Bestway injects Rs1.25b into Mustehkam Cement

Group plans to raise production capacity to 1.2m tons annually.

KARACHI:

Bestway Cement has invested Rs1.25 billion into the company’s subsidiary, Mustehkam Cement Limited, through purchase of right shares, according to a release published by the Karachi Stock Exchange on Tuesday. An extraordinary general meeting of Bestway Cement approved the move to subscribe to the shares at a price of Rs15 per share, compared with a six-month average price of Rs13.07 per share.

After the latest capital injection, Bestway Group’s stake in Mustehkam Cement stands at 95.03 per cent of the total paid-up capital. The group purchased Mustehkam Cement back in September 2005 after a successful bid of $70 million for an 85.29 per cent stake. The plant had been dormant since 1999; however it became operational roughly a month after the deal, in November 2005. It is located in Haripur, Khyber-Pakhtunkhwa, and has an installed capacity of about 0.6 million tons per annum. “The capital inflow is part of a series of measures being carried out since the acquisition of the plant to improve efficiency and productivity,” explained InvestCap Head of Research Khurrum Shehzad. Bestway intends to enhance capacity to 1.2 million tons per annum, while also upgrading some of the existing production lines at the facility.

Mustehkam Cement has registered negative earnings per share in the past three years. In 2010, loss per share stood at Rs7.64, compared with Rs17.05 in 2008. “Consistent losses have been a problem for most cement manufacturers, barring a couple of players, so much of the investments in such plants is aimed at reaching higher economies of scales and cutting losses,” said Shehzad, adding that in the meantime, accruing losses have to be financed through capital injections.

Published in The Express Tribune, April 6^th,  2011.