BBU - Earnings call transcript Q2 2021 | Brookfield Business Partners L.P.

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Operator

Welcome to the Brookfield Business Partners Second Quarter 2021 Results Conference Call and Webcast.

As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] Now I’d like to turn the conference over to Alan Fleming, Senior Vice President of Investor Relations. Please go ahead, Mr. Fleming

Alan Fleming

operator. you, Thank

statements. I’d differ to begin, and remind that and make you financial known subject Before unknown and and like talking responding risks forward-looking may we questions operating results initiatives statements about in are and to may we future performance, to These materially. our our growth

are website. further on known Canada to with filings our regulators information risk in you our For the the and available which U.S., review factors, I on securities encourage

On me Chief Chief Officer; the finish financial energy of advanced Financial recent with our to the Officer; and Executive Jaspreet and with operations. on will the storage review update over I business, Chief discuss Madon, activities call Cyrus then Cyrus at is today an results. our will will to Dehl, Denis our turn Operating Turcotte, first Officer. provide call Jaspreet Denis

questions. the We take to that, your will Cyrus. with to pass be then over And I’ll available call

Cyrus Madon

Alan. Good thanks very for Thanks today. morning, much, us joining and everyone,

we’ve months a busy last our few since a second quarter. had great We call. So had

around traded corporate corporation, shares with or also existing billion. an which pleased been to number initiatives will FFO positive publicly of separately with our business. BBUC through our and entity a we give to investors the cap across invest structure, initial or be long-term market with week partnership, seeing announced performance We’ve business. our paired We either of the be option partnership listed launch a a generated EBITDA but of expected strong BBU we’re continue We momentum operations. Business will $X.X units. value across to our and executing our a on growth limited also in the limited Brookfield Corporation build in of Earlier this

our to acquisitions. Turning

a products provide businesses. are of In acquire last we leaders, June, – we few strong provide capital. they for. to committed three generative over network. cash share They building Modulaire look is we’ve operator services construction of as services, know acquire industry Each they’re agreed excellent the and large-scale is Europe Modulaire Group these for the in the an branch $X operation. and established high provider Asia. It to billion. essential $X customer we years and generate months, proposition leasing to This about a on billion our quality qualities value returns Over of as with has a come leading an business modular a

about normalized grow financial opportunities leverage think its which market for Modulaire considering leadership and acquiring the infrastructure, markets industrials times its position. outlook to profile, help it’s EBITDA, and We’ve growth real in commercial X.X this relationships operations we We’re reasonable identified our estate and value company. is improve to

institutional Australia. a equipment funded flexible customers our We’re leading DexKo due Like partners. a million the cash positions has ownership America, July, XX% structure. durable we for strong many provider acquired Global trailers investing market North its DexKo cost reputation and leading $XXX to balance highly agreed interest of by – towable components industrial with and primarily $X.X acquire is billion. engineered for provider DexKo In we holds a our and and a position business across as Europe its has manufacturers. competitive DexKo’s of operations, solutions to for flows for

value. we EBITDA there believe We’re and paying acquire business normalized opportunities about XX times this create are to to

partnership management with $XXX balance funded We investing DexKo’s a partners. our with growth both in and enhance interest institutional opportunities to support XX% the ownership team. margins accelerate for by We’re million plan to

platform where which These businesses generate and to week, kits a as kits in this referred we Brazil earlier well as Finally, power Aldo power consumed it’s of Aldo. Aldo of cost-efficient and small network and a market leader is positioned acquire fast-growing is a large leading is agreed e-commerce resellers. solar to generation distributor Brazilian is households. Distributed with distributed for generation. a

equity XX% $XXX $XXX which about on a for we self-fund. investment funding business dependent a of certain to ownership expect interest. includes million the meeting We’re targets, million an The earn-out purchase

recycling to We continue progress activities. also our capital

of quarter, proceeds the we During from GrafTech. shares of about generated common $XXX sale net million after-tax of the

fund about last from the would years $X.X used Over three the of to which we’ve be this generated monetization billion investment, growth. help our

of of options the one hope some complete mature to the by year. two these to other or exploring of monetize and businesses We’re our end

