Brookfield Business Corporation Class A · TSX:BBUC
Brookfield Business Corporation Class A — Brookfield Business Partners — Investor Day (September 2016)
58 slides from Brookfield Business Corporation Class A's investor day presentation, Sep 28, 2016
Slide 1: Brookfield Business Partners Investor Meeting
Brookfield Business Partners Investor Meeting September 28, 2016
Slide 2: Cautionary Note Regarding Forward-Looking Statements
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
Slide 3: Table of Contents
Table of Contents 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 3
Slide 4: Overview
Overview CYRUS MADON Brookfield lm
Slide 5: Brookfield Business Partners is a business services & industrials company
Brookfield Business Partners is a business services & industrials company focused on long-term capital appreciation NYSE: BBU TSX: BBU.UN MARKET SYMBOL 5
Slide 6: Our business has diversified operations
Our business has diversified operations… Business Services Industrials Provide construction Provide business Energy supply Industrial and related services services to global chain operations: manufacturing globally, including: clients, including: • Oil & Gas operations: • Design • Real Estate Produc
Slide 7: Leveraging Brookfield's history as an owner and operator of real assets
Leveraging Brookfield’s history as an owner and operator of real assets • 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 7
Slide 8: Well positioned to create value and grow
And well positioned to create value and grow… • Strong balance sheet and access to capital • Experienced management team • Global presence • Long-term track record of strong returns 8
Slide 9: Ability to deploy capital across the globe
…with an ability to deploy capital across the globe 50+ 5 PRIVATE EQUITY INVESTMENT CONTINENTS PROFESSIONALS 9
Slide 10: Construction Services
Construction Services JON HAICK 10
Slide 11: Construction Services: Multiplex brand
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 ~$70 billion CURRENT AND COMPLETED PROJECTS ~1,000 PROJECTS DELIVERED $7 billion+ BACKLOG 100+ PROJECTS 50 Martin Place, Sydne
Slide 12: Our business has attractive attributes
Our business has attractive attributes… Steady Steady earnings Earnings • Long term track record of sustained earnings and and cash & Cash Flowsflows cash flow • Top tier public and private clients (many of whom Diverse Diverse Client are recurring) Baseclient base • Client diversity improves earnin
Slide 13: Distinct projects across a wide range of sectors
...which has allowed us to complete distinct projects across a wide range of sectors COMMERCIAL RESIDENTIAL SOCIAL ~600 PROJECTS ~250 PROJECTS ~150 PROJECTS VALUE: ~$40 BILLION 1 VALUE: ~$15 BILLION 1 VALUE: ~$15 BILLION 1 Brookfield Place, Australia The Tower – One St George Wharf, UK Fiona Stanley
Slide 14: Significant value through organic growth
We have created significant value through organic growth… # OF PROJECTS BACKLOG $ in billions 14% 104 $7.3 21% $6.4 86 2014 2016 1 2014 2016 1 1) As of June 30, 2016 14
Slide 15: Backlog is diversified and robust
...and looking forward our backlog is diversified and robust BACKLOG BY SECTOR BACKLOG BY REGION $7.3 BILLION $7.3 BILLION Government 1% Office Middle East Residential Australia 18% 24% 26% Canada 2% 44% Tourism & 10% Leisure Retail 29% 36% 6% 4% Health UK Education 15
Slide 16: We are building skylines in Australia
We are building skylines in… Australia Australia 108, Melbourne • 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 101 1,100 320 FLOORS RESIDENCES METRES 16
Slide 17: In the UK
…in the UK One Blackfriars Road, London • 760,000 sq. ft. luxury residential tower • Includes retail, public piazza, spa pool, leisure facilities • Expected completion Q4 2017 50 161 274 170 FLOORS HOTEL ROOMS RESIDENCES METRES 17
Slide 18: In the UAE
… in the UAE The Address Boulevard, Dubai • 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 72 200 530 370 FLOORS HOTEL ROOMS RESIDENCES METRES 18
Slide 19: Other Business Services
Other Business Services JON HAICK 19
Slide 20: Diversified operations focus on commercial and residential real estate services
Our diversified operations primarily focus on commercial and residential real estate services FACILITIES MANAGEMENT RESIDENTIAL REAL ESTATE Canada, USA and Australia SERVICES Canada, USA; Realtor networks & 300 million+ sq. ft. managed1 property management FINANCIAL SERVICES LOGISTICS Global M&A and
Slide 21: Providing services to large institutional and government clients
Providing services to large institutional and government clients 1 300 million+ SQ. FT. MANAGED REAL ESTATE 64,000+ REAL ESTATE AGENTS U.S. AND CANADA NETWORKS $75 billion+ VALUE OF OVER 700 TRANSACTIONS ADVISED ON SINCE 2003 1) Proforma for announced acquisitions 21
Slide 22: Services businesses with attractive attributes
