Brookfield Business Partners LP Q1 2022 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Devin Dodge - BMO Capital Markets Equity Research - Analyst : I wanted to start with some questions on Westinghouse maybe for Cyrus or Jaspreet to start with. In the past, I think you've targeted an EBITDA range of $700 million to $800 million. I think you're close to that, at least the bottom of that range on a trailing four-quarter basis, but I think Patrick was talking about some improvement opportunities in the base business, there's upside from recent acquisitions. Now, can you frame how we should be thinking about the earnings power of this business, with everything in the portfolio now, or perhaps what EBITDA range is being used in the marketing process to prospective buyers?

Question: Devin Dodge - BMO Capital Markets Equity Research - Analyst : Okay. That's good color. And maybe another one for Patrick. Look, I really like the rundown you gave on the prepared remarks, last issue on there. But maybe tying in something that Jaspreet was talking about. A lot of companies struggling to either, find labor or covering wage inflation through pricing, how big of a challenge is this for Westinghouse? Can you speak to how quickly you're able to adjust prices across the book of businesses to cover off these inflationary headwinds?

Question: Devin Dodge - BMO Capital Markets Equity Research - Analyst : Thanks for that. Maybe just one last one, we saw that BRK, you know, applied to become a category issuer in Brazil. Can you speak to the implications of the motivations for that change and whether we should use this as a, you know, at least as a potential precursor to an IPO?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Cyrus, I got a question for you first. You know, you had talked about, I guess it was a little over a year ago, the plans to monetize Westinghouse and Clarios, the stock jumped, but ultimately neither was completed last year and maybe partly explains the decline in the stock. By talking about both potential monetization again today, do you have greater line of sight that you feel like these deals can be done? And, I mean, in terms of timing or these things do you think could be done at some point this year?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Okay. No, that's helpful. And then back on Westinghouse, those 25 Russian technology nuclear power plants, did Westinghouse reach out to those and, you know, try to convince them to switch, or was it, you know, them approaching Westinghouse and if it was a mix between the two kind of like what that mix kind of looked like?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : And in terms of that transition, are there abilities for those customers to switch over to Westinghouse immediately? I don't know if there's any financial penalties or you kind of have to wait until those contracts are out and then they switch over to Westinghouse.

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Okay, and if I can just sneak in one last question. I mean, you talked about the broader, you know, perhaps renewed interest in nuclear energy, when you kind of take a lookout over the next 5 to 10 years. I mean, are there certain countries or regions where you see, you know, perhaps could be the key drivers of growth in nuclear energy beyond what you know, you would have seen before this whole Russia-Ukraine situation? Patrick Fragman: It's a great question. Even before Central and Eastern Europe was a region which (inaudible) already combined the seeds for such a move. Why? Because it's a region which was heavily fossil-intensive coal, gas. Secondly, it's a region which has very little of its own resources. What the tragic events in Ukraine have done is they have catalyzed and accelerated the thinking. So definitely, we see a regional approach to be made in Central and Eastern Europe but it's also the case in the UK. I mean, you've probably seen the announcements of the Prime Minister Johnson a few weeks ago, announcing eight sites. One of them being one of the sites where we have made some proposals for 81,000 reactors. And we do expect also that UK will go hard and strong on nuclear energy in the near future.

Question: Gary Ho - Desjardins Securities Inc., Research Division - Analyst : Maybe just sticking with Patrick. I'm just wondering if you can elaborate on some of your recent acquisitions at Westinghouse and maybe could you provide some color on valuation range, what those were done at for these tuck-ins, as well kind of, what else are you looking at that you wouldn't, that's on your wish list.

Question: Gary Ho - Desjardins Securities Inc., Research Division - Analyst : Okay. Got it. And then second part to that I found the small modular reactor really intriguing. I'm wondering if you can provide a bit more details in terms of kind of mix revenue or EBITDA today and where that could go to kind of five years out. And where are you seeing the greatest opportunity in terms of regions and our discussions with partners?

Question: Gary Ho - Desjardins Securities Inc., Research Division - Analyst : Okay, great. Then I have a couple questions on Sagen as well, just given the higher mortgage rates and slowing housing activity here in Canada. What's the implication for earnings for Sagen looking out and also you can provide a bit more color on the India mortgage guarantee core state, and whether you're looking at other regions as well to expand.

Question: Gary Ho - Desjardins Securities Inc., Research Division - Analyst : Okay, great and then my last question, Cyrus while I have you, just going back to the monetization discussions, maybe I can ask it this way. Under what conditions may the monetization of Westinghouse with Clarios not take place. I know it's kind of choppy markets out there, I think in the last investor day, you mentioned kind of 9 to 10 times multiple for these businesses in your intrinsic value. What if you don't get those multiples? Would that mean demonetization will not go through?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Yes, thanks, I guess another one on the Westinghouse and the potential monetization here. Listening to the answers, it sounds like there's a lot of good things in the pipeline but those good things are perhaps likely not to really materialize until maybe 24 or beyond. Or are there some other factors that might take some of the tailwinds out of those revenue initiatives? Whether it's input costs, competitive dynamics, you know, other factors that could reduce some of those tailwinds that sound like, you know, really good momentum in the business.

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay, and for Cyrus, I guess, on the Westinghouse given these tailwinds. I guess it's obviously a more attractive asset to potentially sell. But, you know, on the other hand, why not let the sub-site play out internally within BVU?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Great, fair enough. Okay. Last one, for me just thinking about all of the deal activity that's been underway and financing these deals in the public markets through the debt public markets. I saw just recently that it looked like one public debt deal might have been pulled and replaced with some term financing from one lender. Maybe just talk about the market dynamic for financing these recent transactions.