AGL 40.38 Increased By ▲ 0.18 (0.45%)
AIRLINK 129.21 Increased By ▲ 0.10 (0.08%)
BOP 6.59 Decreased By ▼ -0.01 (-0.15%)
CNERGY 4.14 Increased By ▲ 0.11 (2.73%)
DCL 8.73 Increased By ▲ 0.28 (3.31%)
DFML 42.20 Increased By ▲ 0.95 (2.3%)
DGKC 87.49 Increased By ▲ 0.49 (0.56%)
FCCL 33.48 Increased By ▲ 0.13 (0.39%)
FFBL 66.25 Increased By ▲ 0.35 (0.53%)
FFL 10.67 Increased By ▲ 0.13 (1.23%)
HUBC 112.99 Increased By ▲ 2.29 (2.07%)
HUMNL 16.05 Increased By ▲ 0.82 (5.38%)
KEL 4.80 Increased By ▲ 0.02 (0.42%)
KOSM 7.72 Decreased By ▼ -0.11 (-1.4%)
MLCF 42.51 Increased By ▲ 0.61 (1.46%)
NBP 61.05 Increased By ▲ 0.55 (0.91%)
OGDC 189.40 Increased By ▲ 6.60 (3.61%)
PAEL 26.03 Increased By ▲ 0.67 (2.64%)
PIBTL 7.26 Increased By ▲ 1.00 (15.97%)
PPL 148.85 Increased By ▲ 1.04 (0.7%)
PRL 25.28 Increased By ▲ 0.72 (2.93%)
PTC 16.34 Increased By ▲ 0.10 (0.62%)
SEARL 70.70 Increased By ▲ 0.20 (0.28%)
TELE 7.30 No Change ▼ 0.00 (0%)
TOMCL 36.10 Decreased By ▼ -0.20 (-0.55%)
TPLP 8.03 Increased By ▲ 0.18 (2.29%)
TREET 16.20 Increased By ▲ 0.90 (5.88%)
TRG 51.70 No Change ▼ 0.00 (0%)
UNITY 27.30 Decreased By ▼ -0.05 (-0.18%)
WTL 1.27 Increased By ▲ 0.04 (3.25%)
BR100 9,933 Increased By 91 (0.92%)
BR30 30,521 Increased By 484.4 (1.61%)
KSE100 93,229 Increased By 708.2 (0.77%)
KSE30 28,982 Increased By 195.8 (0.68%)
BR Research

Bestway and Fauji sailing south

Unlike some other cement companies located in the north zone and supplying mainly to those markets, Bestway (BWCL) a
Published February 24, 2020

Unlike some other cement companies located in the north zone and supplying mainly to those markets, Bestway (BWCL) and Fauji Cement (PSX: FCCL) have both earned a profit in the half year ending FY20, though bottomline for both firms fell below Rs500 million. At a time when demand is low, and price competition is intense, this is a pretty good outcome.

In the first quarter, Bestway saw cement production drop by 12 percent which led to lower dispatches (down 9% overall) in the markets, and as a resulted revenue dropped 21 percent—the drop higher due to competitive prices in the domestic north market. Suspension of exports to India caused overall exports to drop 60 percent. This was only exacerbated by weak domestic demand. In 1HFY20, Bestway’s revenues dropped over 28 percent. Evidently, circumstances did not change in the winter.

Margins also shrank from 33 percent to a single-digit. Though average global coal price in 1HFY20 came down 32 percent compared to the corresponding period last year ($99 per ton vs $67 per ton for South African coal), it seems lower retention prices together with higher electricity tariffs chipped away at the margins substantially.

Fauji’s margins are not too different. In the first quarter, Fauji credited its drop in margins to a 36 percent rise in WAPDA tariff, increase in royalty on limestone and clay of over 100 percent and increase in raw material and coal prices due to the axle load limitation (the said restriction had caused transportation costs to go up). The company claimed that a 2.5 MW solar power plant was in the works which would help the company cut down on power costs.

Both companies kept overheads largely in check. Bestway’s finance costs rose to 5 percent of revenues (1HFY19: 3%), which was expected due to higher cost of borrowing as discount rate in the country rose. Being market leader, Bestway started with a much higher top-line, but it was behind Fauji when it came to the bottom line as the latter ran a tighter ship incurring nominal financial costs and keeping cost of production down. If domestic demand does not improve, prices will remain under pressure especially as capacity in the industry has substantially expanded. That would result in a sobering year-end.

Comments

Comments are closed.