- Friday, 22 April 2016 21:06
Bestway Cement Limited
Listed on stock exchanges in Pakistan, Bestway Cement Limited is among the largest companies by market capitalisation. In early 1993 when the group decided to set up its first cement plant (a Greenfield operation in Hattar, KPK), it faced multiple challenges. Domestic economy was highly inhospitable, characterised by high interest rates, high inflation and low liquidity leading to a general economic and political inertia.
Despite these initial difficulties, Bestway Cement completed the project in record time at an initial cost of US$120 million. Hattar plant’s initial capacity was 1 million tonnes per annum. In 2002, at a cost of US$20 million, the plant’s capacity was enhanced to 1.2 million tonnes per annum to meet the ever increasing demand for quality cement.
In 2004, the company took a strategic decision of expanding and setting up a 1.8 million tonnes per annum plant in Chakwal, Punjab. This was Bestway’s second Greenfield project at a cost of US$140 million. To this day, the plant still holds the record for the fastest transformation from Greenfield development to completion in the country.
In 2005, Bestway Cement acquired its third cement plant, Mustehkam Cement for US$70m following an offering by the Privatisation Commission, Government of Pakistan. This plant had an installed capacity of 0.66 million tonnes per annum and had been shut since 1999. The plant was put into operation soon afterwards with a herculean effort by Bestway’s team. Mustehkam’s capacity was later enhanced to over 1.2 million tonnes per annum with an investment of US$64.7million.
Bestway then proceeded to set up its fourth cement plant in Chakwal with a capacity of 1.8 million tonnes per annum at a cost of US$180 million. The plant commenced commercial production in 2008.
With its acquisition of Pakcem Limited (formerly Lafarge Pakistan) in April 2015 for an enterprise value of US$329 million, Bestway now represents 18% of the entire industry's capacity and boasts a total production capacity of more than 8.1 million tonnes per annum.
Today Bestway has emerged as the largest cement manufacturer in Pakistan with state-of-the-art plants in Punjab and KPK. With 18 cement companies and 24 cement plants, 59% of the national market is dominated by four players. Bestway Cement has worked its way up from modest beginnings to becoming the market leader and the one of the lowest cost producers in a competitive industry in less than two decades.
During the financial year of 2015, the company exhibited a sound financial performance, recording consolidated sales of Rs.41.5 billion and net turnover of Rs.32.7 billion. Gross profit stood at Rs.13.3 billion while profit before tax was Rs.12.9 billion. Profit after taxation for the year amounted to Rs.10.1 billion.
Bestway Cement is one of the largest tax payers in the country, having contributed Rs32.1 billion to the exchequer in the last five years.
Bestway Cement is driven by high standards of efficiency and quality. The Company’s ambition is to offer innovative solutions to address market needs. Bestway’s innovative product portfolio of cement and building materials, which includes Ordinary Portland Cement, High Early Strength Cement (Stallion), Sulphate Resistant Cement (SRC) and innovative tile bond (Xtreme Bond) contribute to building on strength across Pakistan, creating a change in construction standards, aesthetics and services in the local industry. Today, the efficient practices started by Bestway Cement are being emulated even by its competitors.
The successful introduction of its brands in Afghanistan, India, Middle-East, Africa and Central Asia has made Bestway one of Pakistan’s largest cement exporters. Despite fierce competition, Bestway has been the single largest exporter of cement to Afghanistan and India, and a lead exporter to various other countries for the past many years.
The company’s leadership is not just limited to manufacturing. Only recently, it has branched out to promote research and development of building and construction solutions that will add value for its customers.
In 2002 Bestway Group looked to diversify when it identified an opportunity within the banking sector. Along with the Abu Dhabi Group, Bestway successfully bid for a controlling share in United Bank Limited (UBL), Pakistan’s fourth largest bank at the time, for a total investment of approximately US$210m.
