Craig Laurie - Chief Financial Officer Cyrus Madon - Chief Executive Officer Jaspreet Dehl - Managing Director.

Nick Stogdill - Credit Suisse Anthony Zicha - Scotiabank.

Thank you for standing by. This is the conference operator. Welcome to the Brookfield Business Partners' Third Quarter 2017 Results Conference Call and webcast. As a reminder, all participants are in listen-only-mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions [Operator Instructions].

At this time, I would like to turn the conference over to Mr. Craig Laurie, Chief Financial Officer. Please go ahead, Mr. Laurie..

Good morning everyone. Thank you for joining us for the Brookfield Business Partners 2017 third quarter earnings conference call. With me today are Cyrus Madon, our Chief Executive Officer, Jaspreet Dehl, our Managing Director and Courtney Burke.

I would, at this time, remind you that responding to questions and in talking about new initiatives and our financial and operating performance, we will make forward-looking statements, including forward-looking statements within the meaning of applicable Canadian and U.S. Securities Laws.

These statements reflect predictions of future events and trends, do not relate to historical events, and are subject to known and unknown risks. Future events may differ materially from such statements.

For more information on these risks and their potential impact on our Company, please see our filings with the Securities Regulators in Canada and the United States and the information available on our website.

For the third quarter, Brookfield Business Partners generated Company FFO of $46 million or compared to $50 million for the same period in 2016.

Our Company FFO benefited from stronger results in our business services and industrial segments, offset by a $16 million loss on the sale of Insignia, our smaller oil and gas producer in Western Canada in our energy segment.

We reported net income attributable to unit holders for the quarter of $9 million compared to net income of $20 million in the third quarter of 2016, due primarily to higher depreciation, amortization and tax expense in 2017.

Our business services segment generated Company FFO of $23 million in the third quarter of 2017 up from $18 million during the same period of 2016, as a result benefited from first deposit of contribution from our road fuels distribution and marketing platform with the acquisition of Greenergy in May 2017 and the Loblaw gas station operations in July 2017.

As well as the continued strength of our facilities management and real estate brokerage operations, partially offset by lower results at our financial advisory services business which tends to have variability in its results.

Our construction services segment contributed $17 million of Company FFO in the quarter compared to $16 million in the same period of 2016. Marginally improved results from our Australian and UK operations relative to the prior year were partially offset by lower activity in the Middle East.

Our backlog is increased to $8 billion up from $6.6 billion at the same time last year, as we secured 7 projects during the quarter. These included 19 Elm a mixed-use development in London, 447 Collins Street a mixed-use development in Melbourne and AYKON London One, a 50-story residential tower in London.

Following the quarter end, we were awarded The Address Residences Jumeirah Gate a mixed-use development in Dubai and Transit City, a residential development in Toronto further raising our backlog to almost $9 billion.

Our energy segment reported Company FFO loss of $5 million during the quarter compared to Company FFO of $12 million in the prior year due to the $16 million loss on the sale of Insignia. Despite current natural gas price weakness, our Canadian operation performed better than in the same period last year, as we benefited from our hedging program.

The duration of the hedges can range between 6 and 36 months and hedges are rolled forward on a quarterly basis. Our Australian operation continues to benefit from its long-term fixed price customer contracts for natural gas.

Our industrial operations segment generated Company FFO of $22 million during the quarter, up from $11 million in 2016, benefited from a full quarter contribution from our Brazilian water services operation BRK Ambiental.

Results at our palladium mining operation continue to improve with the higher palladium prices during the quarter on the back of strong demand fundamentals and a higher sales volumes.

The primary use of palladium is in catalytic converters and currently there is a fundamental supply shortage of this metal driven by automakers focus on improving emission. This has pushed palladium prices to over $900 an ounce, an increase of about $200 an ounce from last year and analysts are expecting demand to remain high in the next year.

In our graphite electrode operation reported company, higher Company FFO with increases in both volume and average pricing. Tightness of graphite electrode supply and higher demand have let you substantial increase in pricing.

