Ladies and gentlemen, thank you for standing by, and welcome to the Wagners half year results briefing. At this time all participants are in listen-only mode. With us today we have the company CEO, Cameron Coleman, CFO, Fergus Hume, General Manager, Michael Kemp, Chairman, Denis Wagner, and Company Secretary, Karen Brown. Following the speakers' presentation there will be a question-and-answer session. To ask a question at this time you will need to press star one on your telephone. Please be advised that this conference is being recorded. I will now like to turn the conference over to your first speaker Cameron Coleman. Thank you. Please go ahead.
Good morning, ladies and gentlemen, welcome to our half year results presentation. The first half of 2021 has shown a great improvement when compared to last year. Overall revenue for the first half compared with the prior corresponding period is up 27% to AUD 155.8 million. The pro forma EBIT result of AUD 10.3 million is a significant improvement as well. This result has been driven by growth in cement volumes, increased precast activity, increased quarry volumes, the commencement of a major project from our Wacol Precast facility, and continued strong utilization of our bulk haulage assets. Over the past six months, we have reduced our gross debt by over AUD 11 million. Overall, the business is in a much better shape than a year ago or even six months ago. Most of our businesses are performing well with bright spots being cement, precast, transport, and quarries.
We had some mixed results from CFT, with strong performance coming from our cross arms in Australia and custom build in the Middle East. Sales in the U.S.A. remained low, and custom build in Australia slowed compared to the prior corresponding period. Our low carbon concrete technology continued to make traction in the U.K. Our contractual differences under a supply agreement with one of our large cement customers has also been resolved. I'll now hand over to Fergus to take you through the financial results in more detail.
Thanks, Cameron. Looking at the first half 2021 pro forma results, our revenues have increased by AUD 26.6 million -AUD 155.8 million, or 21% compared to the second half of 2020, and 27% compared to the prior corresponding period. As Cam pointed out, revenue increased across almost all business units, in particular cement, concrete, quarries, and transport. EBIT has increased by AUD 3.3 million -AUD 10.3 million, or by 46% compared to the second half of 2020, and was significantly up on the first half of 2020. The EBIT margin also improved by 1.2% from the second half of 2020 and 5% from the first half of 2020. Now looking at the segment results. Sales in construction materials and services are higher due to increased activity in the quarry, concrete, and transport division and the higher cement volumes.
The increased sales in concrete reflects the higher volumes being sold as a result of the full commissioning of our Apsat plants and the increase in demand in South East Queensland. However, margins continue to come under pressure on fixed plant concrete sales. The increased sales in the quarry area are due to the South Back Creek Quarry increasing production volumes on the back of 24-hour operations and the Shepton Quarry, which was purchased in June last year. Transport continues to be a strong performer on the back of increased activity in the mining sector. It is pleasing to see the increased activity in these areas, and this has led to a return to higher and consistent EBIT margins. The new generation building materials business has seen a decrease of 1.4% in sales, but an increase in EBIT of 69%.
In CFT, we have seen the electrical cross arm distribution supply business grow revenue by over 15% with growth domestically and internationally. However, we also experienced a downturn in the pedestrian infrastructure and bridge division impacted by delays due to COVID-19. We continue to invest in R&D and business development in the new generation building materials segment to create new product lines and expand geographically. For example, we have introduced poles into our electrical distribution products. We have spent over AUD 800,000 in our low carbon technology, Earth Friendly Concrete in the last six months. A 68% increase on the spend in the prior corresponding period, reflecting the increased research and development and business development spend to grow domestically and internationally, with a major focus on market development in the U.K.
The CFT business had an EBIT margin of over 14%, an increase of 6% or a growth of 68% compared to the corresponding prior period. The EBIT for CFT has grown by 43% compared to the prior corresponding period. It should also be noted that we haven't received any JobKeeper support at all. Now to the cash flow. There has been an improvement in working capital due to the timing of debtors, with some significant invoices raised at the end of June. As mentioned at our full-year results, these debtors were outstanding at the 30th of June and have all been received in this half.
