corporate profile - brookfield business partners/media/files/b/brookfield... · 2019-11-08 ·...

Brookfield Business Partners

CORPORATE PROFILE

NOVEMBER 2019

2

BBUNYSE

BBU.UNTSX

~$6BMARKET CAP1

Business Services and Industrials company

focused on long-term capital appreciation

1) As at market close November 4, 2019

3

Our strategy

3Acquire high-quality businesses, enhance operational value, and monetize

mature assets to fund future growth

Leverage

Brookfield’s

Ecosystem

4

Acquire and manage high quality operations globally

Target a 15% to 20% return on our investments with an overall focus on long

term capital appreciation

• Broad investment mandate with flexibility to invest across multiple industries

and through many forms

• Leverage Brookfield’s global expertise as an owner and operator of real assets

• Acquire market leaders and businesses with high barriers to entry and/or low

production costs, add value through operational and other improvements

• Closely partnering with management teams for long term business success

focused on profitability and sustainability of margins and cash flows

• Opportunistically recycle capital, selling interests in businesses when value is

maximized

• Global sourcing capability and a proven track record over 30+ years of

investing and managing businesses

5

Three primary operating segments

Business

Services

• Healthcare services

• Construction services

• Road fuel distribution and

marketing

• Real estate services

• Others; logistics, financial

advisory services,

entertainment, fleet

management, technology

services

Industrials

• Low voltage battery production

• Graphite electrode production

• Water / wastewater services

• Returnable plastic packaging

• Others; aggregates, natural

gas production, oilfield

services

Infrastructure

Services

• Services to the power

generation industry

• Services to the offshore oil

production industry

Leveraging Brookfield’s expertise as an owner and operator of real assets

$13BASSETS

$11BASSETS

$23BASSETS

Note: Segment level assets exclude Corporate & Other assets of ~$1 billion as at September 30, 2019

6

Global investment and operational team with a local presence

ASIA PACIFIC

$8BSOUTH AMERICA

$6B

Global scale

Note: As at September 30, 2019

60,000+OPERATING EMPLOYEES

NORTH AMERICA

$18B

100+ INVESTMENT

PROFESSIONALS

EUROPE & MIDDLE EAST

$16BASSETS ASSETS

ASSETS ASSETS

Corporate offices

7

$10

$20

$30

$40

$50

Jun Dec Jun Dec Jun Dec Jun

2016 2016 2017 2017 2018 2018 2019

Strong unit performance since spin-off1

1) June 2016

2) As at November 4, 2019

Note: Acquisitions and sales represented as of date of public announcement

Market capitalization increased from $2 billion in June 2016 at spin-off

to ~$6 billion today2

EQUITY

OFFERING

ACQUISITION

$21.47

$39.29

ACQUISITION

AWARDED

SALE

EQUITY

OFFERING

ACQUISITION

ACQUISITION

ACQUISITION

ACQUISITION

ACQUISITION

ACQUISITION

ACQUISITION

ACQUISITION

SALE

SALE

ACQUISITION

EQUITY

OFFERING

8

Our business has substantially increased in size and scale

Key performance metrics have all meaningfully increased since spin-off

1) 2016 balances as of and for the twelve-month period ended December 31, 2016. Today represents balances as of and for the last twelve-month period ended September 30, 2019

2) Represents Brookfield Business Partners’ proportionate share

3) Today FFO includes gains from dispositions of ~$380 million

20161 Today1

Assets $8B $48B

FFO2,3 $200M ~$1.1B

EBITDA2 $240M ~$1.1B

9

Invested Capital Net Proceeds

Self-funding growth

Monetizations have supported capital investment over the last 18 months

~$1.8BINVESTED

CAPITAL

~$1.8BNET

PROCEEDS1

Healthscope~$295M

Clarios~$860M

Westinghouse~$405M

Others2

BGRS$231M

BGIS$171M

GrafTech$1.2B

Quadrant$125M

Others3

1) Net proceeds include sales, distributions and public offerings of portfolio companies

2) Others includes Schoeller Allibert, Imagine, Cardone, Ouro Verde and the acquisition of Teekay Corporation’s remaining interests in Teekay Offshore, totaling approximately

$241 million of invested capital

3) Others includes secondary offering of North American Palladium and sale of US brokerage joint venture totaling approximately $140 million of net proceeds

