Good morning, everyone, and welcome to the Wagners first half FY 2025 results webinar. My name's Sam Wells from NWR Communications, and joining me from the company today is Managing Director Cameron Coleman and Chief Financial Officer Fergus Hume. Following a brief summary of the updated release to the ASX yesterday afternoon, we will have some time for Q&A of the management team. There'll be a choice of two options. First, research analysts will be able to raise your hand if you would like to ask a verbal question of the management team, or we will also take written questions via the Q&A function at the bottom of your screen. We will endeavour to get to all questions asked, in some cases combining questions on the same or similar topic. Thank you, and over to you, Cameron.
Thanks, Sam, and good morning, ladies and gentlemen, and welcome to our half year results presentation. In summary, it's been a very positive six months. We've delivered a strong EBIT result and have experienced continued growth from our core Construction Materials business centred in South East Queensland. The group's revenue for the first half was AUD 225 million. While this represents an almost 4% increase on last half, it is down on the prior corresponding period, as we anticipated, due to the completion of the large precast tunnel project completed in FY 2024. Despite the decline in revenue compared to the prior corresponding period, improved margins across the Construction Materials and Composites businesses have delivered an EBIT result of AUD 20.3 million. This is an improvement on both the first and second halves of FY 2024. This result has been driven by improved market conditions together with operating efficiencies across the group.
Net profit after tax for the first half was AUD 12.3 million, significantly higher than the prior corresponding period, which did include that impairment made against our Earth Friendly Concrete business. The strong operating cash flow generation has enabled us to further reduce our debt, which Fergus will speak to in more detail in a moment. Let's look at the performance of our segments, starting with construction materials. As I mentioned earlier, this segment has again delivered improved results. Demand generally has continued to strengthen, and the growth in our Concrete business is adding significant value through our vertically integrated supply chain model. As concrete volumes improve, so does the performance of our Cement, Quarry, and Transport businesses. Margins continue to improve across this segment as we realise the benefit of good operating discipline.
Looking at cement, while volumes were generally consistent with the prior corresponding period, margins have improved significantly, and the business delivered a 30% improvement in EBIT for the first half compared to the prior corresponding period. The improvement in concrete volumes delivered an almost 40% increase in revenue for the Concrete business, with significantly improved margins, stable market conditions, and operational efficiencies driving this. We've continued to execute our growth strategy in the Concrete business, with further sites added to the network throughout the period and others at various stages of development. In our Quarries business, the investment into plant upgrades, particularly at the Wellcamp Quarry, enabled additional capacity and production efficiencies, driving improved margins. Moving on to our Project Services area, as I'd highlighted, the decline in revenue compared to the prior corresponding period was anticipated and reflects the cyclical nature of large project work.
This business remains well positioned to respond to project opportunities as they arise, and business development activities continued during the period in pursuit of those opportunities. Despite the reduced activity in this segment during the period, it's been encouraging to see overall EBIT growth due to the strong performance of the underlying Construction Materials segment. Our Composite Fibre Technologies segment has seen a significant turnaround compared to prior periods. Overall, revenue for the segment was AUD 34.7 million, and it's delivering an EBIT result of AUD 4.2 million compared to AUD 1.3 million in the prior corresponding period. In Australia and New Zealand, the capital invested in this business is starting to provide the returns we expect on the back of strong crossarm margins, coupled with the growth we are experiencing as a result of launching our new power poles to the market.
The Custom Build business is now delivering margins that meet our expectation, mainly due to a disciplined approach to project selection and pricing. There was an improvement in performance in our Composites business in the U.S., with losses significantly reduced compared to the prior periods, with the right sizing of the business. The business did secure a number of projects during the period that are currently being delivered. I'll now just get Fergus to take you through the balance sheet and cash flow for the group.
Thanks, Cam. Working capital has reduced by AUD 5.7 million, and mainly as a result of the improved collection of receivables. A debt reduction of AUD 10.8 million, together with an increase in cash of AUD 3.7 million, has reduced the net debt by AUD 14.5 million. With the net debt to EBITDA leverage ratio of less than one, we are well placed for growth opportunities, including the ongoing expansion of the concrete plant network. We look at the cash flow statement. Good cash conversion from the operating results has resulted in a good operating cash flow. Our capital expenditure has been tightly managed during this period, with the spend focusing on the replacement of bulk haulage and materials transport assets and plant upgrades and replacements in the Cement business. The improved cash conversion has been used to repay debt, and we recommence the payment of dividends in this half.
I'll now pass you back to Cameron for the outlook.
