Release Date: November 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Brookfield Business Partners LP (NYSE:BBU) reported a strong financial performance with adjusted EBITDA increasing to $844 million, driven by credits from the Inflation Reduction Act.
• The company successfully closed the acquisition of Network International, which will be combined with Magnati to create a leading digital payments business in the Middle East.
• BBU generated over $350 million from distributions and monetizations, including the sale of a significant portion of Altera.
• The company has realized over $6 billion from the sale of 20 businesses, achieving a three times multiple of capital and an IRR of approximately 30%.
• BBU's shares have increased nearly 70% since last year, indicating strong market performance and investor confidence.

Negative Points

• The healthcare services operation in Australia is facing challenges due to an unsustainable cost structure primarily driven by wage inflation.
• There is softness in select markets, particularly in the engineered components manufacturer segment, with weaker sales volumes expected to normalize next year.
• The trading price of BBU shares is still at a wide discount to intrinsic value, despite recent increases.
• The company is focused on reducing borrowings at the corporate credit facility, indicating a need to manage debt levels.
• Performance at the lottery services operations was impacted by the push out of terminal deliveries and lower jackpot levels, resulting in softer industry volumes.

Q & A Highlights

• Warning! GuruFocus has detected 12 Warning Signs with BBU.

Q: How sustainable is the benefit from the Inflation Reduction Act for Clarios, and could there be changes with a new administration? A: (CEO) Clarios is entitled to credits under finalized regulations effective January 2023, incentivizing domestic manufacturing. We expect the annual benefit to be similar based on current production levels and consultations with advisors.

Q: What are your thoughts on the current IPO environment for Clarios, especially after the US election? A: (CEO) We are keeping all options open for Clarios. We've had a robust process and are encouraged by ongoing conversations with various parties. We hope to provide an update soon.

Q: Can you provide details on the sale of Altera's shuttle tanker operations and what's left of Altera? A: (CFO) The shuttle tanker business represents about half of Altera's EBITDA. We will receive about 265 million in net proceeds. We continue to hold the FPSO business and other non-core assets, with net debt at Altera being around 600 million at our share.

Q: How is the broader environment for monetizations evolving, and what types of assets are seeing interest? A: (CFO) The M&A environment is more robust, with increased activity and actionable deals. The IPO market is stabilizing, and strategic buyers are showing interest in cash-generating businesses. We are encouraged by the market's strength.

Q: Can you provide more color on Scientific Games' performance and potential commercial wins? A: (Head of Business Operations) There was some softness due to lower jackpot levels, but we secured new contracts in Delaware and Ohio. (CFO) The team is managing costs well, and new contracts will start generating revenue next year, supporting strong growth and cash flow.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.