10

As at

US$ MILLIONS, UNAUDITED September 30, 2019 December 31, 2018

Corporate cash and financial assets $ 1,122 $ 888

Committed corporate credit facilities 1,550 1,325

Total liquidity $ 2,672 $ 2,213

As at

US$ MILLIONS, UNAUDITED September 30, 2019 December 31, 2018

Business Services $ 1,026 $ 534

Infrastructure Services 2,210 2,003

Industrials 3,960 1,051

Corporate and Other nil nil

Total $ 7,196 $ 3,588

• ~$2.8 billion of proforma liquidity considering the funding of closed acquisitions

• Increased corporate credit facilities to over$2 billion subsequent to quarter end

• No permanent long-term debt at the corporate level

‒ Corporate debt when drawn, is for corporate working capital management

‒ Non-recourse debt held at the operating company level

• Principal sources of liquidity include:

‒ Cash and public securities

‒ Undrawn corporate credit facilities

‒ Cash flows from our operations

‒ Monetization of mature businesses

‒ Access to capital markets

Significant liquidity to take advantage of market opportunities and support our

businesses

Strong balance sheet position

Corporate Liquidity

Proportional Non-recourse Borrowings

11

Our Business Operations

12

18%

39%

43%

Business

Services

Industrials

Infrastructure

Services

Portfolio diversified across sectors and regions

Our Business at a glance

Company FFOFor the 9 months ended September 30, 20191

Company EBITDAFor the 9 months ended September 30, 20191

1) Total Company EBITDA and FFO includes the Corporate and Other segment. Calculation of segment percentage excludes Corporate and Other segment

46%

28%

26%

Business

Services

Industrials

Infrastructure

Services

$871M $859M

13

Services leveraging expertise around real asset value chain

Business Services

Leading global construction company delivering landmark real estate assets

Construction Services

Healthcare

Others

Road fuels, real estate services, entertainment, logistics, fleet management, financial advisory and technology services

Leading private hospital provider in Australia and largest pathology provider in New Zealand

14

Leading service providers to large scale infrastructure assets

Infrastructure Services

Leading provider of services to more than half the world’s nuclear power generation facilities

Services to Nuclear Power Industry

Services to Offshore Oil Production

Leading provider of critical offshore oil & gas transportation and production services

15

High barriers to entry or low production costs leveraging operational expertise

Industrials

A leading global graphite electrode manufacturer for electric arc furnace steelmaking

Graphite Electrode Production

Water & Wastewater Services

Others

Returnable packaging producer, natural gas reserves, auto parts and others

Largest private water and wastewater services company in Brazil

Automotive Batteries

Leading manufacturer of low voltage lead-acid batteries producing 1/3 of global output

16

Approach to Operations

17

Timing & Negotiations

Transaction Structuring

Closing

Aligning expertise to drive portfolio company value

Due Diligence

Transaction Structuring

Business Plan & Strategy

Governance Strategy Business

Planning

Performance

Improvement

Acquisition Operations Management

BBU Investment Teams

CIO

Business

Services

CIO

Infrastructure

Services

CIO

Industrials

Portfolio Company

Monetization

BBU Business Ops Team

COO

North

America

South

AmericaEurope APAC

18

Case Study: Westinghouse Electric Company

Leading provider of services to the nuclear power industry

• Largest services provider to global nuclear power fleet

with a large installed base and long-term contracted

cash flows, acquired for value out of bankruptcy

• Leverage Brookfield’s expertise in renewable power

• Implement profitability improvement initiatives to reduce

costs and improve organizational responsiveness

• Optimize efficiency of supply chain

• Align sales resources to improve commercial terms

• Enhance and expand service offering

• On track for $600M of annualized EBITDA by the end of

2019

• Realized a $315 million distribution ($140 million net to

BBU) in 2018, returning ~1/3 of equity invested

Overview

Investment Date: 2018

Purchase Price: $4 billion

BBU Invested Equity: $405 million

BBU Ownership Interest: ~44%

Operating Segment: Infrastructure Services

Investment Thesis

Value Creation

Progress to date

Annualized EBITDA1

($M)

1) Actual results may vary materially and are subject to market conditions and other factors

19

$269 $247

$144 $121$46

($3)

$96

$1,205

2011 2012 2013 2014 2015 2016 2017 2018

Case Study: GrafTech

Leading producer of graphite electrodes used in electric arc furnace steel production

• A vertically integrated, low cost producer of graphite

electrodes with high barriers to entry, opportunistically

acquired at a low point in the cycle

• Rationalized capacity and refocused business on core

electrode manufacturing production

• Implemented $100 million in cost savings

• Capitalized on improving market conditions with

execution of multi-year take-or-pay sales agreements

• Generated $1.2 billion of proceeds from IPO, distributions

and share buybacks

• Realized ~4x multiple of invested capital

• BBU’s 27% ownership stake is currently worth ~$1 billion1

Investment Thesis

Value Creation

Progress to date

1) As at market close November 4, 2019

2) Current BBU ownership interest is 27%

Adjusted EBITDA

($M)

