The Pakistan Credit Rating Agency Limited
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Uswa Sikandar

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PACRA Maintains Entity Ratings of Bestway Cement Limited

Rating Type Entity
(09-Sep-22 )
(09-Sep-21 )
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. The latest period reported a reduction in cement production reflecting on economic downturn. Increase in prices of all the construction materials has impacted demand for cement as well. However, cement’s demand is expected to come full circle once the macro level fundamentals improve. Keeping the current phase of expansion in view and to maintain its position in competitive environment, Bestway is working on its two expansion projects. Greenfield expansion includes establishing a plant with capacity of 7,200 tonnes of clinker per day along with 9MW WHRP near Paikhel, District Mianwali whereas Brownfield expansion includes establishing a plant with same capacity with 9MW WHRP at its Hattar Site. Both these projects are expected to come online before the end of current financial year. In FY22, the Company picked up pace and report profits in line with the cement industry trend. Industry wide volumetric decrease in sales has been reported but better selling prices have absorbed their impact. During 9MFY22, Bestway Cement recorded net profit of PKR 10.4bln against PKR 8.3bln in 9MFY21. 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%. Coverages have been improving despite increase in borrowings rates and borrowings due to improvement in FCFO's in 9MFY22. The company’s reliance on short term as well long-term debt is increasing to support ongoing expansion projects thus impacting its leveraging as well as 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 second largest cement manufacturer of the country with total cement capacity of ~10.7mln 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 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.