PACRA Maintains Entity Ratings of Bestway Cement Limited
Bestway Cement’s ratings reflect its leading position in the market emanating from its highest market share (19.7%). The Company's recent brown field expansion and successful mergers in the past helped company to maintain its position.The company has cost efficient operational framework, healthy margins, and robust profitability. Despite the sharp decline witnessed in margins, industry wide, on account of 1) international coal prices and relevant duties, 2) increase in FED and 3) dip in cement prices – Bestway managed to depict good margins. The company’s recent expansion of 1.9 mln tpa was commenced in Jun-18 and will be fully operational in FY19 which helped in maintaining its market share regardless of the expansions by many other players. The company’s ratings are further strengthened by the sustainable dividend income from its strategic investment in United Bank Limited (UBL) in which company is holding 7.68%. The company’s financial risk is categorized by efficient working capital management in terms of both cashflows and short term borrowing, low leveraged structure, strong coverages, remains low. The ratings also draw comfort from the strong sponsor support (Bestway Group).
The ratings are dependent on upholding of company’s leading market position along with sustenance of business volumes and margins. Company's long term debt repayment is important to improve financial risk matrix. The company's strong business performance in current stretched economic scenario - challenges on demand front - remains vital for ratings.
Bestway Cement, operates as the largest cement manufacturer of the country with total cement capacity of ~10.7mln tons p.a with the market share of 19.7%. Bestway Cement, listed on PSX, is majority owned by Bestway Group (BWG) UK (77%), mainly through corporates (60%), followed by individuals (~17%). The Company's eight member board comprises mainly BWG nominees. Two directors are Bestway Cement's executives (including CEO) while six are non-executive directors including two independent members. The board’s Chairman Mr. M. Anwar Pervez, is an experienced professional, also a founding member of Bestway Group. The CEO, Mr. Zameer Mohammed Choudrey, is a Chartered Accountant, associated with the group since 1984, supported by a team of experienced professionals.