PACRA maintains entity ratings of Bestway Cement

September 12, 2022: Pakistan Credit Rating Company (PACRA), has maintained entity ratings of Bestway Cement at AA- for the long term and A1+ for short term with a stable outlook forecast.

As per the rating agency, Bestway Cement’s ratings reflect its leading position in the market emanating from its high market share in the 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 the economic downturn. An 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 a 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 the 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.

Press Release