Brookfield Business Partners Investor Meeting September 28, 2016 - - PowerPoint PPT Presentation

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Brookfield Business Partners Investor Meeting September 28, 2016 - - PowerPoint PPT Presentation

Brookfield Business Partners Investor Meeting September 28, 2016 Cautionary Note Regarding Forward-Looking Statements Forward-Looking Statements and Information This presentation contains forward -looking information within the meaning of


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Brookfield Business Partners

Investor Meeting September 28, 2016

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Cautionary Note Regarding Forward-Looking Statements

Forward-Looking Statements and Information This presentation 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 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. 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. Use of Non-IFRS Measures and Other This presentation contains references to financial measures which are not generally accepted accounting measures under IFRS and may differ from similar definitions used by

  • ther entities. We believe that these are useful supplemental measures that may assist investors in assessing our financial performance and the cash anticipated to be

generated by our operations. Such measures should not be considered as the sole indicators of our performance and should not be considered in isolation from, or as a substitute for, analysis of our financial statements prepared in accordance with IFRS. Certain values used in this presentation are for illustrative purposes and based on various factors that may or may not materialize, including past performance metrics that may not be indicative of future performance. References to Brookfield Business Partners or BBU are to Brookfield Business Partners LP together with its subsidiaries unless the context reflects otherwise. All amounts are in U.S. dollars unless otherwise specified.

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Table of Contents

3

Overview 4

CYRUS MADON, CEO

Our Operations

Construction and Business Services

10

JON HAICK, HEAD OF SERVICES

Energy

27

JIM REID, HEAD OF ENERGY

Industrials

35

PETER GORDON, HEAD OF INDUSTRIALS

Financials 43

CRAIG LAURIE, CFO

Looking Forward 51

CYRUS MADON, CEO

Q & A 59

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Overview

CYRUS MADON

4

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Brookfield Business Partners is a business services & industrials company focused on long-term capital appreciation

5

NYSE: BBU TSX: BBU.UN

MARKET SYMBOL

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Our business has diversified operations…

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Business Services Industrials

Provide construction and related services globally, including:

  • Design
  • Program

Management

  • Procurement

Provide business services to global clients, including:

  • Real Estate

Services

  • Logistics
  • Facilities

Management

  • Financial Services

Energy supply chain operations:

  • Oil & Gas

Production – low cost, low decline, long-life assets

  • Oilfield Services

Industrial manufacturing

  • perations:
  • Graphite Electrode

Production

  • Pre-cast Concrete

Construction Products

  • Aggregates
  • Specialty Metals
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Leveraging Brookfield’s history as an

  • wner and operator of real assets

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  • Focus on owning and operating high-quality businesses
  • Target long-term growth
  • Invest where we have a competitive advantage
  • Flexibility to invest in multiple industries in a variety of forms
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And well positioned to create value and grow…

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  • Strong balance sheet and access to capital
  • Experienced management team
  • Global presence
  • Long-term track record of strong returns
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…with an ability to deploy capital across the globe

9

50+

PRIVATE EQUITY INVESTMENT PROFESSIONALS

5

CONTINENTS

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Construction Services

JON HAICK

10

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$7 billion+

BACKLOG 100+ PROJECTS

Construction Services Operates under the Multiplex brand A leading construction contractor in Australia, the UK and the Middle East

and recently expanded to Canada and India

11 50 Martin Place, Sydney

~$70 billion

CURRENT AND COMPLETED PROJECTS

~1,000

PROJECTS DELIVERED

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SLIDE 12

Our business has attractive attributes…

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Steady Earnings & Cash Flows

  • Long term track record of sustained earnings and

cash flow Diverse Client Base

  • Top tier public and private clients (many of whom

are recurring)

  • Client diversity improves earnings stability

Attractive Geographi Markets

  • Core markets are stable with encouraging growth

prospects

  • Geographic diversity improves earnings stability

Deep Relationships with Supply Chain

  • Established subcontractor networks developed over

many years of successful delivery

  • Difficult to replicate as we have grown with subcontractors
  • Mitigates risk in delivery
  • Established culture focused on health and safety

Steady earnings and cash flows Diverse client base Attractive geographic markets Deep relationships

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...which has allowed us to complete distinct projects across a wide range of sectors

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RESIDENTIAL ~250 PROJECTS VALUE: ~$15 BILLION SOCIAL ~150 PROJECTS VALUE: ~$15 BILLION

Fiona Stanley Hospital, Australia The Tower – One St George Wharf, UK Brookfield Place, Australia

COMMERCIAL ~600 PROJECTS VALUE: ~$40 BILLION

1 1 1

1) Historic values converted into U.S. dollars and indexed to inflation

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1) As of June 30, 2016

We have created significant value through

  • rganic growth…

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2014 2016 14% $6.4 BACKLOG

$ in billions

1

$7.3 2014 2016 21% 86 104 # OF PROJECTS

1

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...and looking forward our backlog is diversified and robust

