The Pakistan Credit Rating Agency Limited
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Haider Imran

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PACRA Maintains Entity Ratings of Bestway Cement

Rating Type Entity
Action Maintain Upgrade
Long Term AA- AA-
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

Bestway Cement’s ratings reflect its established position emanating from its leading market share (18%) – fortified by acquisition of Pakcem in Apr15 – cost-efficient operational framework resulting in robust EBITDA margins, and healthy profitability. The company’s business profile is further strengthened by an established and dependable dividend stream from its strategic investment - United Bank Limited (~8% stake) - augmenting its cashflows. The entity’s financial risk, mainly reflected from strong coverages and moderately leveraged capital structure, remains low despite sizeable debt-driven acquisition. The ratings derive benefit/comfort from (i) the company’s association with Bestway Group (UK), and (ii) strong local cement demand on the back of rising economic and infrastructure activity.

In line with its plan, Bestway Cement has lately announced the merger of Pakcem (88% owned) with and into Bestway Cement effective Jan. 1, 2016. Although overall business landscape remains the same, the company is likely to benefit from management and operational synergies by consolidating its operations. Nevertheless, building team cohesiveness remains important. In view of positive sector demand, sizable expansions have been announced by the industry players. This may challenge Bestway Cement’s existing market share.

The ratings are dependent on upholding of the company’s business vis-à-vis financial risk profile. Any significant deterioration in the sector’s outlook, thereby exerting pressure on prices, may negatively impact the ratings.

About the Entity
Bestway Cement, post merger of Pakcem, operates as a single largest cement manufacturer of the country with total cement capacity of ~8.5mln tons p.a. (clinker: 8.1mln tons p.a.). Bestway Cement, listed on PSX is majority owned by Bestway Group (BWG) - UK (~76%), mainly through corporates (62%), followed by individuals (14%).

The Company's seven-member board comprises mainly BWG nominees. Two directors are Bestway Cement's executives (including CEO) while five are non-executive directors including Chairman and an independent director. The CEO, Mr. Zameer M. Choudrey, is a Chartered Accountant, associated with the group since 1984. Mr. Choudrey, also serving as Group CEO, is supported by a team of experienced professionals.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.