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The Pakistan Credit Rating Agency Limited
Press Release

Date
06-Sep-24

Analyst
Shujat Ehsanullah Wasim
Shujat.Ehsan@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Bestway Cement Limited

Rating Type Entity
Current
(06-Sep-24 )
Previous
(06-Sep-23 )
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 has maintained its position by taking capacity enhancement steps through organic and inorganic means. Keeping the cement expansion phase in view and to maintain its position in competitive environment, Bestway completed its two expansion projects in FY23. The company successfully completed the construction of its Greenfield cement plant and Brownfield line of 7,200 tonnes of clinker per day each along with 9 MWs Waste Heat Recovery Power Plant taking the Company's cement manufacturing capacity up to ~15.3mln tons p.a. In FY24, the overall dispatches of the industry increased by 1.6% from 44.6mln tons to 45.3mln tons. The growth in overall dispatches is on the back of healthy growth of export dispatches. The export volumes increased by 54% from 4.6mln tons in FY23 to 7.1mln tons in FY24. The Company boded well with the increase in export volumes and showed an approximately similar growth of 52% in export dispatches. However, the industry’s domestic dispatches witnessed a decrease of 5% from 40mln tons in FY23 to 38.2mln tons in FY24. Despite the decline in the overall domestic dispatches, the Company, contrarily, showed a growth of ~5% in the domestic volumetric sales on the back of higher production capacity available during FY24. The Company recorded gross turnover of PKR 145.6 billion for FY24, 21% higher compared to PKR 120 billion during the last year. Higher revenue was driven by an overall increase of 6% in volumetric sales and the increase in selling prices which was necessitated by an exorbitant and persistent increase in the input costs, thus helping the company in retention of its margins. Financial charges during the period increased by ~65% to PKR 11.2bln from PKR 6.8bln due to higher interest rates and borrowings for the new projects. Net profit for the year grew by 16% from PKR 11.892 billion to PKR 13.769 billion whereas, the net margin remained almost similar at 13.2% (FY23: 13.6%). 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 8.17%. The company’s reliance on long-term debt to support the expansion projects and reliance on short-term debt to manage the working capital cycle has impacted the Company’s leveraging, coverages as well as current ratios.
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 one of the largest cement manufacturers of the country with total cement capacity of ~15.3mln tons p.a. Bestway Cement, listed on PSX, is majority owned by Bestway Group (BWG) UK (77.5%), mainly through corporates (60%), followed by individuals (~17%). The Company's nine-member board comprises mainly BWG nominees. Two directors are Bestway Cement's executives (including CEO) while seven are non-executive directors including three 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.