Brookfield Business Partners CORPORATE PROFILE FEBRUARY 2019
Business Services and Industrials company focused on long-term capital appreciation BBU NYSE BBU.UN TSX $4.3 B MARKET CAP 1) As at market close February 6, 2019 2
Our strategy is to acquire and manage high quality operations globally We target a 15% to 20% return on our investments with overall focus on long term capital appreciation Broad investment mandate with flexibility to invest across multiple industries and through many forms Leverage Brookfield s global expertise as an owner and operator of real assets Acquire market leaders and businesses with high barriers to entry and/or low production costs, add value through operational and other improvements Closely partnering with management teams for long term business success focused on profitability and sustainability of margins and cash flows Opportunistically recycle capital, selling interests in businesses when value is maximized Global sourcing capability and a proven track record over 30+ years of investing and managing businesses 3
Our global footprint continues to grow $27 B 2018 ASSETS NORTH AMERICA $5 B $10 B 2016 vs 2018 ASSETS EUROPE & MIDDLE EAST $2 B $10 B 2016 vs 2018 ASSETS ~45,000 OPERATING EMPLOYEES SOUTH AMERICA $- B $5 B 2016 vs 2018 ASSETS ASIA PACIFIC $1 B $2 B 2016 vs 2018 ASSETS Note: Assets as of June 30, 2016 and December 31, 2018 4
Three primary operating segments Our operating segments reflect our increased activity in infrastructure services Business Services Facilities management and real estate services Construction services Road fuel distribution and marketing Others; including logistics, financial advisory services, entertainment, technology services Infrastructure Services Services to the power generation industry Services to the offshore oil production industry Industrials Graphite electrode production Water / wastewater services Returnable plastic packaging Specialty metals / aggregates Pre-cast drainage products Natural gas production and oilfield services $7 B 2018 ASSETS $12 B 2018 ASSETS $8 B 2018 ASSETS Note: Assets as of December 31, 2018 5
Financial Performance 6
2018 Financial Snapshot $100 $105 $110 $115 $120 $125 $130 $135 $140 $145 $150 $155 $160 $165 $170 $175 $180 $185 $190 $195 $200 $205 $210 $215 $220 $225 $230 $235 $240 $245 $250 $255 $260 $265 $270 $275 $280 $285 $290 $295 $300 $305 $310 $315 $320 $325 $330 $335 $340 $345 $350 $355 $360 $365 $370 $375 $380 $385 $390 $395 $400 $405 $410 $415 $420 $425 $430 $435 $440 $445 $450 $455 $460 $465 $470 $475 $480 $485 $490 $495 $500 $505 $510 $515 $520 $525 $530 $535 $540 $545 $550 $555 $560 $565 $570 $575 $580 $585 $590 $595 $600 $605 $610 $615 $620 $625 $630 $635 $640 $645 $650 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 $60 $65 $70 $75 $80 $85 $90 $95 -$100 -$95 -$90 -$85 -$80 -$75 -$70 -$65 -$60 -$55 -$50 -$45 -$40 -$35 -$30 -$25 -$20 -$15 -$10 -$5 $0 $100 $105 $110 $115 $120 $125 $130 $135 $140 $145 $150 $155 $160 $165 $170 $175 $180 $185 $190 $195 $200 $205 $210 $215 $220 $225 $230 $235 $240 $245 $250 $255 $260 $265 $270 $275 $280 $285 $290 $295 $300 $305 $310 $315 $320 $325 $330 $335 $340 $345 $350 $355 $360 $365 $370 $375 $380 $385 $390 $395 $400 $405 $410 $415 $420 $425 $430 $435 $440 $445 $450 $455 $460 $465 $470 $475 $480 $485 $490 $495 $500 $505 $510 $515 $520 $525 $530 $535 $540 $545 $550 $555 $560 $565 $570 $575 $580 $585 $590 $595 $600 $605 $610 $615 $620 $625 $630 $635 $640 $645 $650 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 $60 $65 $70 $75 $80 $85 $90 $95 -$100 -$95 -$90 -$85 -$80 -$75 -$70 -$65 -$60 -$55 -$50 -$45 -$40 -$35 -$30 -$25 -$20 -$15 -$10 -$5 $0 Proportionate Company EBITDA $843 million 2,3 US$ millions $128 Business Services $131 Business Services $295 Infrastucture Services $195 Infrastucture Services $490 Industrials Proportionate Company FFO $733 million 2,3 US$ millions $470 Industrials ($70) Corporate and Other ($63) Corporate and Other Corporate Liquidity 1 US$ millions 2018 2017 Corporate cash & financial assets $888 $ 392 Committed corporate credit facilities 1,325 675 Total $2,213 $ 1,067 Corporate debt nil nil 1) Unaudited, as of December 31 2) Unaudited, for the year ended December 31, 2018 3) Attributable to limited partnership unitholders, general partnership unitholders, special limited partnership unitholders and redemption-exchange unitholders 7
Disciplined financial risk management Maintaining a strong, flexible balance sheet with ample liquidity at the corporate level to take advantage of attractive opportunities Ongoing sources of liquidity No debt drawn at the corporate level Cash and public securities at the corporate level Undrawn corporate credit facilities Cash flow from our operations Monetization of mature businesses Finance businesses with non-recourse debt at the operating business level Maintain appropriate net debt to total capitalization for the business Long dated debt maturities Access to capital markets $2.2 B 2018 LIQUIDITY 1 5.9 years AVERAGE DEBT MATURITY 1 1) For the year ended December 31, 2018 8
