Brookfield Business Partners L.P.(BBU) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2023 increased to a record $655 million, with an adjusted EBITDA margin improving to 19%, up more than 100 basis points year-over-year [4][20] - Adjusted EFO for Q3 was $288 million, with an adjusted EFO of $218 million excluding gains [20] Business Line Data and Key Metrics Changes - Infrastructure Services generated adjusted EBITDA of $228 million, up from $205 million last year, benefiting from improved performance in work access services and modular building leasing [20] - Industrials segment adjusted EBITDA was $218 million, down from $228 million last year, with strong performance in advanced energy storage offset by lower contributions from graphite electrode operations [21] - Business Services segment adjusted EBITDA increased to $238 million from $213 million, driven by strong results in residential mortgage insurance and dealer software services [21] Market Data and Key Metrics Changes - Global container rates have normalized to pre-COVID levels, improving international shipping options [11] - Raw material prices have decreased, with some prices down close to 25% from peak levels earlier this year [11] Company Strategy and Development Direction - The company is focused on capital recycling, with the $8 billion sale of Westinghouse expected to close soon, generating about $1.5 billion in proceeds [6] - The company is committed to enhancing value through share buybacks, trading at less than 8 times annual EBITDA compared to the broader S&P 500 at 13 times [9] Management's Comments on Operating Environment and Future Outlook - Management noted that while certain regions face challenges, the overall operating environment is improving, with costs for raw materials and logistics stabilizing [11][12] - The company is optimistic about Clarios, expecting it to perform better next year than this year, driven by strong management and operational improvements [50] Other Important Information - The company has refinanced nearly a third of its non-recourse borrowings this year without increasing overall debt costs [6] - Clarios is generating over $500 million in free cash flow annually, with a focus on deleveraging [8] Q&A Session Summary Question: Any capital allocation considerations post-Westinghouse transaction? - Management confirmed ongoing share buybacks as part of their normal course issuer bid, with no additional considerations at this time [27][28] Question: Will corporate debt continue to decrease? - The long-term goal remains to eliminate permanent corporate debt, with proceeds from sales being used to pay down debt [30] Question: Impact of UAW strike on Clarios? - A short strike at the Toledo plant had minimal impact, allowing the company to catch up on inventory levels [32] Question: Clarios EBITDA contribution details? - The strong EBITDA growth was primarily due to organic growth, with no significant one-time factors [38] Question: Rationale for partial sale of Everise? - The decision to sell a portion of Everise was based on achieving a strong return while retaining upside potential [40] Question: Future asset sales? - The company plans to continue selling smaller businesses to generate capital and focus on larger operations [52]