The AUD 6.6 million of capital expenditure this half has been spent across the business with AUD 2.6 million on land for the concrete quarry and precast businesses, AUD 1.3 million on quarry equipment and AUD 1.1 million on CFT plant to complement the AUD 5 million spent last year, which significantly increases our capacity and efficiency. This CapEx spend is mainly growth CapEx, not maintenance CapEx. On to the working capital and net debt. As mentioned previously, the net working capital has reduced while cash at bank has increased in this six months. This has allowed us to repay both equipment finance and term debt. I'll now hand back to Cameron and Michael.
Thanks, Fergus. As reflected in the numbers that Fergus has just presented, it is encouraging to see the improvement in the business. Whilst this improvement is positive, there remains further opportunities for the business to deliver growth in revenue and profitability. Michael will now update you on the progress of our new generation building materials business.
Thanks, Cam. Starting with our CFT business, for those that are unfamiliar with this technology, it is a lightweight, non-corrosive, non-conductive fiberglass material produced here in Toowoomba by Wagners and used in electrical distribution networks. It's used in the form of cross arms, power poles, and light poles. We also use it in a range of custom-built structures, including pedestrian infrastructure and bridges. Whilst revenue was relatively consistent with the first half of FY 2020, continued investment in technology has delivered significantly more efficient manufacturing processes flowing on to improved margins. Our composite business across Australia and New Zealand achieved a 15% increase in cross-arm sales compared to the prior half year. This was offset by a stalling in activity in local and state government-funded pedestrian infrastructure and road bridge projects due to delays we attribute to COVID-19.
The robotic arm on this slide is part of our new cross-arm manufacturing cell. In addition to this investment in high-tech manufacturing, we have commenced the fabrication of two new pultrusion machines to expand our capabilities at our Toowoomba facility. The investment in this plant equipment will double our cross-arm manufacturing capacity or increase our pultrusion capacity by 60% and allow our pultrusion machine to be dedicated to the manufacturing of poles. Looking now at our international CFT operations. In the U.S., COVID has substantially impacted sales along with our ability to build and commission a manufacturing facility. At this stage, we are planning to commence the installation of our new pultrusion machine later this year once our technical team can get to the U.S. with the ability to return home safely.
While U.S. sales were slow, we experienced strong demand for our Composite Fibre Technology in the Middle East. In excess of AUD 2.6 million worth of CFT product was manufactured and shipped internationally in the first half, demonstrating the demand for this product worldwide. More broadly, our international sales team continue to pursue opportunities that we can manufacture and distribute from our Toowoomba facilities. Moving on to our low carbon concrete technology, Earth Friendly Concrete which has made great progress over the past six months. We have significantly increased our spend on the development of our technology in response to increasing international demand. Our technology replaces the cement powder used in traditional concrete. Given the production of cement is responsible for 8% of the world's carbon emissions, Earth Friendly Concrete is now very much on the radar of concrete producers and consumers around the world.
In a recent project by Kier, a major construction company in the U.K., the successful placement of Earth Friendly Concrete into a large water project in London saved 240 tons of carbon emissions alone. When coupled with other projects completed using our technology in just the last six months, we have saved in excess of 850 tons in carbon emission. We now have an accelerating take-up of our technology internationally. Our Earth Friendly Concrete is being used in infrastructure projects undertaken by various construction companies in London through our U.K. distribution partner. In India, we continue to work with our partner, JSW, to obtain the Indian Standards approval required for the application of Earth Friendly Concrete into projects.
Closer to home here in South East Queensland, customers are beginning to select Earth Friendly Concrete for applications ranging from multi-story building complexes to homeowners that value the environmental benefits our technology has to offer. That concludes our commentary on new generation building materials. I'll hand back to Cameron.
We'll move on to the construction materials and services segment. As Fergus reported, on a consolidated basis, the first half has realized a 33% increase in revenue compared to the same period in FY 2020, and it's achieved AUD 14.8 million EBIT. We've also seen an increase in our EBIT margin as a result of the revenue coming from sectors that realize a higher margin. I'll start with our quarry business, which has performed well. The fixed quarries have produced solid volumes, including a full six months from the Shepton Quarry. You'll see a picture of the crushing plant at the Shepton Quarry on this slide here. When coupled with the increase in activity from the resource sector, this business has made a significant contribution to our performance through this period.
