Millat Tractors: 2026-2026 — Crises, Record Growth and a New Chapter in Pakistan's Agri-Machinery Industry

Millat Tractors Limited (PSX: MTL) started its journey in Pakistan in 2026. For more than half a century, the company has been manufacturing and selling tractors, diesel generating sets, prime movers, diesel engines and forklift trucks. In addition, MTL is involved in the sale, implementation and support of IFS applications for industrial and financial management. As of June 30, 2026, the company's annual production capacity was 30,000 tractors on a double-shift basis.

As of June 30, 2026, MTL had total shares of 199,515,947, held by 15,461 shareholders. The local general public holds 37.02 percent — the largest stake. Next are directors, the CEO, their spouses and minor children, holding 31.59 percent. Associated companies, undertakings and related parties hold 11.37 percent. Insurance companies hold 10.64 percent, trusts 3.50 percent, banks-DFIs-NBFIs-pension funds 2.65 percent, joint stock companies 1.15 percent, and NIT and ICP hold 1.07 percent. The rest is distributed among other categories.

This ownership structure carries an important message: while the founder-director group's control is visible, broad public ownership has made the company a symbol of trust in Pakistan's capital market. High participation by insurance and institutional investors means long-term confidence; the 37.02 percent retail stake makes it a popular public champion stock. But the 31.59 percent holding by the director-CEO group also raises questions of governance balance and transparency — a familiar reality for companies standing between family control and institutional discipline.

The financial journey, however, is anything but linear. After a revenue collapse in 2026, MTL recovered in 2026 and 2026, hit the floor again in 2026, posted record growth in 2026, suffered a dramatic fall in 2026, and returned to moderate growth in 2026. The bottom line tells a similar story — growth only in 2026, 2026 and 2026, and contraction in other years. Margins were volatile: the gross margin, which had shrunk until 2026, revived in 2026, slipped again in 2026, and inched up in 2026 while operating and net margins kept falling. In 2026 and 2026, gross and net margins improved steadily; the operating margin rose in 2026 and stayed almost intact in 2026. In 2026, all margins strengthened.

Now let us turn to the year-by-year analysis.

2026: The Post-Pandemic Revenge

After two ruthless years, MTL's topline grew 91.58 percent year-on-year in 2026 to Rs.43,953.78 million. The foundation was a 71.5 percent growth in volumes — 35,515 units. The economy was showing signs of post-pandemic recovery; agriculture grew 2.8 percent. A bumper wheat crop and higher minimum support prices (MSP) for various crops improved farmers' cash flows and liquidity significantly.

The company achieved its highest-ever export volume of 2,000 tractors in 2026. A favorable exchange rate for most of the year boosted gross profit by 118.37 percent year-on-year, pushing the gross margin from 18.51 percent to 21.09 percent. However, carriage and freight costs rose significantly due to export sales, and together with the trademark fee paid to Massey Ferguson, distribution costs grew by 50.51 percent. Administrative expense rose 29.27 percent due to higher payroll despite a reduction in employee count to 346. Other expense grew 108.27 percent on higher provisioning for WWF and WPPF.

Fortunately, other income grew 163 percent, driven by strong dividends from Millat Equipment Limited, gains on sales of short-term investments, and returns on bank deposits and TDRs. As a result, operating profit rebounded 147.48 percent year-on-year, with the operating margin reaching 17.95 percent from 13.89 percent in 2026. Finance cost fell 95.75 percent due to significantly lower short-term borrowings and monetary easing. Net profit rose 168.81 percent to Rs.5,780.93 million, with EPS of Rs.59.68 and a net margin of 13.15 percent, against EPS of Rs.38.36 and a net margin of 9.37 percent in 2026.

2026: Inflation and Interest Rate Pressures

In 2026, the macroeconomic and political backdrop was bleak. High energy costs, a rising discount rate and sharp currency depreciation squeezed MTL's performance. Volumes fell by only 510 units, but the topline grew 21.43 percent to Rs.53,374.42 million thanks to higher tractor prices. Rising raw material, fuel and power costs crushed the gross margin to 19.11 percent, though gross profit in absolute terms grew 10 percent.

