Brookfield Business Partners L.P.(US:BBU)2025-05-06 20:58Unaudited Interim Condensed Consolidated Financial Statements Consolidated Statements of Financial Position Total assets slightly increased to $75.9 billion, while a rise in liabilities led to a decrease in total equity to $14.9 billion Consolidated Balance Sheet Summary (US$ Millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $75,887 | $75,474 | | Total Current Assets | $15,050 | $15,339 | | Total Non-Current Assets | $60,837 | $60,135 | | Total Liabilities | $61,032 | $58,166 | | Total Current Liabilities | $10,147 | $12,166 | | Total Non-Current Liabilities | $50,885 | $46,000 | | Total Equity | $14,855 | $17,308 | Consolidated Statements of Operating Results Net income rose to $256 million in Q1 2025, driven by lower operating costs and disposition gains despite a significant revenue decline Q1 Operating Results (US$ Millions, except per unit amounts) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $6,749 | $12,015 | | Direct operating costs | $(5,402) | $(10,878) | | Gain (loss) on acquisitions/dispositions, net | $214 | $15 | | Net income (loss) | $256 | $203 | | Net income attributable to Limited partners | $30 | $17 | | Basic and diluted earnings (loss) per limited partner unit | $0.38 | $0.23 | Consolidated Statements of Comprehensive Income (Loss) The partnership reported a comprehensive income of $442 million, a significant reversal from the prior year's loss Q1 Comprehensive Income (Loss) (US$ Millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income (loss) | $256 | $203 | | Total other comprehensive income (loss) | $186 | $(259) | | Comprehensive income (loss) | $442 | $(56) | Consolidated Statements of Changes in Equity Total equity decreased by $2.45 billion to $14.9 billion, primarily due to distributions exceeding net income - Total equity decreased by $2.45 billion during Q1 2025, mainly driven by distributions and capital paid totaling $3.54 billion, with a significant portion ($3.52 billion) paid to interests of others in operating subsidiaries12 Consolidated Statements of Cash Flow Cash from operations more than doubled, and with strong financing inflows, the cash balance increased to $3.4 billion Q1 Cash Flow Summary (US$ Millions) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash from operating activities | $815 | $344 | | Cash from financing activities | $757 | $201 | | Cash from investing activities | $(1,454) | $(581) | | Change in cash and cash equivalents | $118 | $(36) | | Balance, end of period | $3,442 | $3,148 | Notes to Financial Statements The notes detail key transactions including an acquisition and disposition, a significant tax benefit, and changes in borrowings Note 2: Material Accounting Policy Information A new U.S. tax benefit for domestic energy production is now treated as a government grant, reducing operating costs - The partnership's advanced energy storage operation recorded a $259 million benefit from U.S. tax legislation for domestic energy production, which was presented as a reduction to direct operating costs in Q1 202530 Note 3: Acquisition of Businesses The partnership acquired Chemelex for $1.65 billion, recognizing significant goodwill and intangible assets - Acquired Chemelex for $1.654 billion, recognizing $645 million in goodwill and $804 million in intangible assets3840 - The partnership's economic interest is ~26% but it has control via 100% voting rights3840 Note 8: Dispositions The sale of the shuttle tanker operation was completed, generating a net gain of $214 million - The sale of the shuttle tanker operation was completed for $484 million, resulting in a net gain of $214 million in Q1 202564 Note 16: Borrowings Corporate borrowings decreased significantly while non-recourse subsidiary borrowings increased substantially Borrowings Summary (US$ Millions) | Borrowing Type | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Corporate borrowings | $1,017 | $2,142 | | Non-recourse subsidiary borrowings | $42,316 | $36,720 | Note 19: Equity The partnership executed share repurchases, managed unit conversions, and paid significant distributions - In Q1 2025, the partnership repurchased over 3 million LP Units and BBUC repurchased 1.26 million exchangeable shares102111 - Additionally, 18.1 million Redemption-Exchange Units were converted into LP Units103 - A quarterly distribution of $0.0625 per Unit was made, alongside a large distribution of $3.516 billion to others with interests in operating subsidiaries, mainly related to the advanced energy storage operation100 Note 22: Revenues Total revenues declined sharply due to the disposition of the road fuels operation in the Business Services segment - The significant drop in total revenue in Q1 2025 compared to Q1 2024 is primarily due to the disposition of the road fuels operation in Q3 2024, which heavily impacted the Business Services segment127 Management's Discussion and Analysis (MD&A) Business Overview and Operating Segments The partnership operates across three segments, with Industrials being the largest by assets and Q1 2025 revenue Assets and Revenues by Segment (Q1 2025, US$ Millions) | Segment | Assets (as at Mar 31, 2025) | Revenues (for Q1 2025) | | :--- | :--- | :--- | | Business services | $31,201 | $2,492 | | Infrastructure services | $15,584 | $731 | | Industrials | $28,816 | $3,526 | | Total | $75,887 | $6,749 | Recent Developments and Outlook The partnership executed several major transactions and faces a mixed outlook across its key operations - In January 2025, the advanced energy storage operation raised $5 billion in new debt, using $4.5 billion to fund a special distribution to owners213 - Completed the acquisition of Chemelex, an electric heat tracing systems manufacturer, for $1.65 billion on January 30, 2025215 - The healthcare services operation's current capital structure is deemed unsustainable, and the business is negotiating with stakeholders while assessing options220 Review of Consolidated Results of Operations Net income increased year-over-year despite lower revenue, due to cost reductions, tax benefits, and disposition gains - Revenue for Q1 2025 decreased by $5.27 billion year-over-year, mainly due to the disposition of the road fuels operation in July 2024230 - Direct operating costs fell by $5.48 billion, driven by the road fuels disposition and a $259 million tax benefit at the advanced energy storage operation232 - A net gain on dispositions of $214 million was recognized in Q1 2025 from the sale of the offshore oil services' shuttle tanker operation235 Review of Consolidated Financial Position The balance sheet expanded slightly, marked by an acquisition-driven increase in intangibles and a significant rise in non-recourse debt - Goodwill increased by $793 million and intangible assets by $840 million, primarily due to the acquisition of the electric heat tracing systems manufacturer246249 - Non-recourse borrowings in subsidiaries increased by $5.6 billion, largely driven by new debt raised at the advanced energy storage operation240305 - During Q1 2025, the partnership repurchased 3.0 million LP Units and BBUC repurchased 1.3 million exchangeable shares under their respective NCIBs258259 Segment Analysis Adjusted EBITDA grew year-over-year, led by strong performance in the Industrials segment, while Infrastructure Services' results were mixed Adjusted EFO by Segment (US$ Millions) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Business services | $117 | $168 | | Infrastructure services | $166 | $72 | | Industrials | $130 | $180 | | Corporate and other | $(68) | $(89) | Adjusted EBITDA by Segment (US$ Millions) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Business services | $213 | $205 | | Infrastructure services | $104 | $143 | | Industrials | $304 | $228 | | Corporate and other | $(30) | $(32) | Liquidity and Capital Resources The partnership maintains a strong liquidity position with substantial cash and undrawn credit, though its debt-to-capitalization ratio has increased - As of March 31, 2025, the partnership had $43.3 billion in borrowings and an additional $8.8 billion in undrawn credit facilities306 - The net debt-to-capitalization ratio rose to 73% at the end of Q1 2025, up from 67% at the end of 2024313 - A quarterly distribution of $0.0625 per unit was declared, payable on June 30, 2025149313