a forward months, at energy move Over operations offering exploring a of decided our an later not were market and storage we conditions. we few time, Denis position but to offering in we’re focusing continue touch this this to due be public on the to business future, advanced we’ll meantime, as the and potential We’ll patient with to a efforts last revisit will in look further. the offering our enhance to in

is to improve focus our the the operations. on completing between while year, continuing ahead, existing Looking our underway now of end the initiatives and

excellent Our shape. in balance sheet is

continue second on to performance in half positioned well of building the year. We’re this strong

hand So with to going that, I’m over to Denis. it

Denis Turcotte

Thanks, Cyrus. everyone. morning, Good

work world’s transform key advance by is providing to and expertise of and two focused on at continued batteries initiatives, support wanted been It closely advanced It combination across particularly business and million improvement energy we environment our suppliers business management sells of highlighting and the operations, businesses. growth customers. some all to made its years grow than to challenging operations. unlock executing their U.S. operations a teams on I original operating flows with the and last through has our enhance today aftermarket more plans, we one execute continuing storage equipment to the since the business value, XXX We’ve manufacturers plans energy on Our team of business and good year progress priorities solutions. to their cash spend operations time year, there. our each activities Clarios, our largest acquired storage Despite to

structure, the management, improvement chain, XX% of engineering From production efficiency primarily and operations procurement us general plant Clarios organizational strengthen repositioned vehicles system. we To-date, earnings to company engineering. and $XXX annual network, have driving capacity. global today business advanced products margin process within plants, performance advanced enabled closed-loop batteries. shift of million improvement has initiatives of a its growth and significant in cost higher we’ve these rapid globally battery success in of about our million increase areas assembly successfully the transportation these excellence and optimizing to functional pursue improve reducing debottlenecking our U.S.-based improving We in supply is worked talent focused generated The build in recycling the we the our manufacturing over and non-conventional to the of by profit perspective, $XXX see to by annually. opportunity growth powertrains batteries mix volume $XXX we a that to million have and total target have The with with

in are to entering requirement electrical increasing all seen nearly well positioned market products the the today. load enable advanced Our vehicles

major We are platform technologies position of electrification and electric with electric vehicle vehicle OEM them storage increasing batteries equipment almost global with vehicle work each their almost voltage support forefront original Today our manufactured allows help We launches, all the to requirements. at needs. that cost to low environmental and sell platforms by development of manufacturers electric advanced us vehicle closely for every manufacturers. with our designing them the and in to technology manufacturers of future development work we meet effectively energy will the safety the world leading during products ship

Clarios which product launches majority clear for already we’ve a of platform our partners battery global advanced the have alongside largest and the We the electric roadmap will OEM vehicle specked vast solutions. of with OEMs next be decade developed

a low product not lithium-ion have cost provide high the We traditional voltage reliability battery and sustainability. many lithium-ion low reduction has a safety, provider solutions been voltage also same are the low as for of for leading and solutions voltage unparalleled business been curve cost The with voltage competitive years. our and advanced in

We are share have market. on over launches expanding market global basis partnered with new rapidly EV the vehicle product platforms and their established XX% battery-electric emerging in both now and manufacturers China a battery in on

of supplier provide are batteries, voltage positioned for spectrum to low we full of As world’s partners. best the solutions our OEM preeminent a

positioning public supported the of efforts Cyrus this and business improvement of a months. operational the of few last over our As Clarios exploring offering mentioned, success

conditions, move time. forward this to at an not decided market IPO with we Given

electrification exceptional We have aftermarket business automotive an with trends. stable growth to exposure profitability high and

and of In value in it revisit to unchanged this With view business meantime, the business focus long-term value success. that, the maximize and on Our hand to future. to position we’ll look plans the Jaspreet. unlock I’ll to is offering to continue in advancing our its we’ll an

Jaspreet Dehl

Thanks, good and morning everyone. Denis,

the million to year. sale of unit $XXX the compared in reported second the Company per quarter or quarter, including As our gains unit FFO to million on we $X.XX million $XXX Cyrus shares year. mentioned, $XXX GrafTech performance $X.XX last last or increased million compared during generating company of EBITDA to $XXX per strong