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44% 36% 2% 18% 24% 29% 4% 6% 10% 26% 1%

Office Retail Education Health Tourism & Leisure Residential Government Australia UK Canada Middle East

BACKLOG BY SECTOR $7.3 BILLION BACKLOG BY REGION $7.3 BILLION

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We are building skylines in… Australia

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  • 1.5 million sq. ft. luxury residential

tower located on Melbourne’s south riverbank

  • Tallest residential tower in the

southern hemisphere

  • Expected completion Q3 2020

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FLOORS

320

METRES

1,100

RESIDENCES

Australia 108, Melbourne

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  • 760,000 sq. ft. luxury residential

tower

  • Includes retail, public piazza, spa

pool, leisure facilities

  • Expected completion Q4 2017

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FLOORS

170

METRES

274

RESIDENCES

161

HOTEL ROOMS

One Blackfriars Road, London …in the UK

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  • 2.1 million sq. ft. luxury downtown

residential tower including retail, pool, leisure facilities

  • One of world’s tallest residential

towers

  • Expected completion by year end

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FLOORS

370

METRES

530

RESIDENCES

200

HOTEL ROOMS

The Address Boulevard, Dubai … in the UAE

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Other Business Services

JON HAICK

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LOGISTICS Global employee relocation services Cold storage warehousing & logistics RESIDENTIAL REAL ESTATE SERVICES Canada, USA; Realtor networks & property management

Our diversified operations primarily focus on commercial and residential real estate services

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FACILITIES MANAGEMENT Canada, USA and Australia 300 million+ sq. ft. managed1 FINANCIAL SERVICES Global M&A and corporate financial advisory services

1) Proforma for announced acquisitions

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$75 billion+

VALUE OF OVER 700 TRANSACTIONS ADVISED ON SINCE 2003

64,000+

REAL ESTATE AGENTS U.S. AND CANADA NETWORKS

300 million+

  • SQ. FT.

MANAGED REAL ESTATE

Providing services to large institutional and government clients

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1) Proforma for announced acquisitions

1

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...with attractive attributes

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Recurring cash flow streams

  • Long-term contracts and customer relationships
  • High contract renewal rates

Diverse Markets

  • Global footprint and network
  • Diverse client base of public, corporate and

private customers Growth Opportunities

  • Organic growth through new contract wins,

long-term franchise agreements and customer relationships

  • Growth opportunities through follow-on

acquisitions – new geographies or service lines

Recurring cash flow streams Diverse markets Growth

  • pportunities
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We have created significant value through organic growth and acquisitions

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Organic Growth

  • Expanded size and scale of real estate agent network and transaction

volumes

  • Entered into new long-term franchise agreements and converted

competing real estate brands to our network

  • Introduced new business lines and geographies while growing financial

advisory service transaction volumes Growth through Acquisitions

  • Expanded operating platforms by executing complementary synergistic

‘bolt-on’ acquisitions

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Brookfield Global Integrated Solutions

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Integrated facilities management company with self perform capabilities, strong customer relationships and contracted cash flows

AUSTRALIA | CANADA | INDIA | NEW ZEALAND | SINGAPORE | HONG KONG | UNITED STATES | UK

Building a Global Facilities Management Company1

30,000+

LOCATIONS

5,600+

TEAM MEMBERS

C$4 billion+

MANAGED SPEND

300 million+

SQ.FT. MANAGED

1) Proforma for announced acquisitions

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Brookfield Global Integrated Solutions Value creation through organic growth

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  • Growth driven by new customer

wins and introducing new product lines

  • Significant growth in government
  • utsourcing, particularly in

Canada

  • Increased scope of services with

existing customers by developing new product lines

  • Launch and expansion of project

management division in Australia

REVENUE GROWTH

C$ in millions $694 $842 $905 $1,238 $1,487 2012 2013 2014 2015 TTM 2016

21% CAGR

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1) 2016 based on last twelve months up to June 30, 2016

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Brookfield Global Integrated Solutions Value creation through acquisitions

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Highly synergistic acquisition of #2 provider of facilities management services in Canada

  • 1,000+ employees
  • 50 million+ sq. ft. of real estate

under management Business focused on critical environment facilities management serving a high growth industry

  • 370 employees
  • 7 million+ sq. ft. of real estate

under management

McKinstry SNC-Lavalin O&M Opportunity to acquire complementary synergistic businesses at highly accretive valuations

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1) Acquisition announced and subject to customary closing conditions

