When the Wagner brothers realised Toowoomba needed better transport links to attract tenants to their business park, they built an airport. When they found ships had to wait too long to unload at their cement works on the Brisbane River, they built a bulk goods wharf. And when they realised their concrete trucks were sitting idle for much of the day, they devised a way of quickly converting them into tippers and using them all day long. “It’s the way we work,” says Denis Wagner FAICD, chairman of Wagners. “If we’ve got a problem, we fix it.”
The four brothers have a habit of turning problems into opportunities and in the process have grown Toowoomba-based Wagners into one of regional Australia’s most significant businesses. The business turns over $300 million a year.
“We don’t get carried away by that. A measure of the business is not the turnover; a measure of the business is the bottom-line,” says Denis. He won’t comment on the profit, except to say: “We’re still here.” Nor will he comment on a 2015 estimate by BRW magazine – which put the family’s wealth at $955 million – except to say it’s wrong.
The business has expanded significantly beyond its origins as a maker of concrete and heavy construction materials and a transport and logistics business. It has offshore operations with a global project office in Kuala Lumpur; it manufactures and exports composite fibre products; it is pioneering low-emissions concrete; and it operates a residential and commercial property development arm as well.
To that list the family can now add infrastructure builder and owner, with the Brisbane West Wellcamp Airport completed in 2014 and the Brisbane River wharf currently under construction.
The story of how they came to build the airport goes back to 1994, when the family bought the 1,200 hectare Wellcamp Downs pastoral property to run a quarry for the construction materials business. After the land was re-zoned by the local council and state government in 2001, Wagners decided to develop the Wellcamp Business Park in 2011.
“We travelled far and wide looking for businesses to set up manufacturing facilities here and we couldn’t get a lot of interest because there was no connectivity in Toowoomba. So, that’s really how the airport came into being,” says Denis.
If one brother is vehemently opposed to to something, it gives us good reason to go back and relook at that issue.
The airport was the first international public airport built in Australia since Tullamarine nearly 50 years ago and was completed in just 19 months, an astonishingly fast time for such a major project. The reason is that the family was the owner, the operator, and the contractor building the airport, and as the owner of a large parcel of land, they were able to build 24 hours a day, seven days a week. There were no contractual disputes and every decision was made on the basis of what would be best overall for the business, not just the contractor or the operator.
The brothers have spent $200 million on the airport and aren’t expecting to get their money back any time soon. “We’ve taken a very long-term investment view of this asset. We built it without any customers. We had to take that risk and the investment felt right. We think that, over the next 20, 30, or 40 years, it’ll be a very wise investment,” says John Wagner, who was chairman of the business before Denis and now runs the airport business.
They say Wagners can adopt this approach because all of the brothers agree that it is a multi-generational investment and they are not under the same pressure as public companies to start producing returns in three to five years.
The airport already takes some 75 scheduled flights a week plus fly-in, fly-out mining traffic and corporate jet flights. John expects that number to rise to 100 flights this year. It is also the first regional airport to have an international freight designation, with Cathay Pacific flying fresh produce weekly from the airport to Hong Kong.
John says this is just the beginning. Within a decade, he expects daily international fresh produce flights, more than a million passengers a year and scheduled daily international flights. Along with flying out fresh produce, bringing in tourists and servicing the mines, the airport will add to Toowoomba’s credentials as a major freight hub, particularly if the proposed inland rail infrastructure project is ever built.
And once the Toowoomba Second Range Crossing – a bypass route that takes traffic around Toowoomba rather than through it – is built, linking the region with the city of Brisbane, the airport can also serve as a second airport for Brisbane.
Using the regions
The brothers say regional Australia is underestimated. It has the potential to feed the world, but governments at all levels need to create an environment for the private sector to build infrastructure, where genuine Australian companies can build roads, rail, airports and dams. The inland rail from Victoria, through central New South Wales and up to Brisbane is needed to move freight and facilitate exports and is a vital infrastructure project that will open up regional Australia to the world.
Wagners is also building a bulk goods wharf on the Brisbane River – the result, once again, of turning a problem into an opportunity. Ships were held up waiting to unload at the company’s cement plant because of a lack of wharf capacity on the northern side of the Brisbane River. So to address the issue, Wagners decided to build its own wharf adjacent to the six-hectare site that houses its cement grinding facility. The 262-metre wharf will take 40,000 tonne bulk cargo vessels and will be available for third party use.
