Tumosan Eyes Boosting Tractor Sales Amid Weak LiraTaylan Bilgic
Tumosan Motor ve Traktor Sanayi AS sees an opportunity for the tractor manufacturer to grab market share as a weaker lira makes foreign imports more expensive.
“We may boost sales this year by 20 percent to about 11,000 tractors,” Tumosan Chief Executive Officer Kurtulus Ogun said in an interview in Istanbul yesterday. “Even farmers who purchased import vehicles on foreign currency installments are selling them in the second-hand market to buy local brands.”
Turkey’s lira declined 19 percent in the past year, the second-worst performance after the Argentine peso among 24 emerging market peers tracked by Bloomberg. The currency has been sliding since May as capital fled emerging markets and protests against Prime Minister Recep Tayyip Erdogan spread nationwide. Selling increased since December on concern that a graft probe will hurt political stability.
“In 2013, imports were about 16 percent of the market” Ogun said. “That share could fall to 11 percent on lira depreciation.” The local market may contract this year to about 45,000 units, he said. A government incentive plan to encourage farmers to replace aging vehicles could lift the figure to approximately 55,000, he said.
Tumosan is the number two tractor provider in the world’s seventh-biggest market, according to the Association of Agricultural Machinery and Equipment Manufacturers. The company sold 16 percent of the 53,803 tractors purchased in Turkey last year.
Turk Traktor ve Ziraat Makineleri AS, a joint venture of Koc Holding AS and CNH Industrial, dominates almost half of the local market with the New Holland and Case brands, according to a Tumosan investor presentation. Ankara-based Erkunt, and U.S.- based Massey Ferguson and John Deere are among other top brands.
The lira will trade at 2.43 per dollar at the end of the year, according to currency forwards data compiled by Bloomberg. That implies a further 8.8 percent weakening from 2.2343 at 5:40 p.m. in Istanbul today.
Exports make up about 2 percent of sales at Tumosan, a figure Ogun wants to double this year. In December, the manufacturer won a tender to provide 70 tractors to Tunisia, whose costs will be covered by the Turkish government. “We sent an extra 20 tractors with that shipment,” he said. “The tender gave us the opportunity to establish a dealership there,” the company’s 13th abroad.
With farm land of 23.8 million hectares (58.8 million acres), Turkey is the world’s seventh-largest agricultural producer. Ogun said the share of the vineyard and orchard segment, which uses smaller equipment, climbed to 7 percent of the market from 2 percent in 1993.
“Last year, 2,500 tractors below 50 horse power were sold,” he said. “That market is rapidly growing.” Tumosan is in talks with a local company for joint production of the smaller tractors, the CEO said, refusing to provide further detail.
Istanbul-based Tumosan was established as a state company in 1976. Albayrak Group, which bought the manufacturer in 2005, raised 120 million liras ($54 million) in an initial public offering seven years later as it sold 26 percent of equity.
Its shares have advanced 1.4 percent this year, compared to a 3.8 percent decline in the benchmark Borsa Istanbul 100 index. Tumosan shares fell 1.6 percent to 4.96 liras at the close today. Net income in 2013 more than doubled to 62.1 million liras on sales that rose 52 percent to 445.1 million liras. The board is expected propose a dividend payout, Ogun said.