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Brookfield Business Partners L.P.(BBU) - 2024 Q3 - Earnings Call Transcript
BBUBrookfield Business Partners L.P.(BBU)2024-11-08 18:49
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Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2024 increased to 844millionfrom844 million from 655 million in the prior year, benefiting from 296millioninproductioncreditsundertheU.S.InflationReductionAct[7][26]−AdjustedEFOforthequarterwas296 million in production credits under the U.S. Inflation Reduction Act [7][26] - Adjusted EFO for the quarter was 582 million, including 131millionofnetgainsprimarilyrelatedtothedispositionoftheroadfueloperation[29]BusinessLineDataandKeyMetricsChanges−TheIndustrialsegmentgenerated131 million of net gains primarily related to the disposition of the road fuel operation [29] Business Line Data and Key Metrics Changes - The Industrial segment generated 500 million of adjusted EBITDA, supported by Brazilian water and wastewater services and advanced energy operations [30] - The Business Services segment generated 228millionofadjustedEBITDA,withstrongperformancefromtheresidentialmortgageinsurer[31]−TheInfrastructureServicessegmentgenerated228 million of adjusted EBITDA, with strong performance from the residential mortgage insurer [31] - The Infrastructure Services segment generated 146 million of adjusted EBITDA, down from 228millionthepreviousyear,impactedbythesaleofNuclearTechnologyServices[33]MarketDataandKeyMetricsChanges−TheacquisitionofNetworkInternational,aleadingdigitalpaymentservicesproviderintheMiddleEast,isexpectedtocreateamarket−leadingdigitalpaymentsbusiness[8][16]−ThehealthcareservicesoperationinAustraliaisfacingchallengesduetoanunsustainablecoststructurefromwageinflation[28]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedoncapitalrecycling,generatingover228 million the previous year, impacted by the sale of Nuclear Technology Services [33] Market Data and Key Metrics Changes - The acquisition of Network International, a leading digital payment services provider in the Middle East, is expected to create a market-leading digital payments business [8][16] - The health care services operation in Australia is facing challenges due to an unsustainable cost structure from wage inflation [28] Company Strategy and Development Direction - The company is focused on capital recycling, generating over 350 million from distributions and monetizations, including the sale of a significant portion of Altera [9][10] - The integration of Network International with Magnati aims to create a champion in the high-growth payment solution space [19][20] - The company plans to continue investing in strategic acquisitions and reinvesting in existing operations to generate incremental returns [35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the sustainability of benefits from the Inflation Reduction Act, expecting similar annual benefits for Clarios [37] - The company is encouraged by the improving monetization environment, with increased interest in M&A activity and strategic buyers [45][48] - Management noted that while there is softness in select markets, overall business performance remains stable [27] Other Important Information - The company has invested about 9billionalongsideBrookfield′sprivateequitybusinesstoacquirehigh−quality,mission−criticalbusinesses[10]−Thecompanyhasrealizedover9 billion alongside Brookfield's private equity business to acquire high-quality, mission-critical businesses [10] - The company has realized over 6 billion from the sale of 20 businesses, achieving a 3 times multiple of capital and an IRR of approximately 30% [11] Q&A Session Summary Question: Sustainability of Inflation Reduction Act benefits - Management expects annual benefits for Clarios to remain similar based on finalized regulations [37] Question: Current IPO environment and dual listing considerations for Clarios - Management is keeping all options open for Clarios and is encouraged by ongoing conversations [38] Question: Details on the Altera sale and remaining debt - The shuttle tanker business represents about half of Altera's EBITDA, with net debt at Altera around 550millionto550 million to 575 million [41] Question: Broader environment for monetization - The M&A environment is becoming more robust, with increased activity and interest in various sectors [45][46] Question: Headwinds faced by Scientific Games - There was softness in U.S. retail sales, but new contracts are expected to generate revenue in the coming years [50][54] Question: Transaction environment for BBU's strategy - The market is enabling for transaction activity, particularly for stable businesses generating sustainable cash flow [58][59]