Building the wharf is typical of the way the brothers approach problems and turn them into opportunities. When they started the Wellcamp Business Park, which occupies 500 hectares of their 2,000 hectare site, they had concerns about the time it would take to have essential services connected. So they applied and became a registered water services provider, which allowed them to build and operate a sewage plant, provide the infrastructure to bring water to the site and provide the reticulation of water to developments within the Wellcamp Business Park.
Similarly, they have a telecommunications carrier licence, with fibre optic cables providing connectivity to and around the business park. They also have approval to provide electricity to the businesses within the site. They buy high-voltage power straight from the grid, put it through their own electricity substation and distribute it to their tenants, passing on the savings.
Their thinking is to provide essential services much more quickly than other providers do and at a cheaper cost to businesses that establish at Wellcamp. “We’re not relying on government-owned corporations or a third party to deliver the services to the site,” Denis says.
John says being a family business gives Wagners a huge advantage. “It’s really all about mutual respect. If you have mutual respect and build on each other’s weaknesses and strengths, then it’s a very powerful situation to be in,” he says.
“The biggest advantage is that you can make decisions quickly and make decisions for the right reasons. One of our strengths is that, if we see an opportunity, it’s really a matter of doing a ring-around between the four brothers to make sure everyone’s happy to invest and then getting on with it. Whereas a lot of the major companies have got boards and a process to go through, we try to keep ours to a minimum.”
The board meets once a month, but the brothers see each other at work every day. Board meetings are run somewhat differently to other companies. The first two hours are taken up with safety and quality assurance, with 25 or 30 staff joining in.
“We believe, in order to have a good safety culture, it’s got to be good from the top down and the bottom up. Our safety statistics have improved dramatically over the last three to five years since we’ve been going down this track,” John says.
Then there are reports from different business divisions followed by a boardroom lunch where they invite people from within the business – someone off the workshop floor or a truck driver, for instance.
“It’s about making sure that we listen to those people and that those people listen to what we’ve got to say. They need to understand who we are and we need to be visible in the business. We like to make sure that those people feel included and that they go back to their workplace and tell their workmates what happened and what was said. That’s a way to get your message out.”
Board decisions are made by the majority, but John says: “If one brother is vehemently opposed to something, it gives us good reason to go back and relook at that issue because we are very aligned with what we want to do and how we want it to work.”
Joining the four brothers on the board is Chris Berkefeld MAICD, who has been an advisory board member since 2011. Berkefeld is also on the board of mining contractor HSE Mining and New Zealand road company, Hiway Group NZ.
John says Berkefeld brings a different perspective and objectivity to the board. “He’s someone who doesn’t get emotional about things like a family member would. He brings a certain calm and a certain behaviour to our board meetings and we find that very healthy,” he says.
Denis says it’s very important that each of the brothers has his own clearly-defined role in the business. Denis is managing director and chairman, John runs the airport and oversees the other infrastructure assets, Neill is in charge of composite fibre technologies and Joe is Australian projects director.
Any conflicts at a board meeting are sorted out then and there. “You can’t let them fester. There are not too many decisions that we don’t come to a unanimous position on. We may have different views but generally, most of the decisions that we come to, everyone agrees with. There might be iterations of them that are a bit different, but everyone agrees. Most of the decisions are made and we just get on with it.”
The Wagner family has been in Toowoomba since the mid-1860s and its business interests in the town stretch back to 1896 when the brothers’ great-grandfather founded a monumental masonry business, which is still running today and is owned and operated by their first cousins.
Wagners, as it is today, was founded by brothers Denis, John and Neill with their father Henry in 1989, after they saw an opportunity in heavy construction materials. They started with a single concrete plant and half a dozen trucks.
The business was subject to aggressive behaviour from competitors when it started, but grew rapidly when Wagners established its first quarry and could control the supply of raw materials. It also had to contend with price fixing in Southeast Queensland by Pioneer Concrete, Boral and CSR, who were fined a record $20 million for the cartel by the Australian Competition and Consumer Commission in 1995.
At its peak, before some of the construction materials arm was sold to Boral for $163 million in 2011, it had 19 concrete plants, several mobile concrete plants, four quarries with fixed plants, the largest fleet of track-mounted mobile crushers in Australia, more than two hundred trucks and 1,100 employees.
The company is currently embroiled in legal action against broadcaster Alan Jones and The Australian columnist Nick Cater, alleging it was defamed by claims that a levee owned by the Wagners caused the death of 12 people in the Grantham floods.
In the process of acquiring land for quarries and concrete plants, Wagners has amassed significant landholdings and as with so many other aspects of the business, has seized an opportunity to move into property development as well, with residential and commercial developments in several locations around Queensland.