QX company was significantly to gains, we in If on CAGR the unit. current FFO economic company year XXXX. or which QX by Excluding $X.XX FFO excluding for was per from FFO unit annual XXXX, per has of a been per a basis, unit in $X.XX would rate have XX%. increased This a XXXX the impacted globe. million last experienced $XXX compounded gains On shutdowns the compare QX across period. per pre-pandemic growth to or quarter the quarter dispositions unit $X.XX is

wanted I of spend overview efforts important invest partnership Before few in segment base. but launch in to ongoing the our own corporate minutes not for new broaden attract units. will want quarter, step a This hope our the investor limited our We to our providing of prefer business, BBUC to structure. who investors on is an an performance to

a may for tax reporting that preferable some investors. also providing be framework While

broader passive special BBUC index be that’s a of as Existing BBUC for effectively base created one receive of our through unit every units split. investors. which will should distribution be ownership unitholders growth index also a As eligible a the Corporation, same with BBU the should share to for BBUC two held. add inclusion will

identical be in intend annum, equate every dividends to spin-off, of $X.XX will dividend share paid. to paid quarterly. will out per unit XX% an the we Following This every and increase on a pay which

a recent the be the market. be and units the As well BBUC Infrastructure have shares exchangeable of and the equivalent well corporate to into the exchange will economically newly Brookfield entity, mirrors which BBU by spin shareholder. option of corporation to distributions. structures and be The trade paired created of received Renewable, time structured Brookfield at will been of out units any shares have identical feature the This BBU

year. last We to Business distribution the generated was we for BBUC of compared to company necessary the the Services, This obtain the the segment special I’ll to end now year. a EBITDA are share of million. of increase Within performance to complete turn meaningful regulatory hoping approvals by quarter. $XXX

Insurer million. should to Residential following $XX company that recent strong in Canada below market measures regulatory off Home that normal. housing Our level contributed support EBITDA loss benefited Mortgage have activity well of and reasonable sales from risk Services levels Despite maintaining than normal well ratios generated short term operating Results started remain in Healthcare and second company costs. strong higher volumes in surgeries Australia, EBITDA in Australia of and $XX increased elective lockdowns remains offset million. for in the quarter performed demand industry. the surgical volume

facilities our position in in investing several healthcare strengthen acute flagship health as mental growing our the of market leading meet area to grow Australia. the We’re underserved an a to – provider as need to well of of hospitals as our in

and benefited EBITDA from $XX the business We productivity quarter. reported level. normalized Construction company Our execution million of strong project for second

new During quarter. to $X.X Greenfield $X.X the brought quarter, Airport. billion six in backlog including billion This our secured from prior Sydney Western the the we projects,

of Moving EBITDA segment. company generated our million now $XXX Industrial the to quarter. second for We

EBITDA well demand by increased original volumes strong batteries. company storage and channel energy for margin quarter. year-over-year as the manufacturing Battery normalized reported demand both operations million equipment XX% aftermarket advanced higher Our of driven advanced in performance in $XXX increased and as

stable. debt. interest As proceeds to consolidate our operating and initiative part manufacture our and part the an down to of level at wastewater Performance operation of remained business, broader sold Brazil reduce used we water in in our our Indian battery

will XX% payments reposition recently operational of broaden These holders, this and improvement company will capital operation. continues EBITDA for slowly presence company of levels. And debt generated access nuclear were second XXXX. which contributed levels $XX out be activity the to work to market. pipeline customer we reduce are cash to strengthen steps And EBITDA exchange in technology City services our the through July XXX,XXX maturities quarter kilometers steps providing offering interest Canadian of for activity finally in In reported our began business and progressing offer customer completed of segment add-on will developing extend We’re quarter EBITDA as the to for lower company Technology Infrastructure contributed build QX, as water operating July, the This quarter. activity liquidity ongoing shipments. we business. over connections, the company our of Oil to million. expenditure we service finally, programs we $XX the million in our $XXX in Maceio Results cash position quarter and well this operation, new two announced and is with a Services line Nuclear EBITDA expect timing acquisitions capital $XX enhance plans with network. million of of the an planned approximately funded and strengthen including assembly services services The In for perform business Services fuel install our Offshore our flows. of and build outage the recover. million to which the we X,XXX

to Turning liquidity.

