Brookfield Business Partners L.P. — 2023 Annual Report
Reporting period: Fiscal year ended December 31, 2023. This is an annual Form 20-F, not a standalone fourth-quarter report. Financial statements are audited and prepared under IFRS in U.S. dollars.
Business context and key financial metrics
The partnership owns and operates business services, infrastructure services and industrials businesses across multiple regions. It seeks to improve operating cash flows, make operations-oriented acquisitions and recycle capital through asset sales. Its stated return objective emphasizes capital appreciation with a modest distribution yield.
| Metric (US$ millions, except per-unit amounts and ratios) | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | 55,068 | 57,385 | Down 4.0% |
| Net income | 3,777 | 240 | Up 3,537 |
| Net income attributable to limited partners | 482 | 36 | Up 446 |
| Basic and diluted earnings per LP unit | $6.49 | $0.48 | Up $6.01 |
| Adjusted EBITDA | 2,491 | 2,254 | Up 10.5% |
| Operating cash flow | 2,130 | 1,011 | Up 1,119 |
| Cash and cash equivalents at year-end | 3,252 | 2,870 | Up 382 |
| Total borrowings | 42,249 | 46,693 | Down 4,444 |
| Net debt-to-capital ratio | 68% | 70% | Down 2 percentage points |
Net income attributable to all unitholders and other non-controlling interests was $1,405 million in 2023, versus $98 million in 2022. This broader measure includes holders of redemption-exchange units, BBUC exchangeable shares and interests in operating subsidiaries, among others; it is not the same as income attributable to limited partners.
Reported net income was heavily influenced by dispositions: the partnership recorded $4,686 million of net gains on acquisitions and dispositions, chiefly the $3.9 billion gain on the nuclear technology services sale and a $524 million gain on the partial sale of its technology services operation. Excluding such items, Adjusted EBITDA rose to $2,491 million. The filing does not present a single consolidated revenue-margin percentage.
Segments and material changes
| Segment | 2023 revenue | 2023 Adjusted EBITDA | 2022 Adjusted EBITDA |
|---|---|---|---|
| Business services | 32,410 | 900 | 641 |
| Infrastructure services | 7,457 | 853 | 872 |
| Industrials | 15,201 | 855 | 879 |
| Corporate and other | — | (117) | (138) |
- Business services revenue fell mainly because of lower prices and volumes at the road fuels operation. Adjusted EBITDA benefited from a full year of contributions from 2022 acquisitions, operating improvements and stronger contributions from the residential mortgage insurer.
- Infrastructure services Adjusted EBITDA dipped as the nuclear technology services business was sold during November, partly offset by lottery services growth. The segment’s Adjusted EFO increased sharply, primarily because it includes the nuclear sale gain.
- Industrials Adjusted EBITDA declined modestly. Record results at advanced energy storage, supported by pricing and demand for higher-margin batteries, were offset by lower contribution from graphite electrodes and Western Canadian energy operations.
- Net interest expense rose to $3,596 million from $2,538 million, reflecting higher interest rates and borrowing associated with acquisitions.
- The partnership recorded $831 million of net impairment expense, including a $599 million goodwill impairment at Australian healthcare services and an impairment related to lower forecast natural gas prices.
Cash flow, debt and liquidity
Cash from operating activities was $2,130 million, compared with $1,011 million in 2022. Investing activities provided $2,537 million, mainly from asset-sale proceeds, versus $18,721 million used in 2022, when acquisitions were substantial. Financing activities used $4,371 million, including distributions and capital paid to non-controlling interests, debt repayments and preferred-security redemptions.
Total borrowings were $42,249 million: $1,440 million of corporate borrowings and $40,809 million of non-recourse subsidiary borrowings. Approximately 70% of total borrowings were fixed-rate or naturally hedged; the weighted average interest rate was 8%, including hedges, and weighted average maturity was 6.1 years. The partnership reported $9.2 billion of undrawn credit facilities at corporate and subsidiary levels. Separately, its $2.3 billion bilateral facilities had $860 million available; its Brookfield revolving acquisition facility was undrawn at year-end and its available amount was scheduled to decrease from $1 billion to $500 million on April 27, 2024.
Capital expenditures were $2.9 billion in 2023, comprising $833 million of maintenance and $2.1 billion of growth expenditure. The partnership reported approximately $1.7 billion of outstanding guarantees, insurance bonds and letters of credit. It stated that material borrowing covenant requirements were being met or waivers had been obtained.
Outlook, risks and unusual items
- Management said operations performed well overall, citing improved margins, resilient volumes and a measured pass-through of higher costs. It expected inflationary pressures to have largely eased, while acknowledging continued uncertainty in the global operating environment. No quantified earnings or revenue guidance was provided.
- Management highlighted continued value-creation initiatives and business sales, with future proceeds and operating distributions expected to reduce corporate borrowings over time. A $0.0625-per-unit quarterly distribution was declared for March 2024, equivalent to $0.25 annualized if maintained.
- The partnership agreed with institutional partners to acquire Network International for approximately $3 billion; its expected equity share was about $150 million. Closing was expected in the first half of 2024, subject to regulatory approvals.
- The planned sale of the real estate brokerage portfolio and general partner interest to Bridgemarq, in exchange for units that would increase the partnership’s interest from 28% to approximately 42%, was expected to close in the second quarter of 2024, subject to shareholder approval.
- Risks include cyclical businesses, sustained high interest rates and refinancing needs, foreign-exchange and commodity movements, impairment and valuation uncertainty, construction contract cost overruns, healthcare labor costs and operating challenges, and regulatory, environmental and cybersecurity exposures.
- Brookfield controls the general partner and provides management services. The filing details potential conflicts, limits on fiduciary duties and Brookfield’s discretion in allocating investment opportunities. The annual base management fee was $87 million; no incentive distribution was payable for 2023.
- The nuclear technology services sale was a related-party transaction involving Brookfield Renewable Partners; it received unitholder approval excluding interested-party holdings. The European Commission opened an investigation into the starter automotive battery market; management said the business had conditional immunity and indemnification and did not foresee material adverse exposure, but the outcome remained uncertain.
Important facts for investors to verify
- How much of 2023 reported profit and per-unit earnings reflects realized disposition gains versus recurring operations, and how comparable Adjusted EBITDA is to cash available to the partnership.
- The healthcare business’s recovery plan, hospital activity and labor costs, and the assumptions underlying its goodwill impairment and remaining carrying value.
- Debt maturities, borrowing costs, covenant headroom and the availability of subsidiary cash for corporate obligations and distributions.
- Completion, funding and expected returns of the Network acquisition and Bridgemarq transaction, including required approvals and any changes since filing.
- The terms and practical effects of Brookfield’s control, management fees, related-party dealings and investment-allocation conflicts.
- Tax and reporting consequences for the investor’s jurisdiction; the filing warns that distributions may not cover an investor’s tax liability and that partnership tax treatment is not assured.
Controls and audit: Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. The assessment excluded Mobile Mini Solutions, acquired in January 2023; its reported share of consolidated assets was approximately 1%.