Our Business 9
Business Services Services businesses across diverse sectors Facilities Management Global provider of integrated facility management services for over 320 million sq. ft of real estate Construction Services Leading international contractor with over 55 year track record of delivering landmark property and infrastructure assets Real Estate Services A suite of services including brokerage services, appraisals and global relocation services Road Fuels A leading supplier of road fuel in the U.K. and Ireland; and the Mobil gas station network across Canada Entertainment The only three Torontoarea gaming facilities, generating over $1 billion in gross gaming revenue annually Others Including logistics and technology companies, and global financial advisory business 10
Facilities Management Integrated facilities management ( IFM ) company providing a full spectrum of management, service delivery and strategic solutions to real estate and infrastructure owners and occupiers Global, leading IFM platform with a long history of successful operations as a long-term, trusted partner to blue-chip clients Contracted cash flows and high renewal rates Services include facility management, project management, and other strategic value-added services Market leader in Canada and Australia with growth focus and rapid expansion in the U.S. since 2016, and operating presence in two European and six Asian countries Leading North American data center and critical environments capability serving cloud providers, co-lo operators and corporates Growth Organic growth driven by new customer wins and introducing new product lines Bolt-on acquisitions of critical environment, data center and other synergistic businesses Best-in-class, cost effective delivery enabled by significant scale, technical expertise, purpose built technology platform and technical self-perform capabilities 34,000+ LOCATIONS MANAGED 320 M SQ. FT. MANAGED 7,000 EMPLOYEES C$4.2 B MANAGED SPEND 11
Infrastructure Services Leading service providers to the infrastructure sector Services to the power generation industry Leading provider of services to the world s power generation facilities including fuel manufacturing and design, engineering and decommission services Services to the offshore oil production industry Leading provider of critical transportation and production services to the offshore oil industry with long term, fixed rate contracts 12
Westinghouse Electric Company 100% ownership of a leading service provider to the power generation industry Largest provider of infrastructure services providing critical services to the world s nuclear power facilities including fuel manufacturing and design, engineering services, and decommission services Cash flows underpinned by long-term contracts for regularly scheduled services Strong reputation as a technology leader in the nuclear power industry Working with the management team to enhance profitability Organizational changes to strengthen the supply chain and customer focus with regional responsibility for product and service delivery Growth opportunities: Enhancing and expanding service offerings Provision of leading technology, including AP1000 design Investment ~$4 billion purchase price, funded with $920 million of equity, ~$3 billion of longterm debt within the business $405 million equity commitment by BBU for 44% ownership 13
Industrials Low-cost producers with high barriers to entry due to market position, operational or capital intensity Graphite Electrodes A leading global manufacturer of graphite electrodes used in electric arc furnaces Water & Wastewater Services Largest private water and wastewater services company in Brazil serving 15 million people Returnable Packaging Leading European manufacturer of returnable plastic packaging producing crates and customizable bulk containers Palladium Mining The world s only pure play palladium producer, located in Canada, producing ~235,000 oz palladium per annum Others Including limestone aggregates mining; longlife, low-cost gas reserves and the largest active service rig contractor in Canada 14
GrafTech International Original investment of $295 million, generated $1.2 billion proceeds to date Monetization April 2018: executed IPO on NYSE under ticker EAF at $15 per share August 2018 realized $230 million of proceeds in secondary offering and share buyback Realized cash and notes of $940 million from IPO proceeds and dividends in 2018 BBU s current ownership stake is 27%, worth ~$1 billion at current market value 1 Investment Highlights Acquired in 2015 for an equity purchase price of $855 million, BBU s share of which was $295 million for a 34% stake Successfully repositioned GrafTech with multi-year take-or-pay contracts for much of graphite electrode production negotiated in 2017 at weighted average contract price of $9,700 per metric tonne (over the next five years), 2X historical average pricing 1) As at market close February 6, 2019 15
