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
(06-Sep-23 )
(09-Sep-22 )
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 demand and hence its production reflecting on economic downturn and inflation. However, cement’s demand is expected to come full circle once the macro level fundamentals improve. 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 of 7,200 tonnes of clinker per day along with 9 MWs Waste Heat Recovery Power Plant near Paikhel, District Mianwali and Brownfield line of 7,200 tonnes of clinker per day along with 9 MWs Waste Heat Recovery Power Plant at Hattar on Mar 29, 2023 and Feb 17, 2023 respectively. In FY23, 16% industry wide volumetric decrease in sales was reported and the Company followed the same trend with a decline of 16% due to reduction in both local and export sales volumes. The Company recorded gross turnover of PKR 120 billion for FY23, 17% higher compared to PKR 103 billion during the last year. Higher revenue was driven by 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. Net profit for the year grew by 16% from PKR 10.23 billion to PKR11.892 billion. 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 reliance on short term as well long-term debt increased to support recently completed expansion projects which impacted its 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 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.