After announcing in March that Bestway cement (PSX: BWCL) had won the bid to acquire the plant and related assets of Dewan Cement, the cement giant backed out of the deal citing uncertainty in legal proceedings. Having acquired Lafarge cement in 2015, the company had climbed the proverbial ladder in the cement industry reaching top spot rallying a capacity share of 17 percent. But will it be able to maintain this position in the next few years?
The company's nine-month financials show a strong increase in the top-line followed by an equal growth in its cost of goods that resulted in margins holding at 44 percent. Margins of other companies have exceeded 45 percent. We have pointed this out earlier also-compared to Lucky (PSX: LUCK) Bestway does have a slight geographical disadvantage but better cost management and more energy efficiency could go a long way.
The company spent more on administration and marketing expenses-the latter is a welcome expense if the company is trying to reach more markets; surely now is the time for that when everyone else is also shifting in third gear.
The future of Bestway really depends on its efforts and investments relative to the rest. The company has acquired a mining license in KP for its expansion of 1.8 million tons. This capacity enhancement would place Bestway somewhere in the top over the next few years, but second to Lucky that is undergoing several expansions.
Uptil the first half of this fiscal however, the company was ahead of the lot both in capacity as well as revenues. It may not be able to sustain this level in the future, and perhaps some successes are short-lived, but the momentum created has to be acknowledged.
Barring the higher revenues, because of higher overheads as well as greater input costs, the company has maintained a lower net profit margin during the fiscal. Finance costs will likely also go up when the company commissions the new plant and borrowing increases.
Its good luck to Bestway for now. The potential is enormous, but the competition is steep. Gear up!
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