Wagners has also established a global construction materials and transport arm to give the business more geographical diversity. Headquartered in Kuala Lumpur, the global operation has taken on projects as far afield as Russia, the Pacific Islands, Papua New Guinea and Africa. “By increasing the geographical spread of our operations, we’re able to reduce the risk of one particular market going through a downturn,” Denis says.
Finding new and better ways of doing things is at heart of Wagners, says Denis. Sometimes the innovation can be relatively simple, but effective. For instance, to overcome the waste of leaving concrete trucks idle for several hours in the middle of the day, the Wagners developed a way to use them by quickly unhitching the mixer part of the trucks to turn them into tippers capable of carrying construction materials. It’s now a practice in the concrete industry that significantly increases utilisation and efficiency, developed because of a necessity to make assets productive.
“These things evolve as a means of resolving problems within operations. There is generally a lot of discussion on how we can do things better,” says Denis. “Our staff are encouraged to look at things that make their jobs easier or more efficient. Much of the innovative thinking and the solutions to issues comes from the guys on the shop floor, we are always surprised by the value and the benefits they bring to our business.”
Sometimes the innovation is more complex, involving research and development and new product development, such as the company’s composite fibre business.
Wagners has developed its own composite fibre products, which are made from plastic fibres and resin and are stronger and significantly lighter than steel. The company has built and exported six bridges to the US, a cycleway across a bridge in New Zealand as well as crossarms for power poles to Malaysia, Fiji and New Zealand.
“With the right product, we have proven that you can manufacture in Australia and sell into the Asian markets,” says Denis.
“It is important to develop new products. We’ve developed our composite products from scratch with a team of in-house engineers that have always believed in their own ability and the value the products offered.
“They have built the machines that actually make the product. They have developed the technology and convinced the market and the end user that our composite fibre offers better value for money than any other product currently on the market. Collectively we have had a vision that, as Neill would often say, composites are the next generation building material.”
The company has also developed a product called Earth Friendly Concrete, which unlike traditional concrete, contains no cement. The manufacture of cement emits huge amounts of carbon because it involves burning the CO2 out of limestone, so making concrete with waste products from steel manufacture and power plants, namely slag and fly ash, has a significant environmental benefit.
Joe, the youngest of the four brothers, is pursuing opportunities in the Middle East and India, where a deal with conglomerate JSW to roll out the product in that emerging market promises to deliver huge environmental and cost benefits. “The Earth Friendly Concrete is going to develop into a huge market,” Denis says.
By increasing the geographical spread of our operations, we're able to reduce the risk of one particular market going through a downturn.
Denis says much of the innovation is driven by necessity. “Maybe not the necessity for the product, but it might be a necessity to broaden our product base, to give us some protection. If the construction materials business or industry goes into decline, we’ve actually got other revenue streams and we’re not as reliant on one industry sector,” he says.
The strength of the concrete business over the years and not having shareholders or the stock market to answer to has also facilitated the innovation. “The very nature of Wagners is that we’re always striving to do things differently and do things more efficiently. Because we’re a private company and we’ve probably got the financial capacity, we can actually give it a go. If it doesn’t work, it’s not catastrophic,” Denis says.
The company is its own disruptor, says Denis. “Rather than a third party coming in and disrupting the industry, why don’t we disrupt it? We will then, not control it, but we’ll have the edge over our competitors. That has actually worked well for us in the past.”
Denis says the biggest challenge as a family-owned business is succession. “We can batch concrete really well, crush gravel, drive trucks, run airports, build roads and dams, grind cement and make precast concrete. But if we don’t get our succession planning right, the whole thing could fall down around us,” he says.
“It’s a challenge when future generations or the next generation starts to come into the business. You’re going to have different skill levels. You’re going to have different levels of education. You’re going to have different capacities to manage parts of the business. One of the real challenges is how do you manage that? How do you handle that equitably?” It’s something the brothers talk about a lot, but they don’t yet have the answer.
There are several options for the business in future: a sale, equity partners, a float or leaving it as it is. They are already fielding calls from investment bankers, which Denis doesn’t mind. “Sometimes, if you talk to those guys, you can find out what else is going on in the market,” he says.
For now, however, there are no plans to leave the business. “What gives me a lot of enjoyment is to see our family business actually build something for the long-term. I think that’s pretty special,” says John.
Denis says going to work at Wagners is exciting. “There’s always something different. There are new challenges every day. There are new opportunities every day – some of those are small, some of those are quite significant. There are new business opportunities. There are new opportunities to do things better. There are new opportunities to develop new products,” he says.
“You can achieve so much if you work well together. It can be rewarding both financially and personally.”