Strategic Initiatives 16
Our Business Strategy We acquire high-quality businesses, add value operationally and harvest capital from mature assets at the right time to optimize investment returns 17 Acquire high-quality businesses Enhance value through operating expertise Leverage our real assets expertise Monetize when value is maximized 17
Quadrant Energy Sale of Australian oil and gas operation for $2.15 billion generated three times invested capital and 40% IRR Acquired Quadrant Energy, together with institutional partners, in a corporate carve-out in 2015 BBU s ownership was 9% Executed long term take-or-pay contract for substantially all of its proven natural gas reserves and financial hedges on oil production; minimizing commodity price risk Implemented cost management discipline, prudent capital allocation and organizational changes Over 95% of invested capital received in dividends over the past 3 years Sale agreement maintains exposure to potential upside in exploration interests $130 M NET PROCEEDS TO BBU $82 M POST-TAX PROFIT TO BBU 18
Power Solutions Definitive agreement 1 to acquire, together with institutional partners, 100% of Johnson Controls Power Solutions business Leading manufacturer of low voltage lead-acid automotive batteries for global automakers and aftermarket distributors and retailers History of steady growth in margins and market share over time, benefiting from very large economies of scale with ability to leverage fixed costs, product development and advances in manufacturing efficiency ~$13.2 billion purchase price, funded with $3 billion of equity, ~$10.2 billion of long-term debt within the business ~30% of the equity commitment by BBU Expected to close by June 2019 154 M BATTERIES PRODUCED PER YEAR 50 GLOBAL FACILITIES 15,000 EMPLOYEES Investment Highlights Leading market player producing 1/3 of global battery industry output Lead-acid and lithium-ion batteries for almost all passenger, commercial and recreational vehicles, conventional to fully electric Advanced, patented manufacturing processes Global, long-term customer relationships with top-tier automakers and retailers Reputation for product quality, distribution and reliability Leading global recycler of conventional batteries Growth by building on track record of innovation 1) There can be no assurance that Brookfield Business Partners will be able to successfully execute on this transaction 19
Healthscope Definitive agreement 1 acquire up to 100% ownership, together with institutional partners, of the second largest private hospital operator in Australia and the largest pathology services provider in New Zealand Healthscope operates 43 private hospitals and owns 24 pathology laboratories, providing access to operating theatres, nursing staff, accommodations, and other clinical care and consumables Provision of essential services drives cash flows and Healthscope has delivered continued growth in revenue and EBITDA for many years. Growth opportunities: Recently completed and ongoing developments, redevelopments and expansions support future growth Well-positioned to benefit from favorable demographics trends and increasing demand for hospital services driven by growing population Investment ~$4.1 billion purchase price, funded with up to $1.0 billion of equity, $1.4 billion of longterm debt, $1.7 billion from sale and leaseback of 22 hospital properties 15% PRIVATE HOSPITAL MARKET SHARE 43 PRIVATE HOSPITAL SITES ~18,000 EMPLOYEES BBU will fund approximately one third of the equity 1) There can be no assurance that Brookfield Business Partners will be able to successfully execute on this transaction 20
Appendices 21
Selected Segmented Financial Information The following tables present selected income statement and balance sheet information by operating segment on a proportionate basis: Statements of Operating Results Statements of Financial Position Three months ended Dec. 31 Year ended Dec. 31 As of Dec. 31 US$ MILLIONS, UNAUDITED 2018 2017 1 2018 2017 1 US$ MILLIONS, UNAUDITED 2018 2017 1 Company EBITDA by segment Business Services $ 30 $ 39 $ 128 $ 103 Infrastructure Services 110 31 295 34 Industrials 120 51 490 144 Corporate and Other (21) (13) (70) (41) Company EBITDA $ 239 $ 108 $ 843 $ 240 Net debt (cash) by segment Business Services $ 199 $ 93 Infrastructure Services 1,890 Industrials 962 512 Corporate and Other (621) (392) Net debt $ 2,430 $ 213 Company FFO by segment Business Services $ 22 $ 22 $ 131 $ 92 Infrastructure Services 71 19 195 21 Industrials 173 30 470 163 Corporate and Other (18) (3) (63) (24) Company FFO 2 $ 248 $ 68 $ 733 $ 252 Equity attributable to unitholders by segment Business Services $ 1,493 $ 1,407 Infrastructure Services 977 302 Industrials 359 1,019 Corporate and Other 134 310 Equity attributable to unitholders $ 2,963 $ 3,038 1) The comparative figures have been updated to conform with the new segment presentation. 2) Company FFO is a non-ifrs measure and is calculated as net income excluding the impact of depreciation and amortization, deferred income taxes, breakage and transaction costs, non-cash gains or losses and other items. When determining Company FFO, we include our proportionate share of Company FFO of equity accounted investment. For further information on Company FFO, see Definitions at the back of the Corporate Profile. 22
