Brookfield Business Partners LP Q4 2021 Earnings Call Transcript

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

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : My first question was on Altera. The supplement kind of talked about how there's a little bit of upside given improvement in oil prices. Just was wondering how you can kind of quantify like the strength in terms of the potential for upside. And then how much of the business could participate in better pricing in the oil markets. But also more broadly, how much this may help demand in terms of actual services that Altera provides.

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Okay. On the Cupa acquisition, are you able to kind of talk about what kind of the thesis was in terms of how you plan to generate value?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Okay. And just my last question. Obviously, BBU has been very active buying and making new investments over the past year, a little bit less active on monetizing. I know it's always going to be hard to kind of predict, but how do you see the market conditions right now as you kind of take a look on your crystal ball the potential to monetize assets within your portfolio? Cyrus Madon - Brookfield Business Partners L.P. - Managing Partner and CEO of Brookfield Business Partners Limited & Private Equity Geoff, Cyrus here. Look, that's a great question. I think the environment is actually ironically quite a bit better now than it was a year ago or even 6 months ago for us. There appears to be, I'll say, a pivot from some technology-oriented in investor interest from what was technology-oriented growth to value. And we think that should benefit us as we look to monetize things down the road. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2022 / 4:00PM, BBU_u.TO - Q4 2021 Brookfield Business Partners LP Earnings Call

Question: Devin Dodge - BMO Capital Markets Equity Research - Analyst : I wanted to get started on the agreement with BAM for the perpetual prefs. Can you walk us through the thought process for why this was the right approach versus maybe some of the other options that you could have considered such as adding capacity under the credit facility or accessing the public equity or pref markets? Cyrus Madon - Brookfield Business Partners L.P. - Managing Partner and CEO of Brookfield Business Partners Limited & Private Equity Yes. Look, Devin, the nice thing about what we've done here is it gives us maximum flexibility. We draw it when we want to draw it. So there's no cost of capital. We don't have it drawn and sitting there idle with a negative drag to our cost of equity here. And we thought that the pricing is reasonable in the context of the market. Obviously, we considered various alternatives. And it just shows support from our sponsor and majority owner. So for all those reasons, we thought it's a great financing for BBU. And this is perpetual. It's redeemable in the instance of an asset sale or an equity raise down the road. But otherwise, it doesn't come due. So it's a great outcome for us.

Question: Devin Dodge - BMO Capital Markets Equity Research - Analyst : Okay. And maybe just one last one. Ember Resources, look, this is a name we don't talk about very often. But it seems like the strength in natural gas prices should be or at least could be a potential benefit in 2022 or maybe 2023. Can you frame for us how the hedge book looks this year versus 2021 or perhaps just a general update on the business?

Question: Gary Ho - Desjardins Securities Inc., Research Division - Analyst : Great. Maybe first question is for Jaspreet. Just on the higher rates. Can you remind us kind of how that impacts the financing cost side of things just looking out? Or have you run any sensitivities on a 25 or 50 basis point move, how that impacts your cash flows looking out?

Question: Gary Ho - Desjardins Securities Inc., Research Division - Analyst : And Jaspreet, can you just remind us the floating rate, how much of your total debt is fixed versus floating?

Question: Gary Ho - Desjardins Securities Inc., Research Division - Analyst : Okay. Got it. Okay. That's helpful. And then my second question is for Denis. Just want to hear your thoughts on all these inflationary comments out in the market, companies needing to bump up their comp to retain talent. Can you maybe talk about a couple of your businesses that you're seeing this impact the most? I think you mentioned kind of brand, I guess in the prepared remarks, kind of BrandSafway is maybe one, but any others that you're seeing?

Question: Gary Ho - Desjardins Securities Inc., Research Division - Analyst : And those price increases, have they all been put in or should we see some lag in the results in terms of margin compression or whatnot?

Question: Gary Ho - Desjardins Securities Inc., Research Division - Analyst : Okay. That makes sense. And then just if I can just sneak one more in. Just touch on kind of 2 businesses that's seen some challenges over the past year. One, Cardone, look like there's some early signs of a turnaround there. And then I think you mentioned on the Altera side. I know you want to remove some of the exposure to commodity moves. Now could this be an opportune time to maybe monetize that asset given where oil prices are? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2022 / 4:00PM, BBU_u.TO - Q4 2021 Brookfield Business Partners LP Earnings Call

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : First question is on the distributions from some of the various companies. Looks like Westinghouse is building a nice track record here. And Sagen has released some of its excess capital, but I believe there's probably some more there. Can you just talk about what you're expecting from those 2 businesses for distributions going forward? And then are there any other businesses that would look like they might have some more recurring type distributions going forward? Cyrus Madon - Brookfield Business Partners L.P. - Managing Partner and CEO of Brookfield Business Partners Limited & Private Equity Yes. So Westinghouse, it's Cyrus here. Look, I think, we think Westinghouse can consistently generate the type of free cash that we've been seeing the last few years. As for Sagen, yes, there is still quite a bit of excess reserves in the company. And obviously, subject to regulatory approval, we would expect to pull that out of the business over time.

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay. Great. In terms of the liquidity position as it stands today pro forma of all of the transactions, looks like it sits around $1.1 billion or so. And the company has been active on the buyback still here in at least to start 2022. So how are you thinking about the buyback and the liquidity position as it stands today? And would you maybe pull on at BAM to accelerate some buybacks? Cyrus Madon - Brookfield Business Partners L.P. - Managing Partner and CEO of Brookfield Business Partners Limited & Private Equity Well, look, you've seen what we've been doing. Our posture has always been that we don't need to choose between the 2. When we see compelling value in the units, we'll keep buying. And when we see compelling investment opportunities, we'll continue making them. And certainly, with this financing that we've just put in place, we've got ample flexibility between that and our credit facilities to continue growing. And added to that, of course, ongoing distributions from our companies, monetization proceeds from our companies down the road. We're very comfortable with our capital position.