Onto our cement business. You'll see at slide 14, a great photo of the site with the world's first composite geopolymer concrete wharf showcasing our CFT and EFC technologies. From this facility and our Townsville site, we supply bulk and bagged cement products to the market. Cement has had a strong first half. We've experienced an increase in sales due to our largest customer returning to full contracted volumes. There has also been a general increase in cement volumes with the increased building activity in Southeast Queensland. Moving on to the concrete business. We've seen increased volumes from our concrete plants as our sites are now fully commissioned, all capable of producing Earth Friendly Concrete as well as traditional concrete. We have also seen a general increase in construction activity in the Southeast Queensland market.
Whilst pricing has remained lower than historically achieved, there does appear to be some positive moves on these prices due to increased demand. The business has continued to be impacted by pressure on concrete pricing and resulting margins. We are seeing early signs of market improvement, and we expect this to continue. We operate a major precast and prestressed concrete projects business at Wacol in Brisbane. In the first half of this financial year, we commenced work on major infrastructure projects. We expect higher revenue and EBIT contributions from this business in the second half of this year, with further opportunities in the infrastructure sector already identified. Our bulk haulage operations provided another solid contribution to our financial performance this half. We have seen a continuation of existing contracts and the start of some new projects.
Our customers have increased their outputs, which has meant higher utilization of our assets and increased revenues in this business. The resource sector continues to provide significant opportunities for our bulk haulage business, as evident from the high level of tendering activity we've seen in recent months. If we now look at our outlook. In CFT, we look forward to the improved margins generated from our new automated crossarm manufacturing cell that Michael spoke about. Revenue growth is expected to improve in custom build applications, including the local and state government-funded pedestrian and bridge market across Australia and New Zealand following the COVID-19 restrictions easing. The commissioning of two new pultrusion machines from our Toowoomba facility will allow us to significantly increase capacity to produce poles, positioning us to service a market that is currently searching for an alternative to timber.
In the U.S., we have commenced design and construction of our factory, and the commissioning of the pultrusion machine will occur later this calendar year. In the meantime, we will continue to pursue sales opportunities across the U.S. that can be manufactured and distributed from our existing facilities. The Middle East will continue to provide opportunities for Composite Fibre Technology on the back of the successful projects that have been delivered in this region to date. Our outlook for our Earth Friendly Concrete business focuses on increasing sales through our concrete batch plant network in Southeast Queensland and through our commercial partners in London and Germany. We will continue to support our partner, JSW, in obtaining Indian Standards approval and leverage off the Indian government's National Action Plan on Climate Change.
Given the success of our Earth Friendly Concrete technology in the U.K., we are seeking potential partners that are dedicated to accelerating the use of green technologies. Our technology makes a positive impact on carbon emissions in the construction industry. We're excited about the global demand for green technology such as ours. On to the outlook for construction materials and services. We look forward to secured infrastructure and resource projects adding an increased contribution across the group. We expect continued growth in our bulk haulage operations. We anticipate the growth in cement sales that have proven to be consistent throughout the year to remain. We expect our concrete business will improve with increased demand in Southeast Queensland, and we anticipate an improvement in selling price.
We expect further growth in our quarry business with a full-year contribution from the Shepton Quarry, along with the benefit of contracts secured in our contract crushing and services business. In conclusion, we are encouraged by the first half result following a tough year in FY 2020. We have a positive outlook going forward within Australia and internationally, with already secured work and a large number of opportunities identified and being pursued. Throughout this period, we've also resolved some disruptions that have affected the business, allowing us to now focus solely on operations and growth. There are still many opportunities for this business, and we'll continue to strive for further profitable growth in all areas.
We remain committed to our growth strategy as outlined in our full-year presentation to achieve planned future growth through innovation and investment in developing new technologies, new product lines, and production efficiencies across all of our business, continued integration of our various business units and international operations, with a particular focus on establishing new markets for our Composite Fibre Technology and low carbon concrete technology, Earth Friendly Concrete. Clearly, with the state of the world, execution of major projects and capacity to accelerate projects has been impacted. Once global lockdowns and restrictions ease, we will resume the pursuit of opportunities for major offshore projects. That concludes our presentation this morning. As mentioned, I am joined here today with Fergus Hume, Michael Kemp, Karen Brown, and Denis Wagner. We are all happy to take any questions you may have.
