September 30, 2019: Pakistan Credit Rating Agency (PACRA), has maintained entity ratings of Bestway Cement Limited at ‘AA-’ for Long-term and ‘A1+’ for short-term, with a ‘stable’ outlook forecast.
Bestway Cement’s ratings reflect its leading position in the market emanating from its highest market share (22.7%) in the north region as at June-19.
The Company's recent brown field expansion and successful mergers in the past assisted to maintain its position.
During FY19, industry dynamics especially for cement players operating in north region have shifted significantly on account of diluted cement prices, increase in FED on coal import and depreciation in Pak Rupee against other currencies.
Along with these factors, muted local demand has affected the company's sales whereby volumetric sales remained largely same (FY19: 8.1mln tpa, FY18: 8.6mln tpa) – reflects capacity utilization remained at par with industry.
During FY19, the Company's margins witnessed downtrend due to aforementioned industry dynamics.
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; retirement of long-term loan in Apr-20 will further strengthen the financial risk matrix.
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.