Brookfield Business Partners L.P. (NYSE:BBU) Q1 2023 Earnings Call Transcript

Gary Ho: Hi, good morning. Mark, thanks for sharing some time with us. Maybe just carry on last question there just on pricing actions that you’ve put through. And I want to hone in on a little bit on the labor side given that’s still a pretty tight labor market out there, particularly in the U.S. Just wondering if you can provide a bit more color in terms of expectations on further price increases to maintain those margins and what you’re seeing on the labor side? And you touched on automation a little bit. Wondering if you can elaborate on that as well.

Mark Wallace: Yes. So Gary, a few things. In general, as we think about pricing in the aftermarket, we do expect the price in excess of inflation. So, we do expect that pricing kind of less inflation will be accretive to our margin expansion in the business. And the reason behind that is, one, not only do we have a complete portfolio of technologies that we offer to our customers. We also offer many additional services that go along with that to include intellectual property that we’re supporting our aftermarket retail customers with. And with that, that gives us a unique ability to put more pricing in the market than you would say that general competition could do because we offer so many more services with our battery offerings.

When it comes to labor, clearly, one of the aspects that we’re focused on in the U.S. operation is continued to deploy automation because that reduces the dependency of course on labor and also makes us more efficient. So I mentioned in my prepared remarks that the U.S. will deliver about $50 million of year-over-year actual cost reduction actually improving our bottom-line performance. And we expect going forward, however you want to frame it, 1.5% to 2% net conversion cost savings in the U.S. from the efforts we have around transportation, automation, reduction of scrap rework, et cetera. And that’s why we’re convinced we’ll be able to deliver $300 million of net cost savings for the business in the next few years as well.

Gary Ho: Okay, perfect. Thanks for that. And then second question maybe for Cyrus or Jaspreet, we’re hopefully a few months away from closing the Westinghouse transaction, of the 1.5 billion in proceeds, have you had discussions with Brookfield in terms of their intentions and how much should the proceeds will be used to repay their preps? And maybe can you just quickly remind me the financing cost difference between the preps and the corporate bonds?

Jaspreet Dehl: Yes, it’s Jaspreet. I can take that. So we haven’t had any conversations yet, as you’re aware to any asset monetizations. Brookfield does have the ability to ask for repayment on those preps. So as we get closer and more clarity on exactly the closing on Westinghouse we’ll have that conversation. So I can’t really give you a definitive answer on that today. In terms of the cost of borrowing, it’s virtually the same, the preps are at 6%. Our RCF is tad higher just with the rates increase, but it’s not the significantly different.

Gary Ho: Okay. Thanks, Jaspreet And then just last question, maybe for Cyrus. Just want to talk about the refi angle a little bit. There’s probably a bunch of assets up there in the market that might be challenged somewhat given the higher refi costs, whether that’s higher amounts of leverage that they had on the books or the refi costs have jumped dramatically versus a few years ago. Are you seeing more opportunities as a result? And the – now, how is that playing into valuations. And more generally on your deployment pipeline, do you see more opportunities on new investments or bolt-ons to existing assets like the Unidas investment that you’ve done?