Brookfield Business Partners L.P.(BBU) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Comparable revenue for the second quarter declined by 30% year-over-year, with the most significant impact in April [6] - Company EBITDA for Q2 was $286 million, up from $237 million in the previous year, while company FFO excluding gains was $173 million, or $1.15 per unit, compared to $138 million, or $1.06 per unit in Q2 2019 [19][20] - A net loss attributable to unit holders for Q2 was reported at $109 million, or $0.73 per unit, compared to a net income of $107 million, or $0.82 per unit in Q2 2019 [19][20] Business Line Data and Key Metrics Changes - The industrial segment generated company EBITDA of $98 million, with Clarios contributing $59 million despite reduced demand due to the economic slowdown [21] - GrafTech reported company EBITDA of $40 million, impacted by lower volumes and sale prices due to the global economic slowdown [22] - The Business Services segment generated company EBITDA of $64 million, with Multiplex showing improved performance compared to Q1 2020 [24] Market Data and Key Metrics Changes - BRK Ambiental in Brazil did not experience a material impact on volumes or service, and pipeline construction remained relatively unaffected [23] - The Brazilian government approved new rules to enhance private sector participation in the sanitation sector, which is expected to provide BRK with increased opportunities [23] Company Strategy and Development Direction - The company plans to focus on core operations and has agreed to sell Healthscope's New Zealand pathology business for $360 million to refocus on Australian hospital operations [12] - The company is actively pursuing new investments and has increased liquidity by enhancing credit facilities, allowing for flexibility in investment across industries [8][9] Management's Comments on Operating Environment and Future Outlook - Management noted that economic activity has gradually improved, with July revenue recovering to about 85% of comparable prior year levels [7] - The company is well-positioned to face the uncertain business environment and anticipates large-scale recapitalization opportunities as businesses with weakened balance sheets struggle to raise capital [9][42] Other Important Information - The company increased its credit facilities by $500 million, bringing total liquidity to approximately $2.3 billion [28] - The company has a four to five-year backlog of capital projects in BRK Ambiental, indicating a strong pipeline for future growth [34] Q&A Session Summary Question: What is the current status of BRK Ambiental's organic capital backlog and RFPs for new concessions? - Management indicated a four to five-year backlog of capital projects and positive outcomes from recent legislation facilitating private sector participation in Brazil [33][34] Question: How is BrandSafway performing in the current environment? - Management noted that while the business is resilient, it has seen a 30% deviation from planned EBITDA but expects recovery in the latter half of the year [39] Question: What is the outlook for new investment opportunities? - Management reported increased activity levels and a cautious approach to potential large-scale distressed opportunities as the economic environment evolves [42][43] Question: What are the implications for Multiplex's company EBITDA moving forward? - Management clarified that funding and EBITDA are separate, and while they may provide capital support, it will not impact future EBITDA [45] Question: How has COVID-19 impacted the investment thesis for larger investments? - Management acknowledged a loss of cash flow during Q1 and Q2 but noted a strong rebound in July, indicating a potential return to pre-COVID levels [53]