Thanks, Fergus. Moving on to the outlook for FY 2025, while demand for construction materials is expected to remain strong, business performance is normally skewed in favor of the first half. January is generally a slower month compared to the rest of the year and is also when we conduct our major shutdown in our Cement business, undertaking all the maintenance, while demand for cement, concrete, and aggregates is low. The downtime and costs associated with this do therefore impact the second half compared to the first half. However, we do expect a strong operating environment to continue for FY 2025 across the group. In cement, we expect some improvement in margins as cost savings in raw materials should be recognized in the second half. Volumes are, however, expected to be slightly softer in the second half compared to the first half.
Concrete volumes are expected to continue to increase in line with the anticipated construction activity across South East Queensland, with the margin improvement experienced in the first half expected to be maintained. The expansion of the company's South East Queensland concrete plant network will remain a focus as development commences on the newly acquired sites. Additional sites for future plants that align with the expansion strategy will continue to be pursued. We do expect improved performance from the Quarries business based on our secured pipeline and expected market demand. Also, the investment in the Wellcamp Quarry plant will continue to deliver improvements in production capacity, product mix, along with cost reduction, resulting in higher margins. In our Project Services area, the Bulk Haulage business is expected to deliver a similar result to the first half, given the contractual arrangements we already have in place.
We should see some improvement in margins with the new fleet being introduced on some projects, which will improve productivity and reduce repair and maintenance costs. There are no major projects of any material nature identified that will provide any significant contribution in the remainder of FY 2025. However, like the first half, we will continue with our business development efforts, pursuing project opportunities for future periods. As we've previously highlighted, the Precast business will exit the Wacol site in FY 2025, relocating to a new company-owned purpose-built precast facility at Ipswich. This will be an exciting move for the business once it's established. In our Composites business, the second half's performance should be consistent with the first half. Demand generally for our composite products should remain strong, and we are expecting an increase in demand for power poles compared to the first half.
The business also has multiple Custom Build projects secured for delivery in the second half at favorable margins and low-risk profiles. Further improvement is expected in the CFT USA business, given the pipeline of work we've secured over there. The losses in the second half should be contained to the same or better levels than what we delivered in H1. In summary, we're extremely pleased with the first half's performance. The growth in the underlying Construction Materials segment has been really positive. Volumes have remained strong, and improvement in margins driven by firm operating discipline and stable market conditions has enabled the delivery of a really positive earnings result. The growth in both sales and earnings in our composite business has also been great to see, with it now benefiting from the significant capital invested into the business in prior years.
We remain extremely excited about the future growth of our Composites business. That concludes our formal part of our presentation, and thanks for joining us. As always, as Sam mentioned, Fergus and I are happy to take any questions you may have.
Great. Thank you, Cameron. Thank you, Fergus. Just before we open up to questions, as a reminder, research analysts can ask questions via raising your hand, so I can unmute your line while the rest of the audience can submit written questions via the Q&A function at the bottom of your screen. First question comes from Max Andrews at Unified. Max, please go ahead.
Thanks, Sam. Well done, Cam and Ferg on the great results. Just on the CFT business, surely your best result to date in that segment. Is there any reason why that couldn't really perform in the second half like it did in the first half? Just on the kind of bespoke projects, are you kind of taking any risk on the project management side in terms of the installs?
Yeah, thanks, Max. The CFT business, we expect to be pretty consistent with the first half. We've got a pretty strong order book on that bespoke project part of the business, or Custom Build as we refer to it. The profile of work we've got there, as I called out in the presentation, is all at a risk level and priced at margins that we're very satisfied with. We called out last presentation six months ago, the result we had over in New Zealand with a job that was mismanaged. We've got that behind us, and we've got an excellent profile of work on our books now that we're very happy with. Yeah, as I said, we're expecting to see continued performance. We're expecting to see a larger contribution from the recently released power pole product line.
Our order book, both in the U.S.A. and in Australia and New Zealand for that Custom Cuild work, is at a risk profile and margin that we're very happy with.
Cool. Maybe just one more. Once you make the switch frofm Wacol to Ipswich for your precast business, do you feel like that's a time when you'll be able to kind of win more kind of large project work?
Look, the switch is not precluding us from winning large project work today. The fact is there just isn't a large precast project opportunity out there today. There's nothing of the magnitude of the Sydney Metro Tunnel or the Cross River Rail Tunnel in Brisbane even open for bid at this point. That is why we grabbed and seized the opportunity to move now while there is a pause, if you like, in construction, in that large-scale construction activity. If something was to pop up, we would absolutely be able to mobilize and meet the project needs from Wulkuraka . The move is not inhibiting our ability to win a large project. The fact that there just isn't a large project out there to win at the moment is the challenge.