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Energy

JIM REID

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$3 billion

ACQUISITIONS DURING CURRENT COMMODITY DOWNTURN AND MARKET DISLOCATION

Oil and gas exploration & production (E&P) and energy related services

28 Horseshoe Canyon, Canada

100,000+

BARRELS OF OIL EQUIVALENT PER DAY OF PRODUCTION

~80% / ~20%

GAS / OIL WEIGHTING

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Our operations include…

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CANADIAN E&P Operate in western Canada with an orientation toward long-life, low-cost reserves located at shallow depths AUSTRALIAN E&P Focused on long-life, contracted natural gas reserves and high return

  • ffshore oil projects

ENERGY SERVICES Contract drilling and well servicing operations in western Canada

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Our operations have attractive attributes…

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Investing for value to build large scale platforms

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  • Low cost gas operator with industry leading full cycle costs in

Canada

  • Large scale, long-life and contracted natural gas reserves in

Western Australia

  • Canada’s largest CBM producer and 12th largest natural gas

producer

  • Largest domestic gas supplier in Western Australia supplying

~23% of the market

  • Low decline with the ability to add significant reserves at a low

cost per barrel / mcf

  • Long-term gas contracts and medium term oil hedging in

Western Australia

  • Active financial hedging in Canada
  • Locations in stable countries – currently Canada and Australia

Long life, low cost reserves Low decline, large in-place resources Focused on downside protection

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  • Opportunities from

Australian business rationalizations

  • Major opportunity for

consolidation in energy services at this point in the cycle

We are building value in our energy investments…

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  • 20 million acres of

exploration permits in Australia

  • Over 2 million acres of

mostly contiguous land in Canadian coalbed methane and shallow gas

  • Focus on cost structure

during downturn environment

  • Sale of non-core assets in

Australia

  • Maintain low decline with

proprietary data management tool

Adding value during downturn to position for successful exit on market recovery Acquisitions Exploration & Development Operational Excellence

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Our western Canadian oil and gas business has reduced cash costs1 from C$2.18 to C$1.74 per mcf

We have created significant value through cost savings and acquisition synergies…

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1) Cash costs include royalties, transportation, operating costs and G&A

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…as well as long term take-or-pay contracts

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  • Largest marketer of domestic gas

in State of Western Australia

  • Acquired for value relative to

reserves, infrastructure, advanced exploration portfolio

  • Structured long-term gas contracts

Quadrant Energy

30%+

COST MANAGEMENT SAVINGS TO DATE

$2.1 billion

INVESTMENT

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Other Industrials

PETER GORDON

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We acquire industrial businesses with distinct characteristics…

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Strong competitive position in their sectors Companies where Brookfield’s operating experience can add value post-acquisition Low rates of change in industry

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  • Priced at a discount to intrinsic value
  • Quality plant & equipment with significant replacement cost
  • Defendable market share in challenging conditions
  • Opportunity for capacity rationalization and cost reduction
  • High cost to build new capacity
  • High switching cost for customers
  • Ownership of scarce resource

...and attractive attributes

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Acquired for value Positioned to withstand cyclical downturns Barriers to entry

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Our current operations include manufacturing and mining businesses…

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BATH AND SHOWER PRODUCTS

10% North American market share with a dominant position in Canada One of two primary palladium mines in North America One of largest western Canadian limestone quarries with 1 billion tonnes of reserves

INFRASTRUCTURE-RELATED PRODUCTS

Pre-cast concrete forms

GRAPHITE ELECTRODES

Graphite electrodes used in electric arc furnaces

PALLADIUM MINE LIMESTONE QUARRY

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…and we are creating value through

  • perational improvement

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  • Support management teams with Brookfield resources,

experience and expertise

  • Improve management systems and operating processes
  • Emphasis on cash margins by product and customer
  • Focus on new product development
  • Systematic cost reduction
  • Surface value from hidden assets
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GrafTech was acquired for half of replacement cost at a low-point in the cycle

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GRAFTECH GRAPHITE ELECTRODE (GE) SALES

$ / MT (2016 dollars) Sales Volume (MT) Price/MT (2016 dollars) Average =$4,114 / MT

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…and we are making step change improvements to enhance profitability

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  • Focus production at lowest cost

facilities and exit non-core businesses

  • Match corporate overhead with

business needs

  • Focus on safety

Cost Savings

$50 million+

EXPECTED FUTURE MARGIN IMPROVEMENT

$50 million+

SAVINGS TO DATE

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COMPANY EBITDA C$ millions

MAAX Bath

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Manufacturer of bath and shower products with strong North American market share

2009 2016F

$13 $40+

  • Investment made in 2008 at the
  • nset of the housing downtown
  • New management team
  • Significant cost reductions
  • Investment in new products (R&D)
  • Focus on marketing and sales

1) Based on future forecasts, actual performance may vary 1

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Financials

CRAIG LAURIE

43

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Meaningful asset base with significant runway to capitalize on opportunities