While we realized some benefit this quarter, we believe that we will achieve significantly better results in the coming year as we finalized pricing at higher levels for 2018. Turning to the balance sheet, assets and liabilities increased with the acquisition described and we successfully access the capital markets during the quarter.

We raised $600 million of gross proceeds to an equity offering concurrent private replacement with an addition of $30 million in proceeds after quarter end when underwriters exercise there are over 11 options. We also increased our revolver, revolving unsecured credit facilities by a $100 million for an aggregate of $250 million to several banks.

Bringing our total liquidity after our closed and announced transactions to approximately $1 billion and at the corporate level our facilities remain undrawn. Our intention at this time is not to utilize corporate debt except as a bridge for acquisitions or working capital needs, but longer term debt placed at the operating company level.

I'll now pass the call to Cyrus to speak to our strategy and growth initiatives..

Thanks, Craig, and good morning everyone. We've had a very productive quarter including making progress on expanding the scale and global footprint of our business. During the quarter, we progressed several strategic initiatives including completing the acquisitions of Teekay Offshore and Loblaw gas station operations.

We were selected as the successful proponent of the largest casino concession ever awarded in Canada, and we continue to build our business in India providing a first lien secured loan for $123 million Total Environment developer.

In September, we closed our acquisition of Teekay Offshore a leading providing of critical transportation and production services to the offshore oil industry. This is a well managed business at the operating level it experienced liquidity constraints given an over leverage balance sheet.

We provided new capital to address their balance sheet leverage and provide liquidity to execute their strategic plan.

Teekay offshore is a market leader in offshore production services controlling approximately 40% of the global fleet in the shuttle tanker market and is amongst the largest players in the FPSO that's floating production storage and offloading market with the focus on midsize projects.

The company generates stable cash flows underpinned by diverse medium to long-term fixed rate contracts with high quality counterparties in fact primarily investment grade counterparties.

As a fee-based business it has limited direct commodity exposure and its customers have competitive operating costs which will support continuing production even in a lower oil price environment.

During the quarter and in partnership with Great Canadian Gaming Corporation, we were selected as the successful proponent by the Ontario Lottery and Gaming Corporation or OLG. To operate and manage three gaming facilities in the Greater Toronto area which I will refer to as the GTA concession.

This is the largest casino concession ever awarded in Canada and includes the premier Woodbine location which is located near Toronto's Pearson International Airport.

The GTA concession generates over a $1 billion of gross gaming revenue today and we have the exclusive right to operate and improve the existing sites for a minimum period of 22 years, with the option to develop a new site and extend the concession period by 10 years.

The modernization will include integrated property expansions that will enhance gaming offering and offer additional food, hotel and entertainment experiences. We expect to close this investment in early 2018.

During the third quarter, we provided a first lien secured loan to Total Environment, an experienced Bangalore-based home builder who has completed and delivered three million square feet of housing to-date. Bangalore is a growing residential real estate market, because of its status as the center of India's high tech industry.

The loan will be used to fund construction of a portfolio of five residential projects. The loan carries a guaranteed return, in addition to equity participation which is linked to revenue from apartment sales, but importantly it is structured as a senior secured loan which gives us lots of downside protection.

We continue to monitor recapitalization opportunities in India, through our engagement with lenders and stressed sponsors. Bank non-performing loans are at an all-time high of about $150 billion in India today.

Over the past year, we've deployed or committed approximately $3 billion of capital alongside institutional partners to acquire five businesses, which we believe have great long-term fundamentals and which are in various stages of onboarding. And today I wanted to spend a little bit of time describing our onboarding process.

When we buy businesses, we seek to enhance their value by generating higher and more sustainable operating and product margins, which result in higher and less variable cash flows. Much of this is identified prior to the acquisition.

We spend time developing a comprehensive operational and financial plan tailored to the unique features of the business. We undertake margin analysis, identify contributing versus underperforming products and services and assess business processes with the aim to streamline and remove unnecessary costs.

One of our business improvement mantras is the right people in the right place.

Our 30 plus years of doing what we do as taught us what a difference it makes to have great leaders in the right place and we analyze the organizational structure carefully ensuring we have effective people in critical roles and that the management team is appropriately aligned with our objectives.