great We’re credit of activities. and with the and a confident after remain operator to in maturities. support favorable drive operating on turn our our our for to business debt accounting over and to back fund questions. financial the We borrowings markets to With in the funding position down to close our the growth for strength the position comments commitment. spent and our like refinancing I’d call that, interest of continue our costs level We $X.X year at available last recent liquidity capitalizing extend billion

Operator

Thank Instructions] Geoff with first comes from Our you. RBC Kwan [Operator question Capital.

line is open. Your

Geoff Kwan

servicing, first businesses in any if that like there guess there sort impacts My I it of, seeing like was Hi, early is of COVID of anything terms or counts are morning. just production, chain good question again. – seems early cases any it’s of Are your that? supply increasing

Denis Turcotte

short not months only been in and secondary was this direct it. nothing business material we the what the answer was tertiary XX each the by of and are make response is I to think for COVID, on implications influenced that sure And acted quickly very that we’ve fact hyper-focused the but of now. impacts

moving So they all and of more in remain more And their they work fact more in hyper-focused. conducting are all their offices. and to businesses back

So up, included. try travel is and ourselves

So I’m always worried of this. course about things like

wave. anything this third in related to going some kind but even we You fourth cases, never in UK know unfold, haven’t how it’s guess seen the of to or I the

Jaspreet Dehl

they’ve Maybe just cases we I’d What is, do. COVID the add we just are reduces it elective some one hospitals, we’re in are is seeing able of Geoff, Australia, the comment. and in the spikes in as seeing surgeries some to where that impacting lockdowns had regions

those rely not significant back agreements. continue government not we’re a today, agreements As do to the to could the we Denis on are go and surgeries, that that able on government EBITDA said, of with monitoring we’re elective seeing in impact have we to and the place but we extent kind

Geoff Kwan

was Okay. insurance mortgages something to sandbox we the outside planning Previously talked for the And had looking just, that would backstop. still what offer on Sagen. and would Is government mortgage pursuing? of company on the be my about potentially that federal second is of question

Jaspreet Dehl

the performing and activities. really And So, had of been business they’ve record has well. underwriting levels transactional

for to on So focused kind growth we’ll the current… now, areas. explore of But think I we’re just look other

Geoff Kwan

you. Okay, thank

Operator

you. Thank

Ho Gary with from Desjardins Our comes next question Markets. Capital

is open. line Your

Gary Ho

morning. Thanks, good

First question maybe Denis. for

profit us Just of that’s improvement from. of you by coming on target Can kind you the million. Clarios, bit color, a increased give where $XXX

kind of in you $XXX timing that of can or think on comment mentioned U.S. may full you operations, of when elsewhere. materialize? terms is million I kind that And the

Denis Turcotte

business I $XXX the of million that strong headcount, and initiatives January over of million Sure. than in more a OEE the in next has There variety supply improvement system, to the is plant discussed But purchasing we’ve speak we American everything and the reconfigured really across efficient think calls. at unfolding looking a over $XXX is happening the was reorganizing Well, and effect is quarters. found from effect, that’s couple to the the you the across North and the of we there incremental as is operation, net we are it management the started the system. bunch team that net rates make underway, and chain reorganize also they reduce

the across around but really reorganization. operations predominantly it’s system, and So

Gary Ho

And then, timing expectations?

Denis Turcotte

of say Well, target it’s two – over kind original through which this is million $XXX be a million This was day from from achieved four, three-year one point. this period. to $XXX be years will incremental incremental year

Gary Ho

what Got IPO, or your it, it end. staying just leverage was valuation there, okay. the with on And push in the delay the then was back maybe on Clarios

Just want next could go what done before the at be gauge, to it?