Thank you. Ladies and gentlemen, we will now begin the question- and- answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Once again, it is star one to ask a question. Your first question comes from the line of Raju Ahmed from CCZ Equities. Please ask your question.
Hi, everyone. Thanks for taking the time this morning. I've got a couple of questions. Can I start with the outlook statement? Is it fair to assume that you're expecting better revenue in second half of FY 2021 versus the first half, and also better margins given the disruptions you've experienced in the first half? Any thoughts of you there, Cameron?
Hi, Raju. We expect the revenue growth that's occurred over this past six months to continue on through the second half. We started really ramping up revenue due to the opportunities that were presenting themselves. Just as we commenced some of these larger project work, revenue started to increase well into the back half of the first half, and we expect that solid performance through the second half.
Right.
As we pointed out in the presentation, that type of work does drive those higher margins.
Okay. Let's take that. I think you're referring to the Cross River Tunnel Precast project there. If you set that aside, when you look at the balance of the business, I assume there was a reasonable level of COVID-related disruptions. As they ease out in the context of Australia, would there be an underlying margin lift in the business?
Well, Raju, there has been a number of project opportunities across the business that we historically see. If you look at the COVID-related challenges that we referred to and that you just touched on, they mainly impacted our custom build side of the business, where we deliver pedestrian infrastructure and road bridges around Australia and into international markets. We do see more activity now in that area of our business as those border closures have eased or lifted, and we can now get our products to market easier and get our salespeople to different sites to explain to asset owners what benefit our products bring to their project.
Okay, that's helpful. Just touching on CFT, I note your comment about the hit from COVID on the pedestrian and road bridge infrastructure projects. Can I assume that it's not so much that if there is demand there, it's more now a question of timing? Following on from that assumption, could there be a scenario where you've got a short-term hump in demand and an upward hump before things start to normalize into your standard growth rate, so around 15%-20% a year? Or is that dependent on capacity on the build?
Hi, Raju. Michael Kemp here. With the Composite Fibre Technology business, particularly in custom build, the level of quoting work has continued to be quite high. What we've seen is the amount of orders actually placed has been quite low. There's still heaps of work out there that we've quoted that's in the pipeline, and it's about sort of seeing it come to fruition. We have a feeling that, as end of financial year approaches, a lot of that's going to have to be accelerated. We are preparing now to be able to meet that increased demand.
Just one more quick one on CFT. As you sort of look to install the U.S. facility and pultrusion line later this calendar year, I presume the price that you sent in the past and, I suppose, over the last two, three years, they've obviously factored in shipping costs and freight charges and whatnot. Those would be, I presume, cycled out once you've got a local operation. Does that mean U.S. operations could potentially operate at a higher margin than your Australian operations? Am I sort of mixing things up here?
No, I think you're right. We're currently sending product to America. We are paying freight. Operating locally, just being a local will give us more opportunities, but also obviously our freight costs will drop, and we will see higher margins out of manufacturing in the U.S.
Okay. Look, the very last thing, there is press talks about the quarantine facility next to Toowoomba Airport. Anything you can update us on that front? If it happens, is it likely to be an FY 2021 story?
Raju, Denis Wagner here. The quarantine facility is a proposal from the family company that's associated with the Wellcamp Airport through the Queensland Government. We've put a proposal to the government that we would build the facility, and they will operate it. From Wagners' perspective, though, the revenue generation, there will be some revenue generation in concrete and quarry materials for the construction of the site. It will be FY 2021. If this happens, and it's a government decision as to whether it proceeds or not, if it happens, it will happen before and be completed before the end of June. There may be some revenue, but it won't be overly significant in the overall scheme of the business.
Okay, I'll leave it there. Thank you very much for the feedback.
Your next question comes from the line of Kurt Gelsomino from Morgans. Please go ahead, Kurt.