...with attractive attributes Recurring Recurring cash cash • Long-term contracts and customer relationships flow streams flow streams • High contract renewal rates • Global footprint and network Diverse Diverse Markets markets • Diverse client base of public, corporate and private customers • Organ
Slide 23: Value created through organic growth and acquisitions
We have created significant value through organic growth and acquisitions 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 busines
Slide 24: Brookfield Global Integrated Solutions
Brookfield Global Integrated Solutions Integrated facilities management company with self perform capabilities, strong customer relationships and contracted cash flows Building a Global Facilities Management Company1 30,000+ 300 million+ C$4 billion+ 5,600+ LOCATIONS SQ.FT. MANAGED MANAGED SPEND TEA
Slide 25: Value creation through organic growth
Brookfield Global Integrated Solutions Value creation through organic growth • Growth driven by new customer wins and introducing new product REVENUE GROWTH C$ in millions lines • Significant growth in government 21% outsourcing, particularly in $1,487 CAGR Canada $1,238 $842 $905 • Increased scope
Slide 26: Value creation through acquisitions
Brookfield Global Integrated Solutions Value creation through acquisitions Opportunity to acquire complementary synergistic businesses at highly accretive valuations 1 McKinstry SNC-Lavalin O&M Business focused on critical Highly synergistic acquisition of #2 environment facilities management provid
Slide 27: Energy
Energy JIM REID “Whe ee Brookfield
Slide 28: Oil and gas E&P and energy related services
Oil and gas exploration & production (E&P) and energy related services 100,000+ BARRELS OF OIL EQUIVALENT PER DAY OF PRODUCTION ~80% / ~20% GAS / OIL WEIGHTING $3 billion ACQUISITIONS DURING CURRENT COMMODITY DOWNTURN AND MARKET DISLOCATION Horseshoe Canyon, Canada 28
Slide 29: Our operations include
Our operations include… CANADIAN E&P AUSTRALIAN E&P ENERGY SERVICES Operate in western Canada Focused on long-life, Contract drilling and well with an orientation toward contracted natural gas servicing operations in long-life, low-cost reserves reserves and high return western Canada located at sha
Slide 30: Our operations have attractive attributes
Our operations have attractive attributes… • Low cost gas operator with industry leading full cycle costs in Long life, low cost Canada reserves • Large scale, long-life and contracted natural gas reserves in Western Australia • Canada’s largest CBM producer and 12th largest natural gas Low decline,
Slide 31: Building value in our energy investments
We are building value in our energy investments… Exploration & Operational Acquisitions Development Excellence • Opportunities from • 20 million acres of • Focus on cost structure Australian business exploration permits in during downturn rationalizations Australia environment • Major opportunity fo
Slide 32: Value created through cost savings and acquisition synergies
We have created significant value through cost savings and acquisition synergies… Our western Canadian oil and gas business has reduced cash costs1 from C$2.18 to C$1.74 per mcf 1) Cash costs include royalties, transportation, operating costs and G&A 32
Slide 33: Long term take-or-pay contracts: Quadrant Energy
…as well as long term take-or-pay contracts Quadrant Energy • 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 $2.1 billion 30%+ INVESTMENT COST MANAGEMENT SAV
Slide 34: Other Industrials
Other Industrials PETER GORDON 35
Slide 35: We acquire industrial businesses with distinct characteristics
We acquire industrial businesses with distinct characteristics… Strong competitive position in their sectors Companies where Brookfield’s operating experience can add value post-acquisition Low rates of change in industry 36
Slide 36: ...and attractive attributes
...and attractive attributes Acquired for value • Priced at a discount to intrinsic value Positioned to • Quality plant & equipment with significant replacement cost withstand cyclical • Defendable market share in challenging conditions downturns • Opportunity for capacity rationalization and cost r
Slide 37: Current operations include manufacturing and mining businesses
Our current operations include manufacturing and mining businesses… BATH AND SHOWER PRODUCTS INFRASTRUCTURE-RELATED GRAPHITE ELECTRODES 10% North American market PRODUCTS Graphite electrodes used share with a dominant position Pre-cast concrete forms in electric arc furnaces in Canada PALLADIUM MINE
Slide 38: Creating value through operational improvement
…and we are creating value through operational improvement • 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 reduc
Slide 39: GrafTech acquired for half of replacement cost
GrafTech was acquired for half of replacement cost at a low-point in the cycle GRAFTECH GRAPHITE ELECTRODE (GE) SALES $ / MT (2016 dollars) Price/MT (2016 dollars) Sales Volume (MT) Average =$4,114 / MT 40
