Bestway Cement: soon to be largest domestic cement manufacturer

The country's largest exporter of cement saw a drop in sales abroad; particularly due to softer demand from Afghanistan. However local sales were beefed up, thanks to firm domestic prices. Growth in domestic dispatches was sketchy, however the top line ticked up by a reasonable 9.8 percent during 1HFY15 compared to similar period of the previous fiscal.
The increase in cost of sales was in line growth in the top line. Resultantly the company managed to keep gross margins intact. A similar tale is told by net margins. However, the cost composition saw some shuffling. Deleveraging allowed a sizeable dip in finance cost. On the other hand, distribution costs spiked despite higher proportion of domestic sales. Administrative and other operating expense also expanded during the period under review. In July 2014, the company acquired Lafarge Cement. That transaction is expected to be completed within a month and should lend a healthy boost to the company's production levels; making it the largest cement manufacturer in the country.

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Bestway Cement

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Rs (mn)                   1HFY14    1HFY15       chg

Sales                      13221     14514      9.8%

Cost of goods sold          8173      9020     10.4%

Gross profit                5047      5495      8.9%

Gross margin                 38%       38%

Distribution cost            187       332     77.5%

Administrative expenses      144       172     19.5%

Other operating expenses     219       332     51.3%

Finance cost                 333        59    -82.3%

PAT                         3759      3943      4.9%

Net margin                   28%       27%

EPS (Rs)                    6.49      6.81      4.9%

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