Pre-BBU

Ownership


Purchase Price: $1.25 billion


BBU Initial Ownership Interest: 34%2

Operating Segment: Industrials

Overview

20

Case Study: North American Palladium

Definitive agreement to sell pure play palladium producer

• Acquired high-quality assets for value through a rescue

financing and subsequent recapitalization at the onset of a

supply-demand dislocation for palladium

• Implemented a new underground mining method that

increased production, reliability, ore recovery, lowered

costs and extended mine life

• Improved commercial strategy to increase sales margin

• Refocused on-site and greenfield exploration to identify

growth targets with potential to add to mine life

• Generated ~$15 million of net proceeds for BBU from

secondary sale in April 2019

• Announced sale in October 2019 to Implats, expected to

generate net proceeds of ~$130 million for BBU

• Expect to realize a 3.3x multiple of invested capital and

IRR of approximately 26%

Investment Thesis

Value Creation

Monetization

1) Current BBU ownership interest is 20%

Adjusted EBITDA

(C$M)



BBU Initial Ownership Interest: 23%1


Overview

$5

$168

2016 2018

Palladium Price

($ per ounce)

Source: CapIQ

21

Appendix I: Financial Disclosure

22

Selected segmented financial information

Statements of Financial PositionStatements of Operating Results1,2

1) Company FFO is a non-IFRS measure and is calculated as net income excluding the impact of depreciation and amortization, deferred income taxes, breakage and transaction costs, non-

cash gains or losses and other items. When determining Company FFO, we include our proportionate share of Company FFO of equity accounted investment. For further information on

Company FFO, see “Definitions” at the back of the Corporate Profile.

2) Company EBITDA is presented as a net amount attributable to unitholders and is a non-IFRS measure and is calculated as Company FFO excluding the impact of realized disposition gains

(losses), interest income (expense), current income taxes, the impact of realized disposition gains (losses), current income taxes and interest income (expense) related to equity accounted

investments, and other items. When determining Company EBITDA, we include our proportionate share of Company EBITDA for equity accounted investments.

US$ MILLIONS, UNAUDITED

As of

Sep. 30,

2019

Dec. 31,

2018

Proportionate non-recourse

borrowings, net of cash

Business Services $ 703 $ 199

Infrastructure Services 2,050 1,890

Industrials 3,619 985

Corporate and Other (898) (621)

Proportionate non-recourse

borrowings, net of cash $ 5,474 $ 2,453

Equity attributable to unitholders by

segment

Business Services $ 1,101 $ 1,493

Infrastructure Services 656 977

Industrials 1,065 359

Corporate and Other 1,032 134

Equity attributable to unitholders $ 3,854 $ 2,963

Three months ended

Sep. 30

Nine months ended

Sep. 30

US$ MILLIONS, UNAUDITED 2019 2018 2019 2018

Company EBITDA

by segment

Business Services $ 64 $ 32 $ 170 $ 98

Infrastructure Services 139 107 362 185

Industrials 189 112 404 370

Corporate and Other (24) (20) (65) (49)

Company EBITDA $ 368 $ 231 $ 871 $ 604

Company FFO

by segment

Business Services $ 31 $ 26 $ 405 $ 109

Infrastructure Services 95 76 251 124

Industrials 103 84 230 297

Corporate and Other (10) (16) (27) (45)

Company FFO1 $ 219 $ 170 $ 859 $ 485

23

Significant portfolio companies

Summary of notable portfolio companies

1) As at September 30, 2019, does not include impact of subsequent events

2) A portion of Brookfield Business Partners’ investment may be syndicated to other institutional investors

