PACRA maintains entity ratings of Bestway Cement

September 07, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Bestway Cement Limited (PSX: BWCL) at "AA-" for long term and " A1+" for short term with a stable outlook forecast, latest press release issued by PACRA showed.

BWCL’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 an 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 maintaining its position in a 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 March 29, 2023, and February 17, 2023 respectively.

In FY23, a 16% industry-wide volumetric decrease in sales was reported and the company followed the same trend with a decline of 16% due to a reduction in both local and export sales volumes.

The company recorded a gross turnover of Rs120 billion for FY23, 17% higher compared to Rs103bn during the last year.

Higher revenue was driven by an 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 Rs10.23bn to Rs11.89bn.

The company’s ratings are strengthened by the sustainable dividend income from its strategic investment in United Bank Limited (UBL) in which the company is holding 7.65%.

The company’s reliance on short-term as well as 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 a focus on sustaining margins.

The ratings also draw comfort from the strong sponsor support (Bestway Group) and 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 the current stretched economic scenario, challenges on demand front remains vital for ratings.

Copyright Mettis Link News