Hi, Denis, Cam, Ferg, and Michael. Thanks for your time today. I've also got a few questions. Firstly, just on Cross River Rail, can I just confirm, did you generate any revenue in that project in the first half of FY 2021?
Yes, we did, Kurt. The site's into full production, there was quite a bit of revenue from that site. Production started in September, we've been ramping up to get to full rates probably by the end of December. You can see the photo on the front of the presentation with all the tunnel segments in the yard. We will see a better contribution in the second half because we'll be at full production for six months as opposed to three months of production.
Understood. How have been margins on the production of those tunnel segments to date? I guess, how have they met your expectations?
Yeah, they have, Kurt. Production targets are being met. The jobs are flowing along as we expect it to.
Of that AUD 40 million contract, how much do you think you'll receive in FY 2021?
I'd say 75%, 80%, something like that, depending on how our client goes in the installation of the elements into the tunnel under the river.
Yeah.
Which is just starting.
You might have only received 15 or so in that first half? 15%, that is.
It'd be more than that, I would suggest.
Yeah. Okay. That's okay, I'll take that offline maybe.
Yep.
Just on the Carmichael contract, what are your second half 2021 volume expectations relative to the first half 2021? Do you think volumes into that contract will be stable or higher or lower, just broadly speaking?
They'll be stable there, Kurt. We don't see any real change to volumes on that project.
Yep. That's great. Just some of the other, I guess, infrastructure opportunities more in the core construction materials business. How has tender activity been, and do you have any line of sight or greater visibility in when you think tender awards will start to flow for that business?
Tendering activity is strong. There's plenty going on out there. We're winning our share of work every week. There's plenty of opportunity. Plenty of opportunity. We're winning our share of it. We see that this sector providing plenty more opportunities into the future. We see it's a good spot to be in the construction materials sector, with plenty of activity happening in Southeast Queensland. The resource sector is providing equal opportunities, actually. We're seeing a lot of projects expanding, a lot of customers wanting to increase volumes. Once you're in there and performing contracts, the upside is quite significant when they start ramping up their export volumes.
Understood. Some of those major concrete projects, I think, in the wind farm space, I think you've touched on in the past. How are those tenders progressing? Do you expect anything to be awarded in the second half of 2021?
We do hope there could be a couple let in the second half of 2021. However, I don't see that they would make any real contribution in this half. Contributions from those projects would flow later this calendar year.
That'll help build out the pipeline of work for the business into FY 2022 if you're successful in those.
Yeah, exactly. Yeah. The reality of it is that there'll be very little revenue generated from those projects before June. It's more into the next year.
Inland Rail, that opportunity there, when do you think progress will be made on tenders and award of work for some of the opportunities you're targeting on that project?
We're in discussion now on material pricing, albeit a little further away than the local area here in Southeast Queensland. We do expect revenue to start to flow or opportunities to start to be let in that area throughout the second half next year. It's 12 months away, at least.
Just one final one from me. Sorry. Those comments you made about your plans to seek third-party capital for EFC, I guess that was a bit of new information today. Could you provide maybe a little bit more color on that front in terms of how much of the business would you be willing to sell and how advanced are these discussions with third parties to invest in your EFC business?
Yeah, can do, Kurt. What's happened there is we've been getting quite a bit of traction for the product, particularly in Europe. As we've formed relationships with various companies over there, we've had a number of approaches to get a slice of the pie, effectively. People that want to get on board and be part of our EFC growth internationally. We're carefully considering what the best options are for that business and what the best channel to market is. A lot of the people that we've been in discussions with don't only offer the investment or the assistance we need to really ramp up the growth of the business over there. They also offer that critical channel to market. We're actually looking at a number of different models for our Earth Friendly Concrete business at the moment.
One of those is to bring on a partner that provides the access to the market and also that desire to really be part of a green technology that solves carbon emission issues.
Would a partnership imply more of a 50/50, then, share of the business going forward, or?
We don't know, Kurt, but I wouldn't say it'd get to 50/50. We would want to maintain more of the business than that if we were to do anything, if we went down that path.
Awesome.
Comments. It's really about the future and the technology development. We have basically our pilot level product at the moment that's getting great traction. We'll do something like 10,000, 11,000 cubic meters of concrete into London this financial year. The opportunity then to grow that and to continue development, and get that product right for all grades of concrete, all applications is the vision. That's where we're trying to get it and why we're looking at working with partners.
