Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wagners Holding Co Ltd (ASX:WGN, Financial) reported a significant improvement in EBIT, growing by 81% year-on-year to $40 million.
- The company declared a dividend of $0.025 per share, marking a return to dividend payments since 2018.
- Revenue from the Southeast Queensland-based construction materials segment increased to $216 million, with an improved EBIT margin of 14.7%.
- The Wellcamp quarry plant upgrade was completed, allowing for increased product range and lower production costs.
- The company has a solid forward order book and expects continued strong demand for its core products in FY25.
Negative Points
- Losses in the CFT USA business were greater than in FY23, impacting overall EBIT results.
- Operating costs increased due to higher repairs and maintenance expenses and increased labor costs.
- The company incurred a $3.2 million impairment related to the early termination of the Wacol facility lease.
- The concrete business faced challenges, although there were signs of improvement by the end of Q4.
- The New Zealand project in the CFT segment delivered a material loss, negatively impacting overall results.
Q & A Highlights
Q: Can you discuss the strategy around expanding the batch network and the profitability of the cement division?
A: The concrete plants provide market access for our cement business. The concrete business has seen significant improvement in pricing and gross margin, boosting confidence in expanding the network. This expansion benefits not only cement but also aggregates and flyash businesses. Cement EBIT margins have increased by over 50% from last year, and the macroeconomic demand for building materials supports this expansion. (Fergus Hume, CFO)
Q: Can you provide background on the bad debt in New Zealand and measures to prevent future occurrences?
A: The bad debt arose from a civil installation contract, which is high-risk work we typically avoid. We prefer to remain a material supplier. The issue stemmed from an inappropriate contracting model for the risk involved. Moving forward, we aim to avoid such installation work and manage it better if necessary. (Cameron Coleman, CEO)
Q: What is the Board's approach to dividends, given the recent declaration of $0.025 per share?
A: The last dividend was paid in 2018. The Board intends to continue paying dividends as long as the business environment supports it. We are pleased to resume dividends and aim to maintain this practice. (Cameron Coleman, CEO)
Q: What are the current objectives for net debt and the balance sheet?
A: We are comfortable with our current leverage ratio. Future capital expenditures, such as concrete plant expansions, will impact debt levels. We aim to manage debt around current levels while maintaining flexibility for growth opportunities. (Fergus Hume, CFO)
Q: Can you elaborate on the disciplined and active management of inventory for FY25?
A: We have moved many businesses to a just-in-time inventory model. While some inventory volumes have decreased, prices have increased. We will focus on reducing inventory in businesses where there are opportunities for improvement. (Fergus Hume, CFO)
Q: What is the impact of the Sydney Metro project on FY25 earnings?
A: Assuming a $5 million contribution from the Sydney Metro precast project in the second half of FY24, which will not be repeated in FY25, and considering increased operating performance due to demand, this is a reasonable starting point for FY25. (Cameron Coleman, CEO)
Q: What measures are in place to ensure the continued growth and profitability of the CFT business?
A: We focus on securing high-margin, low-risk projects and improving manufacturing efficiencies. In the U.S., we aim to establish a sustained pipeline and minimize losses. A new executive has been appointed to drive continuous improvement and innovation. (Cameron Coleman, CEO)
Q: How does the company plan to leverage its investments in assets to drive future profitability?
A: We aim to capitalize on growth opportunities by optimizing manufacturing and production capabilities, focusing on cost control, and leveraging significant capital investments made in prior years. (Cameron Coleman, CEO)
Q: What is the outlook for Wagners in FY25 and beyond?
A: We expect strong demand for core products, a solid forward order book, and increased demand for innovative products. The favorable resources environment and robust civil infrastructure pipeline, particularly in Southeast Queensland, position us well for future opportunities. (Cameron Coleman, CEO)
Q: What are the strategic priorities for Wagners moving forward?
A: Our strategy focuses on growing and consolidating the core construction materials business, pursuing major projects, and expanding opportunities in the CFT business. We also aim to formalize an ESG strategy to align with upcoming reporting requirements. (Cameron Coleman, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
