Anyone familiar with construction materials in Pakistan will possibly have heard the name of Bestway cement. As the market leader, Bestway cement wins over other cement brands both in capacity and sales. This is evident from the fact that in the year 2018, it was recorded that the company owned 18.9 percent of the total market shares. Despite the minimal fluctuation in 2019 (dropping down to 18.1 percent), Bestway cement remained on the top. Known for successfully acquiring numerous functioning plants, the company has established itself as one of Pakistan’s largest cement companies. The company boasts five production lines at four different locations. BWCL is the subsidiary of Bestway Holdings. It was commenced in the United Kingdom during the 1980s.
Bestway Cement Supplies worth
Bestway Cement is a multinational conglomerate with its origins in the UK. Based in the UK, it is the second-largest cash and carries chain in the home country. This Group’s investments in banking, food and beverages, real-estate, and rice-milling sector. In Pakistan, Bestway Group jointly owns UBL, which is the third-largest commercial bank in Pakistan. Bestway Group also owns the most extensive rice-milling facilities in Pakistan.
Bestway Cement supplies to the north zone. It also exports cement to Mauritius, Afghanistan, and India. Primarily, the company produces Portland Cement, including Sulfate resistant cement, tile bond, and grout.
Bestway Cement Plants
Hattar, KP was the first plant of the company, established in 1994. With a capital outlay of 4120 million, it had a capacity of 1 million tons. Later developments further upgraded the total capacity to 1.27 million tons by the year 2004.
Like many other cement companies of that time, Bestway Cement made a smart move to switch its plant to natural gas and then later on to coal to save the production cost. This decision led to almost 60-65% saving of the production cost.
Through an equity bidding of almost 85 percent, the company acquired its second production plant known as Farooqia, KP. This acquisition took place under the bidding of Mustehkam Cement Limited. The second plant had a capacity of 0.6 million tons, which cost around $70 million. The capacity was raised up to 1.2 million tons with another investment of $50 million.
The Production Capacity of Chakwal Plant
The third plant of Bestway Cement is situated in Chakwal. This plant has a production capacity of 1.8 million tons. In 2006, a line of the same capacity was added to this plant, which almost doubled the production capacity.
Bestway Cement acquired PakCem Limited ( formerly Lafarge Pakistan) in 2015. This acquisition was rewarding as it came along with all its facilities situated in Kallar Kahar. It had a per annum capacity of 2.5 million tons. The acquisition’s bid came at the value of $329 million, which accounted for 76% of its shares. Later on, another company was acquired at the bid of 12 percent of the shares. The later bid came through a public offering process. This increased its shareholding in Lafarge Pakistan up to 88 percent.
All these four plants contributed to the success of Bestway Cement as a market leader. Formerly, this position was held by Lucky Cement.
Bestway Cement Market Share
The shareholdings of Bestway Cement have remained consistent till 2019. The associated companies hold up to 60% of the shares. Among these associated cements, Bestway Holdings Limited owns up to 54% of company shares. According to the company’s financial statements, up to 3-4% of the shares are held by Bestway Northern and Bestway Foundation. The Directors of the company own up to 17 percent of the shares. The shares of Chairman and CEO are 5.6 percent combined. 21% of the shares are publicly held, while another Director of the company holds up to 6.3% of the shares.
Market Dynamics
In recent years, the company has actively tried to adopt energy efficiency to save energy costs. The company has made significant investments in technology to cut down costs. Units like WHR have been installed primarily at the Chakwal site, and it was later followed by units at other sites as well. After acquiring the Lafarge plant, the company set up a 12MW WHR with the latest expansion of 9MW WHR. The company has made attempts to halt the usage of fossil fuels and seek alternative energy solutions. In 2019, about 30 percent of the energy demands were catered by the in-house WHRs. The company has also installed water conservation systems to reduce its dependence on groundwater and use rain harvest instead.
As a market leader, Bestway represents a success story. Its expansion into the biggest cement manufacturer in Pakistan is evidence of its success. Over the years, the company has not only significantly increased its capacity utilization but has also managed to increase its market shares. The company reached 98% capacity in 2017. The embarkation on brownfield expansion followed this. In 2019, the company began a newly operational plant.
Like most other cement companies, Bestway cement is primarily a market player in the North. The company has managed to stay at the top even when the competition is high and demand is low. Over the past few years, the sales and growth revenue has been stabilized. However, in earlier years, it was positive-higher. The company only suffered a dip in 2018 and showed signs of a slight improvement in 2019.
The demand for cement and other construction materials is usually high when the government is actively investing in infrastructure projects. The developmental projects like CPEC have favored cement companies like Bestway Cement, which managed to adjust its sales mixes between local ad foreign markets. The domestic market provides better margins at times of high demand. In times of lower demand, the foreign markets come off as much needed reprieve.
The timely measure of switching to WHRs helped the company to maintain a firm ground, especially when the coal prices fluctuated in the international market. The company has managed healthy cash flow despite the fluctuation of margins in 2018. In 2018, the company also utilized short-term loans for its expansion projects. It was measured with the anticipation for surplus cash flow after the completion of the respective projects.
The Future of Bestway Cement
From 2018 and onwards, the situation took a rough turn when India imposed a 200 percent duty on Pakistani exports, and Afghanistan became far less receptive. The company witnessed a 23% decline in the bottom-line. The high costs of production were the main reason.
While the revenue per ton grew by only 7 percent, the cost per ton was 17 percent high in 2019. This resulted in the loss of margins.
Bestway Cement Export Value
The company cut down the administrative and distribution costs up to 5 percent because of lower exports compared to the previous year. However, in 2019 the financial costs grew by 3 percent against 1 percent of last year. The policy rate was tightened due to the new production line’s borrowings and rising markups.
Overall, the company is still profitable. No significant developmental expenditure is expected shortly. However, the commercial development will remain somber, and the recent financial slump is most likely to be recovered soon.
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