Over the years, UBL has emerged as an industry leader and the second largest bank in Pakistan, at the forefront of innovation, providing impressive rewards to its stakeholders.
In August 2003, UBL launched Pakistan’s first derivative money market product, and in 2005, the bank acquired the status of Authorised Derivative Dealer – the only domestic bank to achieve this status. It is also the first institution from Pakistan, and third in South Asia to be accredited with Primary Membership of International Swaps & Derivatives Association.
In June 2007, the Global Depository Receipts of UBL were listed on the London Stock Exchange. The offering targeted institutional investors and raised in excess of US$ 650 million.
UBL once more demonstrated their innovative approach to banking when in April 2010 they launched UBL Omni, an in-house developed project designed to provide banking facilities to the unbanked population of Pakistan. In 2015, UBL Netbanking continued to serve a wider segment with a 30% growth in the customer base. UBL Omni doubled its ‘Dukaan’ agent network to over 40,000, expanding its geographical footprint to more than 850 cities and towns. The number of transactions involving customer mobile applications have grown by 69%, with a 26% growth in value. In 2015, account opening using biometric authentication was launched which resulted in a 54% increase in the account base.
Bestway Group proceeded to increase its shareholding in UBL to 51% by buying out its joint venture partner in June 2011 at a cost of US$220 million, becoming the majority shareholder in UBL. In December 2013, Bestway Group once again announced that it had increased its shareholding in United Bank Limited (UBL), now to more than 61%, by acquiring an additional 10.3% of the shares from the Abu Dhabi Group. Since then, through an investment of over US$120 million, Bestway Group has acquired the entire shareholding of its former joint venture partner, the Abu Dhabi Group.
During the last decade, UBL has emerged as an industry leader by offering a dynamic portfolio of products through imaginative delivery channels. The bank has a significant presence throughout the Middle East, subsidiaries in UK, Switzerland and Tanzania; a branch in New York and Representative Offices in Beijing and Kazakhstan.
The bank has achieved much recognition and has now been awarded Banker Magazine’s “Bank of the Year” for two successive years.
As part of Mr. Zameer Choudrey’s dynamic and proactive business strategy, in July 2014 Bestway Group acquired the Co-operative Group’s pharmacy business in the UK for £620 million. The acquisition was hailed as masterstroke given the competition that involved UK’s largest pharmacy businesses and giant private equity funds.
The pharmacy business forms the 4th pillar of Bestway Group and this investment fits in with the Group’s focus and commitment towards the communities it serves.
In February 2015, the pharmacy business was rebranded as WELL Pharmacy. Mr. Choudrey had announced an investment programme of £200 million over a 5 year period into the pharmacy business. The planned capital investment will bring about a major recruitment and expansion drive, which will support the growing demand for primary healthcare services in the UK.
Blueprint for Success
Since its inception, the Group has always looked to operate as a long-term investor in whichever sector it operates in, looking to grow businesses over the long run.
“You have to take a longer term view, especially with cyclical businesses like cement. Some investments have a long gestational period and that is one of the main challenges we have faced as part of our diversification strategy”, said Mr. Choudrey.
Bestway also maintains a strong ethical stance, something Mr. Choudrey firmly believes stems from the Group being a family business. He said: “Our social values are very important to us. Bestway Group is very active in supporting local communities in the areas in which it operates.”
With regard to where the Group is going in the future, Mr. Choudrey stated, “in line with our growth strategy, going forward Bestway will continue to look for opportunities in new sectors which are stable and show growth potential.”
The Giant with a Heart
As the country’s largest cement producer, Bestway Cement is continuously striving to balance society’s need for cement products with stewardship of the air, land, and water, conservation of energy and natural resources, and maintenance of safe work places and communities.
Established in 1987 in the UK and 1997 in Pakistan, Bestway Group, through its charitable arm, Bestway Foundation has been playing an active part in the socio-economic development of local communities. Every year, the Group contributes 2.5% of its profits to the Foundation, supporting livelihood programmes, healthcare, education, urban development and environmental conservation.