Moving on to our next question, and it comes from the line of Peter Wilson from Credit Suisse. Please ask your question, Peter.
Hi. Thank you. Morning, all. Can I just follow that one up on EFC? The type of partner that you would be looking for, are we talking integrated cement and concrete companies or construction companies?
It could be that, but more of a green technology type investor that's got the desire to see this technology pushed ahead. It's probably not really an existing cement manufacturer that's a potential partner for us. It's more of an organization that's just totally committed to that green technology that provides solutions to the world's carbon emission issues.
Okay. That would be some co-investment, some help on the technology side, but not necessarily the use and distribution of the product.
Yeah. The system we have can be added to any batch plant around the world. It's a reasonably straightforward process to put the equipment that you require to batch EFC on an already existing batch plant. We need to create the demand. The consumers need to demand the product. We'll have batch plant companies wanting to adopt our technology to meet the market requirements.
Okay. A question, I guess, for Michael on that. It does seem like green concrete's time has come, particularly in Europe, in the U.K. When you look at Earth Friendly Concrete, how do you think it's measuring up to some of the other solutions over there? Some of the other zero cement products?
We believe that we are well ahead. If you look at the traction in the market that we've been able to obtain, as I said before, something like 11,000 cubic meters made in batch plants in London and put into footings and into projects such as HS2, the train line from London to Birmingham, the biggest construction project in Europe. We've put concrete onto that. There's a real push, certainly in London, where our focus has been for green materials. We're seeing it at all levels. We're seeing it from top levels of government over there, it is filtering down through into the guys that are selecting materials to be used on projects. As your question as to competitors, let's put it this way.
The companies that are buying the activator from us and supplying Earth Friendly Concrete to market have previously used our competitors and dropped them to use us.
Good bud.
Good bud.
There's a bit of an echo feedback there. CFT Cross Arm international sales, how significant were they in the half and what growth are you seeing there?
The international sales were fairly small, but I guess it's the start. Generally what we find is that a new customer will come on board and they're taking smaller numbers. It is a slow-moving industry. They take time to become the standard product. 10 years ago with Energex in Queensland, we're supplying a few of them. To today, three-year contracts to supply cross arms. In the last short period, we've had two new customers in New Zealand. We've been sending cross arms to Oman in the Middle East, and they've only been initial orders. We're expecting feedback. Wherever they go, they love them, and we end up selling more and more of them.
Okay, got it. On the construction materials services segment, I'd just like to understand some of the pluses and minuses in terms of margins for the first half. In the cement business, for example, given that your major customer has been ramping up volumes, would we be right to assume that the overall segment margin would have declined in the first half?
The cement? No.
Yes.
No. As our volumes have gone up, Peter, we're absorbing more fixed costs. As we've said previously, it takes us the same amount of people to produce 200,000 tons as it does to produce 600,000 tons. Our margins have improved.
Yeah, that makes sense. That dispute with the major customer has been resolved. Can you give us an update on how the pricing worked out for that one?
Yeah, we can, Peter. We're sort of comfortable with where we've landed after that dispute, and pricing is quite appropriate. It is as per the contractual agreement we have in place. Yeah, it's an appropriate price and it's as per our agreement, which is good.
Okay. I guess going forward versus the first half, should we expect any kind of major change in margins on that contract now for the business going forward? Is it just a case of increased volumes, increased fixed cost absorption, like Fergus said?
I think going forward, we can't talk about specific pricing on specific jobs, Peter. Going forward, we see increased volumes and as we pointed out through the presentation, particularly in the concrete side of things, we see some improvement coming in concrete selling prices, which is pleasing because it's certainly been a tough market over the last 12 months, and we look forward to it recovering.
Okay. Then aggregates. The sales of aggregate material, can you comment on which kind of market segments that's going to and what kind of grades, and whether it's been low grade and high grade product?
Yeah. We've seen a shift in that area in our average selling price, an upward shift in our average selling price, which indicates higher grade materials are moving more so than the lower grade materials. We've got a sort of strong performance from both the Southeast Queensland assets that we operate, combined with the mobile crushing and services business that we run. Both those areas are providing strong results for us.