Slide 40: Step change improvements to enhance profitability
…and we are making step change improvements to enhance profitability • Focus production at lowest cost facilities and exit non-core businesses • Match corporate overhead with business needs • Focus on safety Cost Savings $50 million+ $50 million+ SAVINGS EXPECTED FUTURE TO DATE MARGIN IMPROVEMENT 41
Slide 41: MAAX Bath
MAAX Bath Manufacturer of bath and shower products with strong North American market share COMPANY EBITDA C$ millions • Investment made in 2008 at the $40+ onset of the housing downtown • New management team $13 1 • Significant cost reductions 2009 2016F • Investment in new products (R&D) • Focus on
Slide 42: Financials
Financials CRAIG LAURIE Brookfield 43
Slide 43: Meaningful asset base with significant runway
Meaningful asset base with significant runway to capitalize on opportunities TOTAL ASSETS TOTAL DEBT $8.1 BILLION1 $2.1 BILLION1 Corporate and Other Construction 3% 1% Other Business Construction Energy 28% 22% Services 23% Energy 38% 28% 18% 39% Other Other Industrials Industrials Other Business Se
Slide 44: Strong balance sheet and ample liquidity
Strong balance sheet and ample liquidity… 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 requir
Slide 45: Fund growth in current operations and new acquisitions
…will enable us to fund growth in current operations and make new acquisitions… Significant cash flows from operations Opportunistically monetize mature assets and operations Strategically refinance existing debt and manage leverage Closed $4 billion of additional, committed private fund capital whi
Slide 46: Disciplined approach to financial risk management
…while maintaining a disciplined approach to financial risk management Maintain conservative levels of corporate debt Strategically finance asset debt in local currency Actively manage foreign currency exposure Raise capital on an accretive basis and maintain a prudent capital structure 47
Slide 47: An approach to valuation
An approach to valuation US$ in millions4 Company FFO1 Multiple Valuation2 Construction $100 8-10x $800-$1,000 Business Services $45 10-12x $450-$540 Flowing barrels per Price per day (net to BBU)3 flowing barrel Energy 27,000 $28,000-$30,000 $550-$650 Industrials Book Value $363 Total Valuation $2,
Slide 48: Significant embedded growth in existing operations
We have significant embedded growth in our existing operations… BOOK VALUE1 COMPANY FFO2 $ in millions $ in millions 0 $1,290 $204 0 0 $675 0 0 $10 - Stabilized Emerging Stabilized Emerging Businesses Businesses Businesses Businesses 1) Book value of equity at June 30, 2016 excluding securities and
Slide 49: Emerging businesses potential to generate significant Company FFO
… as our emerging businesses have the potential to generate significant Company FFO as they are stabilized EMERGING BUSINESSES COMPANY FFO1 $ in millions $165 $135 Incremental $100 Company FFO $10 1 TTM 2016 15% 20% 25% Illustrative FFO Yield 1) Company FFO based on last twelve months to June 30, 20
Slide 50: Looking Forward
Looking Forward CYRUS MADON 51
Slide 51: Drivers of value creation
Drivers of value creation 1 2 3 Improvement in Organic growth Acquisitions and emerging of stabilized investments businesses businesses 52
Slide 52: Identifying new opportunities in high-quality businesses on a value basis
We continue to identify new opportunities in high-quality businesses on a value basis… Leverage Real Assets Expertise Create Platform Companies Out of Favour Sectors and Geographies Emerging Businesses Capital Markets Dislocation 53
Slide 53: Robust pipeline for new opportunities
We have a robust pipeline for new opportunities across segments and geographies PIPELINE BY SEGMENT PIPELINE BY REGION South America 26% Industrials 40% 6% Europe Business 53% Services 16% Australia 53% & Asia 7% North America Energy 54
Slide 54: Taking advantage of capital market weakness
Taking advantage of capital market weakness 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
Slide 55: In India: banking system stress
In India we are taking advantage of banking system stress • 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 • Fastest growing major economy, positive policies
Slide 56: In Brazil: liquidity constrained conglomerates
In Brazil we are taking advantage of liquidity constrained conglomerates • Discussions with large corporate groups interested in monetizing non-core assets • Discussions with banks regarding distressed borrowers in need of additional capital • Presidential impeachment in • Focus on high quality busi
Slide 57: In conclusion our longer term strategic goals
In conclusion our longer term strategic goals are 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 58
Slide 58: Q&A
Q&A CYRUS MADON Brookfield }59
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