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Business Recorder
28-07-2025
- Business
- Business Recorder
Bestway Cement Limited
Bestway Cement Limited (PSX: BWCL) was incorporated in Pakistan as a public limited company in 1993. The company is engaged in the manufacturing and sale of cement. BWCL is the subsidiary of Bestway International Holdings limited (BIHL) which holds 56.43 percent shares of BWCL. BICL is the subsidiary of Bestway Group Limited (BGL) which is the ultimate parent company of BWCL. Pattern of Shareholding As of June 30, 2024, BWCL has a total of 596.253 million shares outstanding which are held by 8641 shareholders. 60.34 percent of the company's shares are held by Associated Companies, Undertakings and Related Parties which also includes its holding company, Bestway International Holdings Limited (BIHL). Local General Public accounts for 21.15 percent of BWCL's shares followed by Directors, CEO, their spouse and minor children with a stake of 17.16 percent in the company. The remaining shares are held by other categories of shareholders. Financial Performance (2019-24) Over the period under consideration, BWCL's topline has only seen a drop in 2020. Conversely, its bottomline plunged in 2019, 2020 and 2022. BWCL's margin which had been shrinking until 2020 posted a tremendous rise in 2021. Gross margin continued to grow in 2022, however, operating margin remained static and net margin faded. In 2023, operating margin posted a rise to reach its optimum value; however, gross and net margin slightly plunged. In 2024, gross margin stayed intact while operating and net margins diminished. The detailed performance review of each of the years under consideration is given below. In 2019, BWCL's topline could hardly muster 1.36 percent year-on-year growth to clock in at Rs.53,601.51 million. During the year, the overall industry volumes dropped by 2 percent on account of slow construction activity amidst slow disbursement of PSDP funds. Moreover, India also imposed import duty of 200 percent and restriction on import of cement from Pakistan which resulted in depressed export volumes. BWCL's sales volume nosedived by 5 percent year-on-year in 2019 to clock in at 8.126 million tons as against the sales volume of 8.590 tons recorded in 2018. Due to depressed demand, the company utilized 76 percent of its plant capacity in 2019 versus 97 percent capacity utilization registered in the previous year. Cost of sales grew by 10.69 percent year-on-year in 2019 on account of steep depreciation of Pak Rupee, high inflation and energy cost. This translated into 15.35 percent decline in gross profit in 2019 with GP margin inching down from 35.84 percent in 2018 to 29.93 percent in 2019. Distribution expense dropped by 17.70 percent year-on-year in 2019 due to a massive cut in export freight and handling charges in 2019. Administrative expense posted a plunge of 65.52 percent in 2019 which was the result of a massive drop in amortization expense. Other expense also slid by 32.11 percent year-on-year in 2019, which was on account of lower compensation to the landowners as per the Supreme court's directive for the land acquired at Hattar plant. Other income couldn't prove to be encouraging either and lost its footing by 28.10 percent in 2019 on the back of lower income from the disposal of waste materials. All these factors contributed towards 6.52 percent dive in BWCL's operating profit in 2019 with OP margin sliding down to 24.79 percent versus OP margin of 26.88 percent posted in 2018. Finance cost gave another major blow as it ballooned by 149.56 percent in 2019. High discount rate as well as increased borrowing to set up a new plant with an annual capacity of 1.8 million tons were the main reasons behind high finance cost. However, finance cost was largely offset by share of profit of equity accounted investees which grew by 7.91 percent in 2019. The bottomline plummeted by 23.26 percent year-on-year in 2019 to clock in at Rs.10,097.29 million with NP margin of 18.84 percent versus NP margin of 24.88 percent posted in 2018. EPS dropped from Rs.22.07 in 2018 to Rs.16.93 in 2019. In 2020, BWCL witnessed 30.73 percent year-on-year dive in its net sales which clocked in at Rs.37,128.73 million. While the industry was already grappling against macroeconomic headwinds which had culminated in lackluster construction activity in the country, COVID-19 further fueled the fire resulting in 1 percent plunge in the industry's domestic sales. Industry-wide export sales posted 20 percent growth in 2020 which mainly came on the back of robust clinker exports. BWCL's sales slumped by 10 percent year-on-year in 2020 to clock in at 7.311 million tons. The company utilized only 69 percent of its plant's capacity during the year on the back of depressed demand. Higher input cost coupled with low cement