Brookfield Business Partners L.P.(BBU) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA for 2021 increased to $1.8 billion, up from $1.4 billion in 2020, reflecting strong performance across all segments [21][23] - Annual adjusted EBITDA on a run rate basis has now increased to more than $2 billion, significantly up from $215 million when the company was created in 2016 [8][12] - The company ended the year with $2.2 billion of corporate liquidity, bolstered by a recent commitment from Brookfield Asset Management for $1 billion of long-term preferred equity capital [25][26] Business Line Data and Key Metrics Changes - Business services segment generated adjusted EBITDA of $561 million in 2021, more than double compared to 2020 [21] - The residential mortgage insurer contributed $265 million of adjusted EBITDA, benefiting from record underwriting activity [21] - Advanced energy storage operations reported adjusted EBITDA of $784 million, driven by strong aftermarket demand [23] - The water and wastewater operation in Brazil saw a 15% increase in performance compared to 2020 [24] Market Data and Key Metrics Changes - The Canadian housing market is expected to remain stable in 2022, supported by strong underlying fundamentals and moderate home price appreciation [21] - The healthcare services segment in Australia reported adjusted EBITDA of $69 million, showing improvement despite ongoing lockdown impacts [22] Company Strategy and Development Direction - The company plans to continue focusing on acquiring high-quality businesses with strong growth potential and high cash returns [8][12] - Recent acquisitions, including DexKo Global and Modulaire Group, are expected to enhance the company's global footprint and operational capabilities [9][10] - The company is also focused on integrating recent acquisitions and accelerating initiatives to surface value in existing operations [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the operating environment, noting a pivot in investor interest from technology-oriented growth to value [33] - The company anticipates continued growth in adjusted EBITDA and cash flows, supported by strong operational performance and strategic acquisitions [12][21] - Management highlighted the importance of maintaining strong ESG practices and recently published an inaugural ESG report [26] Other Important Information - The company generated approximately $350 million in distributions to support growth activities, with significant dividends from its Canadian Residential Mortgage insurer and nuclear technology services operation [11][25] - The intrinsic value per unit of the business has increased at a compound annual rate of 18% over the past five years [12] Q&A Session Summary Question: Potential for upside in Altera due to oil prices - Management noted that the current oil price environment is favorable, encouraging customers to extract more, but cautioned against providing specific forecasts due to volatility [28] Question: Value generation thesis for Cupa acquisition - Management sees opportunities to improve processing yields and expand supply through incremental acquisitions, enhancing the company's market position [30] Question: Market conditions for monetizing assets - Management indicated that the current environment is better for monetization compared to previous periods, with a shift towards value-oriented investments [33] Question: Thoughts on financing approach with BAM - Management emphasized the flexibility of the financing arrangement, allowing for capital drawdown as needed without incurring costs when idle [36] Question: Growth opportunities in Westinghouse's environmental services division - Management highlighted significant growth potential in this area, supported by a strong leadership team and strategic acquisitions [38] Question: Impact of higher interest rates on financing costs - Management has been proactive in refinancing to lock in lower rates and has hedged a significant portion of floating rate exposure [42][44] Question: Inflationary pressures on costs - Management acknowledged cost pressures across various categories but noted that price increases have generally offset these costs [50][52] Question: Update on Sagen's underwriting activity - Management expects normalization in underwriting activity but believes strong housing market fundamentals will support ongoing demand [75] Question: Clarios' advanced battery sales as a percentage of revenue - Management noted strong aftermarket demand for advanced batteries but did not provide an exact percentage of revenue [80] Question: Altera's vessel redeployments - Management emphasized the need for certainty in contractual relationships moving forward, focusing on recovery and returns [83]