Cyrus Madon

it’s Cyrus look here. Yes,

the busy, at and a want be it, there future feedback selling We got close unitholders, disciplined try is was market when we – number we’ll valuation, it for were be one in but specific think amount lower but their the whatsoever things, things. lower take we’re rush caused can proceeded to IPOs probably the no I to in a buying get we no to just we factor otherwise reasonable became at our and arises choppy. perhaps we is this is reconsider that that company a which IPO. get opportunity of have to pull could like we’re when very A value, we public. we think we us we are won’t. And disciplined If the

Gary Ho

how change fairly about $X.X potential does the know But Westinghouse then still assets. or monetization a liquidity. with maybe and at the I here, view the Clarios other Westinghouse monetization related And you with delay you We that billion on on topic. call. talked capitalized Okay. comfortable quarter last

here? versus on about you think how monetization opportunities capital deployment Just to some other want color get

Cyrus Madon

we no, be should doesn’t. Look Yes, clear. it

our sell of need no have any businesses. to larger We

So got is levers that. we’ll The of financings. just to with including companies. pull cash start generated lots here We’ve the company at our

large of out businesses, some out of our that. dividends seen scale You’ve doing keep us pull regularly we’ll

doesn’t the we for the So said, put want any it are market most That where if we our constantly should anything to are acceptable. values assessing proceeds on you us don’t to. pressure opportunities realize of businesses sell to assume with

Gary Ho

got Thank it. you. Okay,

Operator

you. Thank

comes with Markets. CIBC Priebe Capital question next Our from Nik

Your line is open.

Nik Priebe

thanks. Yes,

to ask about few a portfolio questions wanted companies. you a Just pair

recognition was that some sounds know timing display it at stronger. and cycle growth give us of like the wondering EBITDA year second a quarter there? and if the results how can on there, maybe in customer are bit half will was and the contribution you Westinghouse’s looking confident the expecting year-to-date based early for full earnings the color bit Just on be whether you’re second still of you’re could of I to compared lower I variability plan relative a

Denis Turcotte

here. Yes. Denis

COVID in to fact So forward and slower a no back half kind off than the but that and the through earlier advance, results looking year. last year the as indirectly bit, full of my function in of of this little year because outages to year expect a doubt that comments, better again, last fact well was modestly have start there we’re year. push a be per planned things they year and strong customers it’s probably And their will

have. forward looking to order book So we’re the we

Nik Priebe

second Okay to and with respect question, my then Sagen. just

those I defensible thoughts market your business, past to a – think be? CMHC criteria. qualification think walk year recent sense has get growth gains of if I CMHC and its changes just wondering could over that how just on from share premium I’m – might tightening back you maybe how benefited the decision

Cyrus Madon

comment on they can’t is. market is the we that take possible strategy expect CMHC some our of of keep gains forward. they quite back doing to some It’s what what for will their going lost, sure and but Well we share

Nik Priebe

Okay.

Okay. That’s it from No, me. fair you. Thank enough.

Operator

Instructions] [Operator comes you. Our Veritas. Thank with Khmelnitsky question next from Dimitry

Your line is open.

Dimitry Khmelnitsky

everyone, and thanks for Hi, a lot my Yes. taking call.

I have and IndoStar. Everise question first that So is on

yield a investments, regional wondering the made those? what the or Just yield – was on expected on FFO you – going when FFO in those

Cyrus Madon

we made we think going I those but to ask are an not don’t question, I to don’t Dimitry, FFO I’m think acquisitions. yield actually we the published when going – Jaspreet

Dimitry Khmelnitsky

on FFO? And to comment maybe their you quarter’s and perhaps EBITDA contribution can this

Jaspreet Dehl

Yes, Jaspreet. hi, Dimitry, it’s

you going small the of the performance IndoStar of they and So color again, this or through business, quarter that to of – India of wave two a in FFO disbursements we did specifically and the could our did maybe don’t the kind impact collections impact contribution. is business. business. They disclose which and Everise our IndoStar provide I of overall the a little And size lending the of year, on business. relative on underlying bit was are EBITDA COVID have difficult just businesses. COVID given second India kind

closed to liked even some in Everise, below know it’s probably in where for July is couple expectations. our I that see year, say as performing we but would that of days, acquisition we is with business line and and of this you contracts. this were have early very a performance of January quarter, early So new as kind well we won that recover. starting They’ve

of more locations, days, quite it’s contribution to small to two the EBITDA in Again, But service offshore overall margins. fairly U.S. which positive is accretive customers the again to businesses the business. are of that starting is early today. through things We’re