prices resulted in 93 percent decline in BWCL's gross profit in 2020 with GP margin considerably thinning down to 3 percent. Distribution and administrative expense dropped by 40.69 percent and 18.57 percent respectively in 2020. BWCL didn't book any provisioning against WWF and WPPF in 2020, resulting in 97.97 percent fall in other expense. Gain on the sale of property, plant and equipment coupled with compensation from supplier culminated into 102.62 percent growth in other income in 2020, however, other income was still less than 1 percent of BWCL's net sales in 2020. Hence, it couldn't produce any significant impact on the bottomline. BWCL incurred operating loss of Rs.25.91 million in 2020. Finance cost showed no mercy and grew by 43.59 percent in 2020 due to higher discount rate in the last quarter of 2020 coupled with low cash generation from operations. Share of profit from investees grew by 14.93 percent in 2020 due to superior performance of UBL during the year. BWCL posted loss before tax of Rs.506.48 million in 2020, however, tax credit culminated into net profit of Rs.49.25 million. NP margin stood at a skimpy 0.13 percent in 2020 while EPS slid down to Rs.0.08. The demand that remained suppressed for the two successive years posted a staggering rebound in 2021 owing to construction package announced by the government as well as rise in infrastructure and real-estate projects in the country. Cement industry's domestic volume grew by 20 percent in 2021 while exports registered 16 percent surge. BWCL made the most of the improved macroeconomic scenario and attained a stunning 53.15 percent growth in its topline in 2021. This came on the back of 18 percent rise in the company's off-take, which clocked in at 8.66 million tons coupled with improved prices. In 2021, BWCL's capacity utilization stood at 81 of sales only rose by 11.80 percent in 2021 due to relatively stronger Pak Rupee compared to the previous year and also because the company met 45 percent of its power requirements through its internal Waste Heat Recovery plant, boilers and gensets. Better pricing and cost control measures resulted in gross profit escalating by 1386.78 percent with GP margin jumping up to 29.20 percent in 2021. The company was able to curtail its distribution expense by 23 percent in 2021 by managing freight and handling expense and payroll expense despite higher sales volume. Administrative expense also grew marginally by 4.78 percent in 2021 despite an increase in the number of employees from 1501 in 2020 to 1537 in 2021. Other expense multiplied by around 5572.73 percent to clock in at Rs.949.79 million in 2021 as the company booked hefty provisioning for WWF and WPPF in 2021 which it didn't do in the previous year. Other income didn't show any significant movement in 2021 and rose by a mere 3 percent. The company was able to post operating profit of Rs.14,690.56 million in 2021 as against operating loss registered in the previous year. This is translated into OP margin of 25.83 percent in 2021. Better cash generation as well as monetary easing enabled the company to push its finance cost down by 5024 percent in 2021. Better share of profit from UBL offset the finance cost and translated into net profit of Rs.11,577.724 million in 2021 which was up by 23407.11 percent when compared to last year's net profit. NP margin clocked in at 20.36 percent in 2021 while EPS posted a strong rebound to settle at Rs.19.42. The growth trajectory of BWCL's topline continued in 2022. The company posted 27.27 percent growth in its topline, which clocked in at Rs.72,370.53 the growth didn't come on the heels on improved volumes. Rather, the impetus was provided by upward revision in cement prices in 2022. The local industry shrank during the year whereby the domestic off-take plunged by 1 percent whereas export off-take registered 44 percent fall in 2022 on the back of deteriorating macroeconomic conditions, political mayhem, high inflation and cost of borrowing as well as depreciation of Pak Rupee which dented demand. BWCL's sales volume dropped by 10 percent year-on-year in 2022 to clock in at 7.839 million tons. Plant capacity utilization also stood at 73 percent in 2022 due to dampened demand. Cost of sales grew by 22.64 percent year-on-year in 2022; however, by passing the onus of cost hike on to the consumers, BWCL was able to attain a higher GP margin of 31.77 percent in 2022. Distribution expense grew by a massive 59 percent year-on-year in 2022 which came on the back of a huge spike in payroll expense of sales force and elevated freight charges during the year. Administrative expense also registered a steep 160.64 percent jump on account of higher payroll expense as the number of employees grew from 1537 in 2021 to 1921 in 2022, and also because of generous donations. Other expense also considerably