High inflation pushed payroll costs up — even as the employee count fell to 334 — driving selling and administrative expenses up by 8.60 percent and 11.92 percent respectively. Higher trademark fees added pressure. However, dividend income lifted other income by 430.17 percent to Rs.271.67 million, enabling operating profit to grow 12.73 percent, albeit with the operating margin down to 16.66 percent.

The real blow was a 2354.87 percent surge in finance cost, caused by repeated hikes in the discount rate. Liquidity constraints compounded the trouble: the FBR did not refund Rs.5.7 billion of sales tax, forcing the company to take large short-term borrowings for working capital. The imposition of a super tax pushed the effective tax rate to 37.52 percent in 2026, against 26.63 percent in 2026. Consequently, net profit fell 6.47 percent to Rs.5,407.01 million, with a net margin of 10.13 percent and EPS of Rs.28.19.

2026: Flood-Hit Farmers and Industry Recession

2026 began with devastating floods in the southern region. Farmers' pockets shrank, squeezing tractor demand from the start. Sky-high inflation, rupee depreciation, a high discount rate, spiked energy charges and import restrictions together wrecked the highly import-oriented automobile industry. MTL produced only 19,022 units — 45.3 percent less than in 2026 — translating into 63 percent capacity utilization, even worse than the 2026 level.

The topline fell 17.21 percent year-on-year to Rs.44,190.84 million, with sales volume down 47 percent. Cost of sales fell 18.13 percent, limiting the gross profit decline to 13.29 percent; the gross margin rose to 20 percent due to upward price revisions aimed at passing on cost hikes. Operating expenses surged 15 percent because of higher trademark fees and payroll. With significantly lower dividend income and exchange losses from the weaker rupee, MTL booked net other expense of Rs.319.01 million. Operating profit fell 24.57 percent, with the margin slipping to 15.18 percent. Finance cost rose 496.70 percent due to an unparalleled discount rate and considerably higher long-term and working-capital borrowings.

Net profit slid 37.53 percent to Rs.3,377.64 million, with EPS of Rs.17.61 and a net margin of 7.64 percent — the lowest among all years under review.

2026: Record Comeback

2026 was a record year for MTL. The topline grew 107.13 percent to Rs.91,534.50 million. The company produced 30,479 tractors, achieving 102 percent capacity utilization. Dispatches stood at 30,620 units, up 64.43 percent year-on-year, driven by improved farm economics and robust growth in major crops. Cost of sales rose 198.31 percent, but gross profit grew 142.40 percent, taking the gross margin to a new high of 23.42 percent.

Selling and distribution expenses rose 77.68 percent due to a massive spike in the trademark fee paid to Massey Ferguson Corp, insurance and salaries. Administrative expense surged 87.33 percent because of higher payroll — employee count jumped from 336 to 473. Other income strengthened 142.39 percent on hefty dividends from Millat Equipment Limited and higher returns on bank deposits, but the impact was largely offset by a 59.43 percent rise in other expense due to higher profit-related provisioning. Operating profit rose 168.63 percent, with the operating margin jumping to 19.68 percent. The company cut finance cost by 12.32 percent by paying off outstanding liabilities. Net profit surged 202.72 percent to Rs.10,224.875 million, with EPS of Rs.52.26 and a net margin of 11.17 percent.

2026: The Year of Demand Destruction

In 2026, the euphoria reversed. The topline fell a drastic 43 percent to Rs.52,108.997 million, with sales volume down 39.32 percent to 18,580 units. Of these, 5,795 tractors were sold under the Green Tractor Subsidy Scheme of the Government of Punjab. Capacity utilization plunged to 62 percent, from 102 percent a year earlier.

Agriculture grew only 0.56 percent in 2026, as adverse weather affected major crops including wheat, cotton, sugarcane, rice and maize. The tractor industry recorded its lowest sales in two decades — just 29,192 units. Cost of sales fell 45.45 percent due to lower production, lower inflation and an improved local currency. Gross profit deteriorated 35.30 percent in absolute terms, yet the gross margin reached its highest level of 26.61 percent. Selling and distribution costs fell 14.25 percent on lower trademark and insurance fees. Administrative expense rose 19.16 percent mainly due to higher payroll, even though the workforce was streamlined from 473 employees in 2026 to 464 in 2026.

