The Pakistan Credit Rating Agency Limited
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Saadat Mirza

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PACRA Maintains Entity Ratings of Bestway Cement Limited

Rating Type Entity
(09-Sep-21 )
(11-Sep-20 )
Action Maintain Maintain
Long Term AA- AA-
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

Bestway Cement’s ratings reflect its leading position in the market emanating from its high market share in north region. The Company's brown field expansion and successful mergers in the past assisted to maintain its position. Economic activities have resumed despite continuing vicissitudes of COVID 19. Growth in local capacity utilization depicts the sector’s resilience to the impacts amid country wide lock down observed due to COVID-19 outbreak. This resulted in improved demand along with pricing implications supporting margins. Furthermore, curtailed policy rates and better cement prices giving the required supporting environment to flourish. By keeping in view the current phase of expansion and to maintain its position in competitive environment, Bestway plans for Greenfield expansion and decided to establish a plant with capacity of 7,200 tonnes of clinker per day along with 9MW WHRP. In FY21, the Company picked up pace and report profits in line with the cement industry trend. Significant increase in sales has been observed along with better margins. During 9MFY21, Bestway Cement recorded Net profit of PKR 8.3bln against Net loss of PKR 20mln in 9MFY20. The Company’s ratings are strengthened by the sustainable dividend income from its strategic investment in United Bank Limited (UBL) in which company is holding 7.65%. The company’s financial risk is categorized by efficient working capital management in terms of both cashflows and short-term borrowing. Coverages have been improved sizably as the FCFO's showed improvement in 9MFY21. The company has reprofile its debt book by converting short term debt into long term debt which will not impact the leveraging ratio and have positive impacts on current ratio. The Company's business performance with local demand remains vital with focus on sustaining margins.
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. The company's good business performance as compared to other players in current stretched economic scenario - challenges on demand front - remains vital for ratings.

About the Entity
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 22.7% in the north region. Bestway Cement, listed on PSX, is majority owned by Bestway Group (BWG) UK (77.5%), mainly through corporates (60%), followed by individual (~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.

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.