Segment Description Notable Portfolio Companies Economic Interest1

Business ServicesService businesses in commercial and residential real

estate, construction, health services and fuel distribution

and marketing

Real Estate Services • 28 - 100%

Multiplex (Construction Services) • 100%

Healthscope • 28%2

Greenergy (Fuel Distribution Business) • 14%

Fuel Marketing Business • 26%

Ouro Verde • 38%2

One Toronto (Entertainment Facilities) • 13%

Infrastructure ServicesInfrastructure businesses servicing the

power generation and offshore oil production industries

Westinghouse • 44%

Teekay Offshore • 31%

IndustrialsIndustrial businesses including manufacturing, metals

and mining, water and wastewater services, and natural

gas production

GrafTech International • 27%

BRK Ambiental • 26%

Clarios • 29%2

North American Palladium • 20%

Schoeller Allibert • 14%

Ember Resources • 46%

CWC Well Services • 54%

24

Acquisitions

Summary of acquisitions completed since spin-off1,2

Segment Portfolio Company Acquisition Date Invested Capital1 Economic Interest2

Business Services

Greenergy May 2017 $45 million 14%

Fuel Marketing Business July 2017 $43 million 26%

One Toronto January 2018 $6 million 13%

Imagine October 2018 $21 million 31%

Healthscope June 2019 $295 million 28%3

Ouro Verde July 2019 $50 million 38%3

Infrastructure Services

Teekay Offshore September 2017 $317 million 31%

Westinghouse August 2018 $405 million 44%

Industrials

BRK Ambiental April 2017 $383 million 26%

Schoeller May 2018 $45 million 14%

Clarios April 2019 $860 million 29%3

1) Figures are presented net to Brookfield Business Partners L.P.

2) As at September 30, 2019, does not include impact of subsequent events

3) A portion of Brookfield Business Partners’ investment may be syndicated to other institutional investors

26

Appendix II: Dispositions Over the Last Twelve Months

27

Case Study: BGIS

Sale of global facilities management business for $1 billion in May 2019

• Facilities management business with high-quality customer

base and long-term contracts and that leverages Brookfield’s

real estate expertise, acquired through a carve-out

• Executed organic and bolt-on acquisition growth strategy

to expand size, scale, service offering and geographic

footprint

• Established a leading global facilities management

provider, managing more than 320 million square feet of

real estate across more than 30,000 global locations

• Sale to CCMP generated net proceeds of $171 million

for BBU

• 70% of invested capital received in distributions over the

past 4 years

• Realized 3.5x multiple of invested capital and IRR of ~45%

Investment Thesis

Value Creation

Monetization



BBU Ownership Interest: 26%

Operating Segment: Business Services

Overview

~45%IRR

3.5xMULTIPLE OF

INVESTED CAPITAL

28

Case Study: BGRS

Sale of global executive relocations business in June 2019

• Carve-out and consolidation to create one of the largest

global outsourced executive relocation businesses

servicing high quality corporate and government clients

• Growth through acquisitions and service line expansion

to become a global leader in mobility services

• Enhanced profitability through increased focus on

operational efficiency and customer service

• Sale to Relo Group generated net proceeds of

$231 million for BBU

• Realized IRR of 20%+

Investment Thesis

Value Creation

Monetization

Investment Timeline: ~20 years


Operating Segment: Business Services

Overview

~$230MNET PROCEEDS

TO BBU

20%+IRR

29

Case Study: Quadrant Energy

Sale of Australian oil and gas operation for $2.15 billion in November 2018

• High-quality energy assets through a complex corporate

carve-out providing the seller with speed of transaction

execution

• Executed long term take-or-pay contract for substantially

all of Quadrant’s proven natural gas reserves and hedged

oil production to minimize commodity price volatility

• Improved profitability through cost management discipline,

prudent capital allocation and organizational changes

• Sale to Santos for net proceeds of $130 million for BBU

while retaining exposure to exploration upside potential

• Over 95% of invested capital received in dividends

• Realized 3.0x multiple of invested capital and IRR of

~40%

Investment Thesis

Value Creation

Monetization




Overview

3.0xMULTIPLE OF

INVESTED CAPITAL

~40%IRR

30

Appendix III: Governance

31

Structure

• Brookfield Business Partners has entered into a Master Services Agreement with Brookfield Asset

Management

‒ Annual base management fee equal to 1.25% of total capitalization of Brookfield Business

Partners

• Brookfield Asset Management entitled to incentive distributions equal to 20% of an increase in the

volume weighted average unit price of BBU over an established incentive distribution threshold

‒ Current incentive distribution threshold is $41.96/unit

Note: For further information regarding the arrangements refer to the Management Services Agreement available in the public filings of Brookfield Business Partners in the U.S. and Canada

32

Governance

Cyrus Madon Chief Executive Officer Ralf Rank Chief Investment Officer, Business Services

Jaspreet Dehl Chief Financial Officer Jim Reid Chief Investment Officer, Infrastructure Services

Denis Turcotte Chief Operating Officer David Aiken Chief Investment Officer, Industrials

Senior Management Team

Investor Relations Contact

Alan Fleming

North America 1-866-989-0311

Global +1-416-645-2736

Email: [email protected]