Okay, good. The precast business, what's your confidence level in keeping that one operating once the Cross River Rail contract ends at the end of the year? Do you think there'll be enough incoming work to fill it?
It's looking pretty good. There's some major highway upgrade projects that have actually been let now and are going to happen. There's one in particular to the north of Brisbane that's going to consume a lot of precast. The other huge opportunity, sort of 12 or 18 months away for the precast business is the Inland Rail project. There is a massive amount of precast concrete elements required in our region for that. We are quite excited about the precast opportunities that are in the market and already identified. We have a number of tenders in place now that if successful, will drop in line with the wind down of Cross River Rail. It's pleasing to see those opportunities lining up so we don't end up in a position where we're sort of winding down that precast factory.
Sure. Got it. One last one for Fergus. Just in the results, in the pro forma, I guess there was AUD 3.8 million of adverse movements in foreign exchange contracts excluded. Can you just remind us what are these derivatives? What are they hedging against? What are you hedging against?
US dollars, and there's an interest rate hedge in there as well. The interest rate hedge, whilst we're paying it down, the interest rate going against us hasn't helped there. With the dollar, we took out some coverage when the dollar dropped right at the start of COVID, because there was a lot of doom and gloom around. That coverage, we've still got going forward. As the dollar has, instead of dropping and flattening before it starts to rise, it bounced. We've got ourselves in a position where it's looking worse because the dollar's moved a lot. It's not unexpectedly budgeted for at those rates that we were hedged at. We're quite comfortable with the position. It's obviously disappointing not to be able to take some of the higher rates on offer at the moment, but that looks better for next year.
It might be obtuse, but if you've only got, I guess, a very small amount of US dollars revenue, so what is this hedging?
US dollar expenses. A lot of our raw materials in this organization are purchased in US dollars. That's in both our new generation building materials business and in our cement business. That's a mark to market, Peter. That $3 million will unwind. Most of that will unwind in the second half.
Okay. Yeah, I guess the quantum of your U.S. revenues, but that does make sense if it's your expenses.
Not related to our U.S. Yeah. It's not at all related to our U.S. revenues. It's related to our ongoing monthly requirements for raw materials into the Southeast Queensland business here.
Okay. That makes sense. Fine. I'll leave it there. Thank you.
As a final reminder ladies and gentlemen, to ask a question please press star one on your telephone keypad now and wait for your name to be announced. Your next question comes from the line of Robin Lu from Macquarie. Please ask your question.
Hi all. Thanks for taking my questions today. I just want to touch on the concrete business. I know you mentioned that you're seeing some improvement in prices here. Can you just give us an indication on just what the size of these improvements have been, and just touching on where you see the market balancing through 2021, particularly given the fact that infrastructure and residential have shown signs of improvement there?
Yeah. Concrete price increases in our organization have been order of magnitude 10%-15% up. The volumes that we're seeing, particularly out of the residential activities, coupled with the increase in infrastructure work, projects such as Cross River Rail and some major road upgrade work that's going on. We have a fairly optimistic view on concrete volumes going forward. We see them increasing and providing opportunity for all concrete producers in Southeast Queensland.
Sorry, there's a bit of feedback there. Do you mind elaborating a little bit on the residential market? I know you talked about infrastructure a bit, just seeing whether there is exposure from direct benefits from increasing demand in resi, particularly in Queensland.
Yeah, our biggest exposure to the residential market is probably outside of Brisbane, particularly around the Sunshine Coast and Toowoomba region. We've seen a significant increase in activity in the general residential market in that area. I would say the majority of our customers are now booked out almost 12 months in advance on their home build program. Whereas if you wind back 12 months ago, they were probably sitting at about four months work in hand. They're now almost 12 months work in hand. That helps.
Yeah. Thanks. Just on CMS, obviously, haulage business has been doing pretty well. You've been winning contracts over the last 18 months. Do you mind giving a bit of an update around the mix movements in the overall CMS business, against what you would have seen in the first half 2020? Just on the impact on margins as well. Thanks.