The businesses we have acquired over the past year require different levels of attention from us and we are in various stages of bringing them on board. For example our carve-out acquisitions of BRK Ambiental and the Canadian gas stations required us to move quickly to build management teams with the skills and experience to lead them.

In both cases, we secured CEOs early in the process and turned our focus to identifying and retaining high potential individuals from both within and outside of the organizations. At BRK Ambiental, we've instituted timely and detailed financial and operating reporting, set up governance structures and initiated compliance training for our employees.

Rebranding can also be a key component of our onboarding efforts. We expect the rebranding at BRK's highly visible municipal water and sewage facilities in Brazil to be completed by the end of the year. Similarly, rebranding of our Canadian gas stations to the Mobil brand is underway with completion targeted for the middle of next year.

Several of our businesses have growth potential, and we work with our management teams to develop growth strategies. Teekay Offshore, has current growth projects in the late stages of completion, which we expect will contribute to near term cash flow growth, as well as longer term market opportunities.

Greenergy completed a small tuck-in this quarter to augment its growing footprint in Canada and the company continues to plan for growth into Brazil and the Middle East. BRK Ambiental is a scalable growth platform because of the social need in Brazil for water and sewage treatment, as well as a supportive government policy.

Here we plan to surface value from the longer term mature projects and reinvest the capital into high returning, new concessions. The initial business plans, longer term governance and strategies for growth represent a large part of what we do at Brookfield Business Partners to create value.

Looking ahead we remain optimistic, as we believe that business conditions particularly for our industrial operations segment are very positive, in addition we're well positioned to enhance the scale and global diversity of Brookfield Business Partners as we benefit from a combination of being able to source attractive acquisitions and add value post acquisition.

Thank you for joining us today. And with that, I'll turn it back to the operator who will take questions..

Thank you. [Operator Instructions] The first question is from Nick Stogdill with Credit Suisse. Please go ahead..

Hi. Good morning. If I could just start with the construction services of a multi-part question.

So we are seeing some improvement this quarter versus the last couple of quarters, due you think we can get EBITDA back to the level we saw in 2015, 2016 more to get it there? Second question, you called at the Middle East is that there a broader trend your seeing in that region or just lumpiness in the results? And then lastly on construction, cash, the cash balance in the business looks like it's over 10% of the segment assets, are there any plans to upstream some of that to the corporate level in the near future?.

So Nick, its Cyrus here and I'll leave the cash question to Craig. But, just to answer the first question, I think we've owned this company for 10 years and but for the last year we generated about $100 million in FFO every single year. So we fully expect to get back to that level, it may take a little bit of time, but we fully expect to there.

Your second question was on the Middle East, I believe is that correct?.

Yes, correct.

So, we think you called out the lower activity I guess, I should say?.

Yes. So our backlog in the Middle East is lower than it has been for a little while and particularly on a year-over-year basis it's down. And that's due to couple of reasons; one the residential sector has slowed quite a bit in the Middle East where we operate.

And two, we just weren't successful in winning contracts on a basis that we were comfortable with and there are two parts to that consideration, one is couldn't earn the margins that we needed to and the second is the contractual terms, we're just now, we just weren't able to accept the contractual terms that some of the clients were putting forward.

So that's what's happened in the Middle East..

Thank you.

And then for Craig, I guess on the cash that the, segment level in construction?.

Yes. So in terms of cash flow, I would say probably two things, the first one is that, certainly on a longer term basis we do expect this is the type of business where your cash flow should roughly equal your FFO.

And so certainly to your point on the overall basis, we would expect that to receive cash from this underlying business related to this quarter and small increase in cash that really is just timing.

The cash flow is depending on working capital on each payment of suppliers and trades and others its only they can bounce around, but to answer your question we do expect cash to come from construction of the longer term..

Is there a target level of 5% of assets running like that, you look at or is it just sort of cash needed basis you alternate when it's appropriate?.

Yes. Just when it's available and appropriate and we will look to do it..

Thank you.