Awesome. Thanks, guys.
Great. Thanks, Max. Next question comes from Liam at Morgans. Liam, please go ahead.
Morning, guys. Can you hear me there?
Yeah, we can hear you, Liam.
Excellent. Just on Cement, can you just talk about price change versus volume change recently? How's that been moving? On Quarries, you sort of talked about some additional CapEx. Can we expect a change in that volume output? For example, when I'm modelling that quarry subdivision, I have volumes fairly stable. Can we expect that to grow now?
Yep. I'll jump in first on the Cement. Liam, on cement, pricing is moving in line with CPI as far as top-line price. Volumes are reasonably consistent. The big thing for us is just cost control, managing to get our raw materials negotiated at better delivered rates, including shipping. There is some pretty reasonable upside in margins due to that. You have increasing sales price, decreasing costs, and pretty stable volumes.
Just while you're on that, Cam, what sort of change have you had in the clinker price? I'm guessing that's what's driving it.
Yeah. Look, it's not just clinker. It's clinker shipping and some operational efficiencies on the site. There's a combined number there, Liam. The clinker movement is not a huge percentage of that.
Okay. Great.
Probably low single digits in terms of percentage-wise, Liam, for the reduction in clinker price. But it was a reduction. I guess this time, 12 months ago, we were thinking that we're probably looking at an increase. So we were happy to see the reduction.
Go on. Quarry volumes going forward?
Quarry volumes will grow. The market's growing. We're moving more product into our own concrete plants from our quarries. As we build more concrete plants, the opportunity to draw more aggregates through that vertically integrated supply chain model presents itself. As I pointed out, we've spent significant money at our Wellcamp Quarry upgrading the plant to improve capacity and also improve production costs. We're well positioned at the quarry to take advantage of the larger volumes at a reduced production cost.
Given the geography of those quarries, are you able to push price? For example, if we were to compare it to Boral?
Oh, look, it's still competitive. There's plenty of operators in the quarries industry. There is a point where you won't win any work if you push it too hard.
Great. I'll jump back in the queue. Thanks, guys.
Thanks, Liam.
Thanks, Liam. Okay. Next submitted question is from EBITDA. Oh, sorry, EBIT margins. You've done a good job growing margins despite lower revenues. Do you have any aspirations for medium- or long-term EBIT margins within the construction materials business specifically?
I guess that we had a bit of a margin decline from the second half to the first half, and that was mainly due to the growth in our volumes of concrete, with concrete being a lower margin business, but we had a significant increase in volumes and price in our Concrete business. In the fullness of time, we'd like to see that margin in the Concrete business improve. We have seen across the rest of the businesses, we saw reasonable EBIT growth in a margin sense. Our sort of, obviously, our aspirations are for EBIT growth, but it's going to be mainly the biggest lever for us is around the concrete and the concrete price. If we can improve our margins through efficiencies of operations on that concrete, then we will see a good increase in our underlying Construction Materials EBIT margins.
Great. Thank you. Maybe just a follow-on from that on the Construction Materials business. Are you able to provide a breakdown of revenue growth within that business? How much of the increase was driven by volume as opposed to price?
Across the businesses, in total, it's a bit hard to say, but if we look, as I just mentioned before, the biggest growth in revenue was in our Concrete operations business, and that was both volume and price. In the Cement businesses, Cam called out, we had growth mainly due to price, not due to volume. Our volumes were relatively level. In the Quarries business, we've seen a bit of both in both areas. It's hard to be definitive because some of those ones are a bit different depending on your product mix as well that comes out of there. Yeah, there's been a good mix of both volume and price across the Construction Materials business.
Sam, I did call out a 40% increase in revenue for the Concrete business on the prior period. We have seen some significant improvement in that. That is both volume and selling price growing significantly.
Great. Thanks, guys. Maybe just moving to CFT, in particular, the U.S.A. business, a couple of questions there. Can you talk to the outlook for that business, particularly around profitability? Has your experience thus far in the business in the U.S. shaped any potential future expansion plans for that business or other businesses moving forward?
Yeah. We had a much improved half in the CFT USA business with some really good discipline around cost control and project delivery. Looking forward, we've secured quite a reasonable pipeline of work in that custom build space. As I pointed out, that's all at low-risk profile and satisfactory margins for us. That is really encouraging to see that area of the business starting to move. The exciting part of it, though, that's yet to be realised is the entry into the electrical infrastructure, cross arms, and power poles. There is a lot of work being done on that and some real opportunity there, particularly to get our power pole production line established and meet the market over there. We've identified a distribution network requirement for our poles, and we're just working through the market penetration phase there.