Sorry, Robin, were you talking about just the project style of things or across the whole business?
Across the whole CMS business, just around the mix movements across the four key segments.
Look, in terms of first half versus first half, cement revenue-wise is up nearly 23%. Our concrete's up nearly 47%. Our quarry projects is up 75%. Our transport projects is up 76% in revenues.
Possibly on margins, or is that something that you could talk to as well?
Obviously, cement margins are much better as we've got a higher volume, as I said before. Our concrete operations, the margins are about the same. Whilst the revenue's risen, we haven't seen a great increase in the actual underlying margin. It is a better margin than it was, but on a percentage-wise, it's about the same. Our quarry projects have seen a really large increase because we've gone such a big increase in revenue that has driven such a large increase in the profitability. Likewise with transport, we've seen a large increase in our EBIT as well earned.
In summary, we're very happy with the margin growth on all of the businesses, excluding concrete.
Yeah. If we look at projects, we're missing, as Cam said, we haven't had a concrete project drop for a while, and concrete projects are one area where we do see some good margins and good revenues. In terms of quarry projects, we've still got some equipment that we'd like to see better utilized. Our transport projects, we've got our transport fleet very well utilized there. For us to look at some improvements in transport would really come down to just small increases and increases in capital. Cement, obviously volume really helps cement. It's a volume business. We are also looking at better utilization of the plant and more smarter ways of moving product and things around in the cement plant. There is some potential there. We're encouraged by what we've done, but we've got a lot more to do.
Yeah. That sounds good to me. I just want to touch on costs for a second. Particularly around your input costs, given the higher Aussie dollar, how have you seen this contributed to your, particularly your CMS margin expansion, whether it's cement or other raw materials?
As I said before, part of the reason why we've got that mark to market is because we've hedged out a lot of our U.S. dollar exposure. As I said, we haven't enjoyed that uplift, we probably haven't seen that improvement in margin. Next year we are in a position to take advantage of the higher exchange rate. We should see an improvement in margin next financial year.
Yeah.
Sort of more operationally, shipping is the expense that's the one to watch at the moment. We've got a good shipping contract in place. However, as we look into the future, we are watching that shipping pricing. It's certainly on the uplift.
Yeah, that makes sense. The last one from me is corporate costs. Just saw an AUD 3.5 million increase year-on-year. Do you mind just giving some color around what drove the higher cost this half, please?
The derivative mark to market. If you exclude the derivative mark to market, our underlying costs are down on the first half and second half of last year.
Great. Thanks. That's all from me.
Your next question comes from the line of Brook Campbell from JPM organ.
Yeah, thanks very much for taking my question. Just a quick one, it might have already been referred to, we're just keen to understand the timing of the additional concrete batching plants that you're looking to bring in commission, I presume over the next sort of year or so. Just the timing of that one, please, also actually.
Yeah, Brook. We have two more sites. One of them now has the DA back and is ready to go. We don't have a desire to put a plant on that in the next couple of months, but certainly, I think we'll bring that plant online over the next 12 months. We would see no revenue generated from that plant. It's on the south of Brisbane, in the next 12-month period. It'll be a plant that has the same sort of capability or capacity of the other plants we've put in place. I would say 12 months away for that one. The other site that we've identified is just on the west of Brisbane, and we've purchased that land, and it would be similar timing. It would be 12 months.
That's great. Thanks, actually. Then, I guess for the two sites combined, what would be the total CapEx for sort of land and then building up the plants over the next 12 months or so?
The land's already taken care of. The plants would be in the range of sort of AUD 2 million-AUD 3 million at both sites.
Great. Thanks.
You'd generate sort of at least circa 10,000 cubic meters a month out of the two plants.
That's great. Thanks.
There are no further questions from the telephone lines. I would now like to hand the conference back to the presenters for closing remarks. Thank you.
Well, thanks very much for dialing in to hear our results today, everyone. That concludes the presentation. We are hosting a number of one-on-one investor presentations over the next few days and are happy to accommodate anyone that would like to organize that with us. Thanks very much. We'll close the call.
Ladies and gentlemen, that concludes today's conference call. Thank you for your attendance. You may now disconnect.