In May, 2014 Bestway Cement was ranked 10th out of 478 Publically Listed Companies by volume of donations in Pakistan according to Pakistan Centre for Philanthropy’s (PCP) Philanthropy Survey 2012.
Over the years, Bestway Group has donated over US$20 million to charitable causes in the UK and over US$10 million to charitable causes in Pakistan.
The aspect of quality education has long been neglected especially in the rural areas where masses are still deprived of good educational facilities. Bearing this in mind, the Foundation constructed a college building in a far flung and backward area of Gujar Khan Tehsil to provide free and quality educational facilities to girls, who would otherwise have had to go without higher education due to lack of a girls college in the area. Additionally, a large school with capacity for nearly 500 students in the village of Tatral, which is near Bestway’s cement plant in Chakwal has just been completed and started functioning.
In the last five years, Bestway has contributed nearly Rs.333 million for various initiatives including donations to various educational and health institutions like Institute of Business Administration IBA, Karachi), Lahore University of Management Sciences (LUMS), Forman Christian College, Shaukat Khanum Cancer Hospital, Layton Rahmatullah Benevolent Trust and National Society for Mentally and Emotionally Handicapped Children among others.
Bestway’s financial assistance expands to include talented students who, for want of sufficient resources, are unable to continue with their higher studies, and widows and indigents of the local communities in the shape of monthly stipends. Only recently, the Foundation announced setting up of a new £1.8 million endowment fund with the world renowned Oxford University to sponsor two Pakistani students at the university every year.
In the area of basic health, free medical facilities are provided to the local communities through dispensaries and medical units located at Bestway’s factory premises benefiting nearly 100,000 patients in the last five years.
Bestway Foundation UK has been associated with the Duke of Edinburgh Awards since 1994 and in June 2015, the Foundation was awarded the Gold Partner status by the charity in recognition of Bestway’s contribution towards the success of the Awards.
Said Mr. Choudrey: “Climate change is a defining challenge for the 21st century and the construction sector as a whole. As an emitter of greenhouse gases, we are aware and accept our responsibility to minimise and offset these emissions through our actions. Wellbeing of the social environment in which Bestway operates in is considered an integral part of our success. Bestway plants are ISO 14001:2004 Environmental Management System (EMS) certified. Our plants not only meet the stringent environmental quality standards prescribed by the Environment Protection Authority of Pakistan, it even surpasses the national and international standards for emissions. Our emission levels are below 50 microns, whereas the Government of Pakistan's acceptable standards are 300 microns and international standards are 50 microns per cubic meter of air at NTP.”
Bestway Cement is as economic as possible with energy and limits the emissions of potentially hazardous substances to a minimum. In the last five years, nearly 500,000 trees and plants were sown in and around our factory areas as part of various environment conservation campaigns. Bestway has been a regular recipient of numerous environmental excellence awards for its positive contributions to sustainable development.
Bestway’s efforts are dedicated towards achieving more efficient and environmentally-friendly production methods. After pioneering the use of waste heat in 2011 with a 15MW plant in Chakwal, Bestway Cement installed two 13.5MW environmentally-friendly waste heat recovery power plants at Hattar and Farooqia operations during 2015, and another 12MW is currently underway at Pakcem, Kallar Kahar plant. The project is at the outset and is expected to be fully operational in February 2017.
These power plants have not only reduced Bestway’s reliance on national grid, but also helped in alleviating the country’s power crisis to a certain extent and reduce greenhouse gas emissions by 60,000 metric tonnes of carbon dioxide.
The world is rapidly expanding; sociologists foresee by 2050, 70% of the world population living in cities. As we witness urbanisation rapidly spread and cities develop and expand in Pakistan, Bestway Cement is committed to building on strength across the country by improving lives for local communities, safeguarding the environment, contributing to the country’s economic growth and providing superior returns for its shareholders.