grew on account of provisioning done for WWF and WPPF and the write-off of receivables related to excise duty paid on sales in previous years. Operating profit grew by 27.28 percent in 2022; however, OP margin remained stagnant at 25.84 percent. Higher discount rateincreased working capital requirements as well as capital expenditure drove the finance cost up by 38.28 percent in 2022. However, once again, the share of profit from UBL was robust enough to offset the finance cost. While profit before tax grew by 24.52 percent year-on-year in 2022, 130 percent increase in tax expense due to the imposition of super tax resulted in 11.56 percent plunge in net profit which stood at Rs.10,238.086 million in 2022. NP margin stood at 14.15 percent while EPS slipped to Rs.17.17 in 2022. In the year ended June 2023, BWCL's topline posted 21.24 percent growth year-on-year to clock in at Rs.87,741.81 million. While the construction activity remained sluggish during the year on account of dejected macroeconomic indicators, the growth was led by high prices. Overall industry volumes also dwindled in 2023 whereby local and export sales volume dropped by 16 percent and 13.13 percent respectively as higher construction cost, political chaos and hike in discount rate kept the potential investors at GP margin registered a nominal dip to clock in at 31.13 percent in 2023 due to passing on cost hike burden to the consumers. Distribution expense also posted a meager 1.57 percent uptick in 2023 which also speaks volume of the depressed off-take during the year. Low-capacity utilization reduced the human resources requirement resulting in a reduced payroll expense. This pushed the administrative expense down by 37 percent in 2023. Other expense also followed the suite and registered 22.22 percent cut in 2023. However, other income proved to be encouraging and clocked in at Rs.1382.99 million in 2023 as against the operating expense of Rs.445.32 million in 2022 due to write off of receivables related to excise duty. Operating profit grew by 37.49 percent year-on-year in translated into OP margin 29.30 percent in 2023. Finance cost continued to be the source of concern for the company and posted 361.23 percent hike in 2023 on the back of high discount rate and increased borrowings. Share of profit from UBL, despite posting 74.64 percent growth in 2023, couldn't offset the huge finance cost which dampened the bottomline growth to 16.14 percent in 2023. Net profit stood at Rs.11,891.698 million in 2023 with NP margin of 13.55 percent. EPS grew to Rs.19.94 in 2023. In 2024, BWCL posted 18.44 percent year-on-year growth in its topline which clocked in at Rs.103,922.26 million. During the year, the volume of the overall cement industry dwindled by 5 percent to clock in at 38.2 million tons. This was due to depressed politico-economic backdrop of the country. The cement sector found its safe haven in the export sales, which mounted to 54 percent to clock in at 7.1 million tons. This was due to Pak Rupee depreciation which made the Pakistani cement attractive to the international buyers. Talking about BWCL, it registered 6 percent higher sales volume during the year which was recorded at 6.96 million tons in 2024. This was due to the instigation of two new manufacturing lines at Hattar and Mianwali. Improved volumes coupled with increased selling prices enabled the company to record 17.98 percent higher gross profit in 2024 with GP margin staying intact at 31 percent. Distribution expense surged by 35 percent in 2024 on account of higher freight & handling charges mainly due to improved export volumes. Administrative expense escalated by 52.80 percent in 2024 due to higher payroll expense. This was despite the fact that BWCL streamlined its workforce from 2128 employees in 2023 to 1979 employees in 2024. Other expense ticked up by 14 percent in 2024 due to increased provisioning done for WWF. Other income deteriorated by 52 percent in 2024 due to considerably thinner income recognized on short-term investment and lower gain recorded on the disposal of property, plant & equipment. BWCL recorded 12.36 percent uptick in operating profit in 2024 with OP margin ticking down to 27.80 percent. Although the company discharged a considerable portion of its external borrowings in 2024, high discount rate resulted in 64.21 percent elevated finance cost in 2024. Share of profit of equity accounted investee grew by 26.50 percent in 2024 particularly on the back of profit from UBL. Net profit improved by 15.78 percent to clock in at Rs.13,768.575 million in 2024 with EPS of Rs.23.09 and NP margin of 13.25 percent. Recent Performance (9MFY25) During the period under review, BWCL's net sales ticked up by 2.42 percent to clock in at Rs.81,999.478 million. Competitive international pricing and increased global demand led to 28.1 percent