Lower provisioning for WWF and WPPF pulled other expense down 22.65 percent. But other income plummeted 44 percent — no dividend from Millat Equipment Limited, lower returns on bank deposits due to monetary easing, lower interest on early payments and advances, and no exchange gain recognized. Operating profit tapered off 43.19 percent, yet the operating margin stayed almost intact at 19.60 percent. Despite monetary easing, finance cost mounted 82.60 percent because of a massive spike in short-term borrowings, as the company's sales tax refund of Rs.7.588 billion was not processed during the year.

Net profit weakened 37.67 percent to Rs.6,372.928 million, translating into EPS of Rs.31.94 and a net margin of 12.23 percent.

2026: Cost Pressure, Yet Strong Margins

In 2026, net sales grew 22.35 percent year-on-year to Rs.63,755.24 million. Volumes, however, were weak. Delays in implementing government subsidy schemes, restricted access to affordable financing, and spikes in fertilizer, fuel and seed prices squeezed farmers' ability to invest in new machinery. Yet higher per-unit prices — driven by increases in steel, engine and imported component costs — lifted net sales.

Cost of sales grew by a lesser 13.47 percent, allowing gross profit to rise 46.85 percent and the gross margin to climb to 31.94 percent — the highest in six years. Distribution expense rose 24.82 percent, likely due to higher fuel prices pushing up freight. Administrative expense ticked up 8.16 percent as a higher minimum wage raised payroll. Other expense rose 26.67 percent, likely due to higher provisioning for WPPF and WWF. Other income dipped 6.25 percent, possibly due to the high-base effect of selling investments in the previous year. Operating profit rose 55.26 percent, with the operating margin jumping to 24.93 percent.

Finance cost tapered off 32.85 percent due to monetary easing, but liquidity constraints persisted as the sales tax refund continued to mount, so external borrowings kept rising. Net profit improved 23 percent to Rs.7,840.789 million. The report shows EPS of Rs.19.65; although profit grew 23 percent, EPS looks lower than the previous year's Rs.31.94 — possibly due to a change in the share-count base, a point investors should note. The net margin stood at 12.30 percent.

The Road Ahead

There are signs of hope for the industry. The start of the Green Tractor Scheme for Medium Horse Power Tractors, seasonal demand from the wheat harvest cycle, and flood rehabilitation drives are positive omens. The company also plans to focus more on exports to offset thin domestic demand.

The most significant development: MTL has recently entered into a distribution agreement with Lovol Intelligent Agricultural Technology Co., the largest agricultural machinery manufacturer in China. Under the agreement, MTL will distribute high-technology and efficient agricultural machinery in Pakistan, strengthening its product range and enhancing its presence in the agricultural market.

Analyst's View

This six-year account shows that MTL's profits rest on three things: the crop cycle, government policy — subsidies and tax refunds — and the company's own cost-control capability. The net margin sinking to 7.64 percent in 2026, the record profit of 2026, the demand collapse of 2026, and the 31.94 percent gross margin of 2026 prove that the company knows how to contract in crisis and rebound quickly when opportunity arrives.

However, stalled sales tax refunds and rising external debt dependence are a concern for long-term liquidity. A good company does not run on taxpayers' money, but when the state delays its own obligations, even a sound firm is forced to lean on bank loans — the stuck refunds of Rs.5.7 billion in 2026 and Rs.7.588 billion in 2026 tell that story. Policy shocks such as the super tax also distort corporate planning.

All in all, MTL is a mirror of Pakistan's agricultural economy. When farmers have money, MTL's balance sheet smiles; when crisis hits, the first scar appears in the company's books. Going forward, the Green Tractor Scheme, the export push, and the Lovol agreement are the three pillars that will determine MTL's destination for the next decade. The question is not just whether the company can bounce back; the question is whether Pakistan's policymakers will give producers like MTL enough room to breathe through affordable farm financing and timely refunds.