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1) As of June 30, 2016

TOTAL ASSETS $8.1 BILLION1

23% 28% 28% 18% 3%

TOTAL DEBT $2.1 BILLION1

38% 39% 22% 1%

Other Industrials Energy Corporate and Other Other Business Services Construction Other Industrials Energy Other Business Services Construction

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Strong balance sheet and ample liquidity…

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Over $200 million of cash and $650 million available on revolving facilities No net corporate debt Non-recourse financing at the operating asset level Consolidated net debt to total capitalization ratio of 28% Actively manage our liquidity and capital requirements

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…will enable us to fund growth in current operations and make new acquisitions…

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Significant cash flows from operations Opportunistically monetize mature assets and operations Strategically refinance existing debt and manage leverage Closed $4 billion of additional, committed private fund capital which is a “partner” to BBU

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…while maintaining a disciplined approach to financial risk management

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Maintain conservative levels of corporate debt Strategically finance asset debt in local currency Actively manage foreign currency exposure Raise capital on an accretive basis and maintain a prudent capital structure

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An approach to valuation

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$800-$1,000

Construction

$100

$450-$540

Business Services Energy

$363

Industrials

$2,200 - $2,600 8-10x 10-12x $45

Multiple Company FFO1 Valuation2

$24 to $28

US$ in millions4

Value per Unit

Book Value Flowing barrels per day (net to BBU)3 Price per flowing barrel

$28,000-$30,000 27,000

$550-$650

Total Valuation

1) Based on last 12 months to June 30, 2016 “Company FFO” is a non-IFRS measure based on funds from operations that may differ from similar definitions used by other entities 2) Net of BBU’s proportionate share of debt financing, as applicable 3) On a net to BBU basis, on a gross basis flowing barrels per day of 108,000 4) Figures rounded for presentation purposes

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We have significant embedded growth in our existing operations…

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  • $1,290

$675 $204 $10

BOOK VALUE1

$ in millions

COMPANY FFO2

$ in millions

1) Book value of equity at June 30, 2016 excluding securities and corporate cash, adjusted for repayment of our acquisition facility. Book value is presented net to Brookfield Business Partners 2) Company FFO based on last twelve months to June 30, 2016 excluding gains on securities. Company FFO is presented net to Brookfield Business Partners

Stabilized Businesses Emerging Businesses Stabilized Businesses Emerging Businesses

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… as our emerging businesses have the potential to generate significant Company FFO as they are stabilized

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EMERGING BUSINESSES COMPANY FFO1

$ in millions

$10 $100 $135 $165 TTM 2016 15% 20% 25%

1

1) Company FFO based on last twelve months to June 30, 2016 excluding gains on securities. Company FFO is presented net to Brookfield Business Partners

Incremental Company FFO Illustrative FFO Yield

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Looking Forward

CYRUS MADON

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Drivers of value creation

Improvement in emerging businesses

1

Organic growth

  • f stabilized

businesses

2

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Acquisitions and investments

3

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We continue to identify new opportunities in high-quality businesses on a value basis…

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Leverage Real Assets Expertise Create Platform Companies Out of Favour Sectors and Geographies Emerging Businesses Capital Markets Dislocation

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We have a robust pipeline for new opportunities across segments and geographies

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53% 26% 6% 16% 53% 7% 40%

Business Services Energy South America Europe Australia & Asia Industrials North America

PIPELINE BY SEGMENT PIPELINE BY REGION

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Taking advantage of capital market weakness

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Energy and industrial businesses had been impacted by weak commodity and capital markets earlier this year Invested approximately $400 million in securities of businesses with high quality assets and strong long-term fundamentals Markets have recovered and our investments have increased in value by $95 million1

1) $95 million in realized and unrealized gains on a gross basis, or $27 million net to Brookfield Business Partners

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  • Fastest growing major economy,

positive policies and lower inflation stimulus

  • Domestic savings amongst the

highest in the world at 30% of GDP

  • Headwinds from weakness in

corporate and bank balance sheets

In India we are taking advantage of banking system stress

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  • Evaluating opportunities to

recapitalize and improve businesses

  • Partnered with State Bank of India

to pursue distress opportunities

  • Local partner enables us to

access proprietary deals

  • Recently provided a loan with

equity-type return potential to a local residential developer

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In Brazil we are taking advantage of liquidity constrained conglomerates

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  • Discussions with large corporate

groups interested in monetizing non-core assets

  • Discussions with banks regarding

distressed borrowers in need of additional capital

  • Focus on high quality businesses

with barriers to entry

  • Presidential impeachment in

unprecedented political crisis

  • Weak macroeconomic figures but a

few indicators starting to rebound

  • Scarcity of capital and rationalization
  • f operations by large businesses
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In conclusion our longer term strategic goals are

58

Own and operate high quality businesses with solid long-term fundamentals Create operating platforms which we can grow over many years Target long-term returns of 15 to 20% on our investments

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Q & A

CYRUS MADON

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