, cash flows remained sufficient and debt coverages stayed strong, resulting in overall improvement in the liquidity profile.

Furthermore, the company’s capitalization profile further strengthened during the period under review as the capitalization indicators continue to improve on timeline basis.

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