33

Definitions and Use of Non-IFRS Measures

• Company Funds From Operations (Company FFO), where applicable, is a key measure of our financial

performance and we use Company FFO to assess operating results and our business performance. Company FFO is

a non-IFRS measure which does not have any standard meaning prescribed by IFRS and therefore may not be

comparable to similar measures presented by other companies. Company FFO is calculated as net income excluding

the impact of depreciation and amortization, deferred income taxes, breakage and transaction costs, non-cash gains

or losses and other items. Company FFO is presented net to unitholders, or net to parent company. When determining

Company FFO, we include our proportionate share of Company FFO of equity accounted investments. For further

information on Company FFO see “Use of Non IFRS Measures” of the 2019 6-K.

• Company EBITDA, where applicable, is a key measure of our financial performance and we use Company EBITDA to

assess operating results and our business performance. Company EBITDA is non-IFRS measure which does not have

any standard meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by

other companies. Company FFO is further adjusted as Company EBITDA to exclude the impact of realized disposition

gains (losses), interest income (expense), current income taxes, the impact of realized disposition gains (losses),

current income taxes and interest income (expense) related to equity accounted investments, and other items.

Company EBITDA is presented net to unitholders. When determining Company EBITDA, we include our proportionate

share of Company EBITDA of equity accounted investments. For further information on Company EBITDA see “Use of

Non-IFRS Measures” of the 2019 6-K.

• Equity attributable to unitholders is exclusive of the equity interest of others in our operating subsidiaries

• Unitholders are defined as the parent company prior to the Spin-off on June 20, 2016 and as limited partnership

unitholders, general partnership unitholders, special limited partnership unitholders and redemption-exchange

unitholders post Spin-off.

1) For further information regarding the arrangements refer to the Management Services Agreement available in the public filings of Brookfield Business Partners in the U.S. and Canada

34

Important Cautionary Notes

All amounts are in U.S. dollars unless otherwise specified. Unless otherwise indicated, the statistical and financial data in this document is presented as of September 30, 2019.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION

This Corporate Profile contains “forward-looking information” within the meaning of Canadian provincial securities laws and “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and in any applicable Canadian securities regulations. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of Brookfield Business Partners and its subsidiaries, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods. In some cases, forward-looking statements can be identified by terms such as “expects,” “anticipates,” “plans,” “believes,” “estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.”

Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, which may cause the actual results, performance or achievements of Brookfield Business Partners L.P. and its subsidiaries to

differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: the impact or unanticipated impact of general economic, political and market factors in the countries in which we do business; the behavior of financial markets, including fluctuations in interest and foreign exchanges rate; global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; strategic actions including dispositions; the ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits; changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates); the effect of applying future accounting changes; business competition; operational and reputational risks; technological change; changes in government regulation and legislation within the countries in which we operate; changes in tax laws, catastrophic events, such as earthquakes and hurricanes; the possible impact of international conflicts and other developments including terrorist acts; and other risks and factors detailed from time to time in our documents filed with the securities regulators in Canada and the United States.

Statements relating to “reserves” are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described herein can be profitably produced in the future. We qualify any and all of our forward-looking statements by these cautionary factors.

We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on our forward-looking statements, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by

law, Brookfield Business Partners undertakes no obligation to publicly update or revise any forward-looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise.

CAUTIONARY STATEMENT REGARDING USE OF NON-IFRS MEASURES

This Corporate Profile contains references to Non-IFRS Measures. When determining Company FFO and Company EBITDA, we include our unitholders’ proportionate share of Company FFO and Company EBITDA for equity accounted investments. Company FFO and Company EBITDA are not generally accepted accounting measures under IFRS and therefore may differ from definitions used by other entities. We believe these metrics are useful supplemental measures that may assist investors in assessing the financial performance of Brookfield Business Partners and its subsidiaries. However, Company FFO and Company EBITDA should not be considered in isolation from, or as substitutes for, analysis of our financial statements prepared in accordance with IFRS.

References to Brookfield Business Partners are to Brookfield Business Partners L.P. together with its subsidiaries, controlled affiliates and operating entities. Brookfield Business Partners’ results include publicly held limited partnership units, redemption-exchange units, general partnership units and special limited partnership units. More detailed information on certain references made in this corporate profile will be available in our Management’s Discussion and Analysis of Financial Condition and Results of Operations for the third quarter ended September 30, 2019.

corporate profile - brookfield business partners/media/files/b/brookfield... · 2019-11-08 ·...

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