We are quite excited if we can replicate what we do in Australia with those power poles. There's a huge opportunity for us.
Okay. Great. Thank you. On the Projects business, there was one question earlier around the move in locations, but you've stated no major projects secured to deliver material revenue in FY2025. Can you just comment on the tender activity?
Yeah. It's an interesting point, Sam. There has been no major project activity, and yet the core Construction Materials business has managed to perform and still beat prior corresponding period EBIT. That has been really encouraging. The more exciting part of that is there is a lot of tendering activity going on in the Projects Services business in all areas, whether it be contract crushing, mobile concrete plants, bulk haulage, precast projects. There is a whole lot of opportunity out there that we're currently not enjoying. The business has the assets and the capability to execute those projects as they come online and as they're awarded. We're in a reasonable space there. Whilst there's not a huge amount of activity there today, it is an area of business that we've got a very strong track record of performing in, and it's just a timing thing.
We know these projects can be lumpy. We've got a solid performance from our underlying businesses, Composites and Construction Materials, and we've got a huge opportunity in our Project Services business as large projects come to light across South East Queensland and internationally on those other projects that we follow closely.
Okay. Great. Thank you. I think Liam has another question at Morgans. Are you there, Liam? Liam at Morgans, just double-checking no further questions.
Sorry, guys. Unmuted now. Just on Concrete, I'm guessing that division is now profitable. Are you sort of approaching your return of capital or cost of capital? Can you just talk through the economics of the expanded batch network? How many plants are you at at the moment, and where do you expect that to go, and what are the CapEx implications?
I'll kick off and let Cam talk to the future. We have certain plants that are definitely making a profit for us, Liam, at the concrete plant line, and there are still some plants that aren't. Overall, we're close to break-even, a small loss, a small gain in some months, but it's probably looking as a small loss in the Concrete business. Compared to two years ago when that business was riding a AUD 5 million loss, it's a big improvement for us. In terms of are we getting to the return on capital when you include the pull-through? By what we mean by pull-through is our Integrated business where we're using both our cement and our aggregates and our fly ash into that concrete plant. We're definitely getting to those return numbers that we were looking for.
In terms of the expansion of the plant network, we have secured two sites in this year. We've bought the land, but there are other ones in there. I'll let Cam talk to the total side of the network and what we're doing there.
Yeah. So Liam, as Fergus pointed out, we've got eight operational plants running. We've got another two. We've got the Wulkuraka, Ipswich site where we're moving our precast yard to that will also be a concrete distribution site to the general market. That plant's now well and truly under construction and is the first cab off the rank. That's the first plant to add to the network. Coupled with that, there'll be one to the north of Brisbane and another one to the south of Brisbane that we secured the land and paid for a couple of months ago. Those plants are being ordered as we speak. That gives us the capacity then to really service that entire South East Queensland market.
The strategy then is to go sort of further afield back towards the southern end of the Gold Coast is the next sort of focus area for us.
Great. It is a network of eight at the moment, expanding to three and an additional three in the sort of the short to medium term, and then another one.
Yeah. We've actually got four sites lined up ready to go. One under construction now. Another two we're ready to push the button on orders for concrete plants in the coming weeks. And then a third one that'll be about a year away.
Go on. Thanks, guys.
A fourth one, sorry. Fourth plant about a year away.
Great. Thanks, Liam. Just one final dividend question, guys, before we wrap it up. Any comments on dividends? Given the strength of the core business, should we expect dividends in the future?
As we called out, we commenced the payment of a dividend for the first time in a long time in this half. We declared a final dividend last year on the back of the numbers. It's always our intention to maintain paying the dividend. I think we weren't looking at paying an interim one this time. We were probably still on the look at the full year results and make sure that we give people the right sort of number when we look at the full year results plus our outlook around our capital expansion. As we called out there, we're going to spend a bit of money in the not-too-distant future around concrete plant expansion. We just need to make sure that we're balancing our cash the right way, but it's definitely our intention to maintain paying a dividend.
Great. Thanks, Fergus. I think that's all the time we have for questions today. If you do have any follow-up questions, please feel free to send them through to myself or the team. Maybe with that, I'll just pass it back to you, Cameron and Fergus, for any closing comments.
Thanks, Sam. Thank you very much, everyone, for dialing in and listening to our presentation today. That is pretty well all we have got. We will close the meeting, and thank you.
Okay. Great. Thank you. That concludes today's Wagners first half results call. Thank you and enjoy the rest of your day. Goodbye.