Governance Senior Management Team Cyrus Madon Chief Executive Officer Peter Gordon Chief Operating Officer Jaspreet Dehl Chief Financial Officer Ralf Rank Chief Investment Officer, Business Services Joe Freedman Senior Vice Chairman Jim Reid Chief Investment Officer, Infrastructure Services David Aiken Chief Investment Officer, Industrials Brookfield Business Partners has entered into a Master Services Agreement with Brookfield Asset Management Provides a comprehensive suite of services to Brookfield Business Partners Base management fee equal to 1.25% annually of total capitalization of Brookfield Business Partners Brookfield is entitled to receive incentive distributions equal to 20% of an increase in the unit price of BBU over the incentive distribution threshold (currently $41.96/unit) 1) For further information regarding the arrangements refer to the Management Services Agreement available in the public filings of Brookfield Business Partners in the U.S. and Canada 23
Investor Relations Contact: Monica Thakur North America 1-866-989-0311 Global +1-416-363-9491 Email: bbu.enquiries@brookfield.com 24
Definitions and Use of Non-IFRS Measures Company Funds From Operations (Company FFO), where applicable, is a key measure of our financial performance and we use Company FFO to assess operating results and our business performance. Company FFO is a non-ifrs measure which does not have any standard meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. Company FFO is calculated as net income excluding the impact of depreciation and amortization, deferred income taxes, breakage and transaction costs, non-cash gains or losses and other items. Company FFO is presented net to unitholders, or net to parent company. When determining Company FFO, we include our proportionate share of Company FFO of equity accounted investments. For further information on Company FFO see Use of Non IFRS Measures of the Q3 2018 6-K. Company EBITDA, where applicable, is a key measure of our financial performance and we use Company EBITDA to assess operating results and our business performance. Company EBITDA is non-ifrs measure which does not have any standard meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. Company FFO is further adjusted as Company EBITDA to exclude the impact of realized disposition gains (losses), interest expense, current income taxes, and realized disposition gain, current income taxes and interest expenses related to equity accounted investments. Company EBITDA is presented net to unitholders, or net to parent company. For further information on Company EBITDA see Use of Non IFRS Measures of the Q3 2018 6-K. Equity attributable to unitholders is exclusive of the equity interest of others in our operating subsidiaries Unitholders are defined as the parent company prior to the Spin-off on June 20, 2016 and as limited partnership unitholders, general partnership unitholders, special limited partnership unitholders and redemption-exchange unitholders post Spin-off. 25
Important Cautionary Notes All amounts are in U.S. dollars unless otherwise specified. Unless otherwise indicated, the statistical and financial data in this document is presented as of December 31, 2018. CAUTIONARY STATEMENT REGARDING FORWARD- LOOKING STATEMENTS AND INFORMATION This Corporate Profile 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 forwardlooking 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 L.P. and its subsidiaries 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. Statements relating to reserves are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described herein can be profitably produced in the future. We qualify any and all of our forward-looking statements by these cautionary factors. 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. CAUTIONARY STATEMENT REGARDING USE OF NON-IFRS MEASURES This Corporate Profile contains references to Company FFO. When determining Company FFO, we include our unitholders proportionate share of Company FFO for equity accounted investments. Company FFO is not a generally accepted accounting measure under IFRS and therefore may differ from definitions of Company FFO or Funds from Operations used by other entities. We believe that this is a useful supplemental measure that may assist investors in assessing the financial performance of Brookfield Business Partners and its subsidiaries. Company FFO should not be considered as the sole measure 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. 26