Dimitry Khmelnitsky

the seeing be progressing? I there? can And on Any What And how Jaspreet. wonder are comment that trends are you on Cardone. would you comments Thanks, the that turnaround helpful. Understood. if is

Denis Turcotte

place in growing that their part variety a news good a to but our target. our softness is The their not is categories margin here. tends results confident a there above remember, very at lower product their is their in efforts, in in internal we Denis There the We in product Sure. beginning job about only we’re the mix team. been a track. product was and of actually feel back management of a the team. elements in see difficult a on of was, to has you some be bit put repositioning rate of categories. as situation of We And It mix. at the see spring turnaround course, demand but good one higher the the margin

on going will plan. work confident, is we’re all, and optimistic meet we’re in this all that So we’re time. to But take track we’re and it

Dimitry Khmelnitsky

Understood. wonder that in business you. last can on QX of what terms of was if Okay, And thank impact you shutdowns BrandSafway, the on I year? comment in

Jaspreet Dehl

can it’s I – Dimitry. maybe So Jaspreet, start add. Denis can Maybe then and

a the at did especially last of people can COVID Brand significant see impact you people through in depth year And when we a So have as we the lot on business this crisis, heavy U.S. ground appreciate, is the of and typically the work. we’re doing

of distancing kind the more some safety maintaining measures So of social difficult. and became the

an So that had on business impact performance.

deferral year work maintenance We some gas saw in specifically oil last our from large-scale as also capital in some a industry. and the of well as customers, projects

levels kind only impacted maintenance that operations. QX What a we’re seeing of can in year. – so long, push work industrial last mentioned performance I large-scale so you recovery, of for slower kind now And as especially is kind is of that activity and out

bit but be of the early some to starting come construction, year, say this it recover. a in maybe of definitely into a year-over-year, slower, been seeing back seeing half So a should activity. continue pickup to next And looking to new are I’d we it’s back that year and we’re

Denis Turcotte

the a it positioning. good creates pipeline difficult probably great couple conditions that front, targets There on couple is we’ve developed the I be job. company lot indirectly difficulty way given least think of size, and would then in to the We’ve acquisition last got us creating And opportunity not for very the regard, us. not were I that indirectly are announce yes, for other acquisitions. you a couple market of under over of this No, should growth next year every to than got did its of and so a add for of a opportunities things able a an quarters at if over one a say

Dimitry Khmelnitsky

Understood.

I’ve And a asking lot. lot questions. of a last thanks Okay, question. been

specifics the that, plans perhaps and recent one. that Maybe apologize revenue maybe I I about own that. more DexKo. about and Modulaire from talk other for can going cetera? synergies, So benefit But acquisition, businesses – et forward. last that’s that Any from the you could wonder if cetera et more the you – potential the

Cyrus Madon

going Look, Dimitry, businesses treat it’s we’re acquisitions. them our all other Cyrus here. are, for to these just The like plans

We plan. have an on-boarding

ground productivity we’re hit months. strategy. improvement Look develop for detailed capital plan opportunities. how growth place in We our will opportunities. going over the Put running for first a of to few the Look allocation

it, we of we refine bought executing. before and All start we’ll those but strategies which identified

Dimitry Khmelnitsky

very you much. Thank Okay.

Cyrus Madon

Dimitry. Thanks, Okay.

Operator

Thank you. And like question-and-answer Madon this call Cyrus closing the I session. concludes back over the to would now remarks. to turn for

Cyrus Madon

much Well, you forward with for to quarter. and we us look thanks very next speaking joining

Operator

Thank conference call. concludes today’s you This participating. for

disconnect. now may You

Brookfield Business Partners (BBU) 6 Aug 212021 Q2 Earnings call transcript