higher export volumes of the local industry, which clocked in at 6.5 million tons. Conversely, local sales of the overall cement industry dipped by 6.6 percent to clock in at 27.5 million tons due to higher interest rates, taxes and construction cost. BWCL also recorded 4.5 percent dip in its sales volume which clocked in at 5.17 million tons in 9MFY25. Cost of sales plummeted by 5.11 percent due to depressed dispatches as well as the company's increasing inclination towards the use of alternate energy. However, with price optimization, the company was able to drive its gross profit up by 20.35 percent in 9MFY25 with GP margin recorded at 34.73 percent versus GP margin of 29.56 percent posted in 9MFY24. Distribution and administrative expense mounted by 26.52 percent and 32.96 percent respectively in 9MFY25 due to inflationary pressure. Higher profit related provisioning appears to be the cause of 57.58 percent higher other expense recorded in 9MFY25. However, it was conveniently offset by 139.40 percent higher other income posted during the period. Operating profit picked up by 21.13 percent in 9MFY25 with OP margin clocking in at 31.50 percent versus OP margin of 26.63 percent recorded during the same period last year. Monetary easing coupled with lower outstanding liabilities at the end of the period resulted in 26.42 percent decline in finance cost in 9MFY25. Finance cost was offset by 113.11 percent progress exhibited by the share of profit of equity accounted investee in 9MFY25. BWCL's net profit clocked in at Rs.17,541.45 million in 9MFY25, up 69.98 percent year-on-year. This translated into EPS of Rs.29.42 in 9MFY25 versus EPS of Rs.17.31 recorded in 9MFY24. NP margin also posted a phenomenal growth from 12.89 percent in 9MFY24 to 21.39 percent in 9MFY25. Future Outlook With the improvement in macroeconomic indicators, construction activity is expected to pick up. However, sustained period of high inflation and discount rate coupled with higher taxation, energy cost and duties will suppress the margins as many cement companies may not be able to pass on the onus of cost hike to their customers owing to fierce competition in the industry. However, since BWCL is one of the lowest cost producers, it may be able to sustain its margins and profitability.
Business Recorder
03-06-2025
- Business
- Business Recorder
Attock Cement acquisition: Alpha Cement files PAI as Bestway exits the race
Alpha Cement Company Limited, a Karachi-based company, intends to acquire the majority stake and control of Attock Cement Company Limited (ACPL). The development comes as ACPL's parent company, Pharaon Investment Group Ltd, signalled its intent to divest its shareholding in the cement manufacturer. As per a public announcement of intention (PAI) filed by Arif Habib Limited, appointed as Manager to the Offer by Alpha Cement Company, the 'acquirer intends to acquire 84.06% shareholding, i.e. 115.5 million shares, and control of the target company, i.e. ACPL'. Moreover, Alpha Cement has expressed interest in acquiring a further 7.97% (10.95 million shares) through a public offer, if required. Fauji Foundation, KAPCO eye majority stake in Attock Cement As per the PAI, Alpha Cement's principal line of business is to produce, manufacture, prepare, treat, process, refine, and deal in all kinds of cement and its allied products. Bestway exits the race In a separate notice, Bestway Cement (BWCL), one of the largest cement manufacturers in the country, informed that it had submitted a non-binding offer to Standard Chartered Bank (SCB), which is handling the sale process on behalf of PIGL, to purchase the majority stake in Attock Cement. 'This is in reference to your letter No. PSX/Gen-1107 dated 2nd June 2025, and the article published in the Business Recorder dated 30th May 2025, which reports on the proposed divestment by Pharaon Investment Group Limited (PIGL) of its shareholding in Attock Cement Pakistan Limited (ACPL), and mentions Bestway Cement Limited (BWCL) among the suitors and as one of the interested parties in the said transaction,' BWCL notice read. The cement maker shared that it evaluated the opportunity presented by the proposed divestment of PIGL's shareholding in ACPL and submitted a non-binding offer to Standard Chartered Bank (SCB), 'This submission only constituted the preliminary and non-binding phase of the transaction process, which was intended to communicate our indicative interest to the seller's advisors.' However, BWCL was later informed that it had not been invited to participate in the second phase of the divestment process. Attock Cement Pakistan Ltd was incorporated in Pakistan on October 14, 1981, as a public limited company. The company is a subsidiary of Pharaon Investment Group Limited Holding S.A.L, Lebanon. Its main business activity is the manufacturing and sale of cement.
