Brookfield Business Partners L.P. — 2022 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. Financial statements are audited and prepared under IFRS in U.S. dollars.
Business context
Brookfield Business Partners owns and operates business services, infrastructure services and industrial businesses globally. Its four reportable segments are business services, infrastructure services, industrials, and corporate and other. The partnership reported $89.5 billion of total assets and operated across multiple regions; its largest revenue-generating segment was business services.
Key financial metrics
| Metric (US$ millions, except per-unit data) | 2022 | 2021 |
|---|---|---|
| Revenue | $57,545 | $46,587 |
| Net income | $355 | $2,153 |
| Net income attributable to all Unitholders | $146 | $643 |
| Basic and diluted earnings per LP Unit | $0.73 | $3.28 |
| Adjusted EBITDA (non-IFRS) | $2,335 | $1,761 |
| Cash from operating activities | $1,011 | $1,693 |
| Cash and cash equivalents at year-end | $2,870 | $2,588 |
| Total borrowings | $46,693 | $29,076 |
| Net debt / total capital | 70% | 67% |
Adjusted EBITDA by segment was $722 million for business services, $872 million for infrastructure services, $879 million for industrials and negative $138 million for corporate and other. This non-IFRS measure excludes, among other items, interest, taxes, depreciation and amortization, and specified gains, losses and unusual costs; it should not be treated as a substitute for IFRS results.
Investing activities used $18.7 billion of cash, principally reflecting acquisitions; financing activities provided $18.1 billion, including net borrowing proceeds and capital from partners. Total assets rose to $89.5 billion from $64.2 billion. The filing states that $6.92 billion of undrawn credit capacity was available at corporate and subsidiary levels. Subsidiary borrowings are generally non-recourse to the partnership and secured by the relevant operating businesses. Their weighted average interest rate was 7.4%, weighted average maturity was 5.8 years, and approximately 40% were fixed-rate or hedged.
Material changes versus 2021
- Revenue increased 24%, primarily from acquisitions and expanded contributions from businesses acquired in 2021. Reported road-fuels revenue includes U.K. duties recorded gross: $8.1 billion in 2022, with no impact on the business’s margin.
- Adjusted EBITDA rose $574 million, with contributions from all three operating segments. Net income attributable to Unitholders fell $497 million, mainly because 2021 included gains from partial dispositions of graphite electrode operations and public securities.
- Net interest expense increased $1.07 billion to $2.54 billion, reflecting acquisition-related borrowing and higher borrowing costs. Total borrowings increased $17.6 billion; net debt rose to $43.8 billion from $26.5 billion.
- Operating cash flow declined $682 million, with a $2.26 billion use of cash from non-cash working capital. Capital expenditures were $1.58 billion: $816 million maintenance and $759 million growth.
- Acquisitions included Scientific Games Lottery, La Trobe, CDK Global, Magnati, Unidas, BHI Energy and TexTrail, alongside the acquisition of a stake in roofing-products maker Cupa and the privatization of Nielsen through convertible preferred equity.
- The partnership distributed BBUC exchangeable shares to unitholders at one share for every two LP Units in March 2022 and repurchased 2.53 million LP Units during the year.
Outlook, risks and unusual items
- Management expressed optimism that business fundamentals would strengthen in 2023, while citing persistent inflation, stretched supply chains and structurally higher labor costs. It expects essential-service businesses to support performance; no consolidated numerical earnings or revenue guidance is provided.
- The proposed sale of the nuclear technology services business to a consortium led by Cameco and Brookfield Renewable was valued at approximately $8 billion enterprise value. The partnership expected approximately $1.8 billion of proceeds for its 44% interest and anticipated closing in the second half of 2023, subject to approvals and other conditions. Unitholder approval was obtained in January 2023; completion was not assured.
- Offshore oil services entered Chapter 11 proceedings in August 2022 and emerged in January 2023 with a deleveraged balance sheet. The filing cautions that its future performance remains uncertain.
- 2022 included $296 million of business separation, stand-up and restructuring costs, $251 million of net revaluation losses and $146 million of transaction costs. Net interest expense and acquisition-related amortization also increased materially.
- Key risks include leverage and refinancing costs, rising interest rates and inflation, foreign-exchange and commodity exposure, economic cyclicality, acquisition integration and execution, cybersecurity, regulation and litigation, and geopolitical developments including the war in Ukraine. The partnership reported $2.5 billion of outstanding guarantees, insurance bonds and letters of credit; it said known claims were not expected to result in a material settlement liability.
- Brookfield’s control, management role and related-party arrangements create conflicts and dependence risks. Brookfield had subscribed for $1.475 billion of preferred securities bearing a 6% preferential return. The partnership’s base management fee was $94 million in 2022.
Most important facts for investors to verify
- Whether the nuclear-business sale closed on the expected terms and timing, and the net proceeds ultimately received.
- How acquisition contributions, organic operating performance and gross-recorded road-fuel duties explain revenue growth and Adjusted EBITDA; review the IFRS reconciliation as well as the non-IFRS measure.
- The sustainability of operating cash flow and liquidity after acquisition spending, working-capital outflows, debt service and the increase in borrowing costs.
- The offshore oil-services restructuring’s effects on debt, ownership and future cash flows, and whether the healthcare business recovers from pandemic-related operating pressures.
- Integration and financial-reporting controls at recently acquired businesses. The internal-control assessment excluded acquisitions representing approximately 30% of assets, 48% of net assets, 5% of revenue and 57% of net income; the auditor’s control opinion also excluded those businesses.
- The consequences of Brookfield’s control and related-party arrangements, including preferred securities, management fees, potential conflicts and Brookfield’s Redemption-Exchange Units.