And my next question just to going over to GrafTech, at the Investor Day you talked about pricing for Q1 2018 in the 7500 level per metric ton, maybe an update on what you are seeing there and then if you could just talk about the sustainability of the current pricing environment and are you seeing any early signs on the supply side of anything changing?.

Sure, okay I am happy to speak to that. So in short the pricing environment remains very strong today. And there is still a huge shortage of electrode capacity given where demand is today. So we aren't seeing any change there yet. And I think at our Investor Day we told you that we would expect to realize pricing in the order $7500 a ton.

We have no reason to believe that we won't achieve that and again that's a combination of much higher prices we're achieving combined with some lower pricing that was put in place quite some time ago for Q1. But on average it should come out to that number at least.

I will tell you just for your interest and this would be an industry first, we've changed the way the pricing works quite substantially in a couple of ways typically in this industry producers were pricing Q4 for the entire following next year and maybe a little bit into the next following year, into the second year.

In this case, what we've done is we've actually put some tons up for auction, on a shorter term basis and we're getting exceptional high prices and for those who are willing, wanting a longer term relationship we're actually entering into contracts now on a multi-year basis and on a take or pay basis.

So that's the first for the industry and we've had some success in doing that and we would see where it opens out we're right in the heart of contracting as we speak. So we'll have to see where that opens out. But we're feeling pretty good about that..

Okay, thank you. Thanks for the color..

The next question is from Anthony Zicha with Scotiabank..

Yes, hi good morning..

Hi Anthony..

Cyrus relating to GrafTech, are you experiencing any supply shortages of needle coke you mentioned that you are getting to the party purchases.

Is that still the case or as it returned to normal?.

Yes, so we always, we're about 75% Craig, self-supply and needle coke and we buy the rest on the global markets. We saw quite a bit of a shortage during the hurricanes in Texas and our own needle coke facility was impacted for -- I think 16 days.

But, it is back to what I would call normal more or less and needle coke pricing is up a lot just as graphite electrode pricing is up a lot, but there is capacity to meet our production needs..

Okay, great. And there are articles describing the global shortage of the graphite electrodes for the electric arc furnaces. Do you see this as temporary or could this last several years has been some industry talked that it could last several years.

What's your opinion on that Cyrus?.

Look, it's very tough to know what will happen. There is no doubt that this is a cyclical industry, it has ups and downs. We were fortunate to buy it. We think pretty well at the trough of a cycle -- average cycles in this sector tend to be in the seven year range.

So, it wouldn't surprise me if we had a few strong years here ahead of us, but it is tough to know. And over the last several years' capacity has been leaving the system, if the pricing stays very, very strong, we would expect to see new capacity come on. But, it would take a long time to come on..

And not to mention the environmental barriers?.

No question..

One more question, relating to total environment, could you give us a bit more color about your investment there and how will it be categorized, will it be other business services or will it be in construction investment?.

So, this is our second loan that we've made and structured in this manner. And I think, I should just step back for a minute. The broader Brookfield organization has been in the business of making residential loans in India for a long time, several years now. And we actually have a team that's highly experienced doing this.

What's happened today is, the market for financing for developers has dried up, the states bank in India have a very high level of non-performing loans and they need to deal with it and that's caused a -- that's caused financing to dry up in the country.

And what it's created is the opportunity for us to make some chunky loans that will earn really strong returns over a 3, 4, 5 year period and we'd now make two of those and there maybe a couple more.

We don't expect that this situation will last forever in India and when liquidity improves borrowing costs for this new residential development should drop as well. But, that just gives you a little back ground on what's given rise to the opportunity.

And we are continuing to look at others and if we can make them on a secured basis, on a equity like return, we will be quite happy to make these loans..

And last question, relating to BRK Ambiental, could you give us a bit of color on the operating environment in terms of bidding activity? Is everything running according to plan?.

Yes. I will give you a little update on what we have done. As I mentioned we have -- we are underway rebranding the business. We put a new CEO in place and she is building a first class management team within the business. We've instituted a formal water quality program with centralized oversight and data management.

We have rolled out an anti-bribery corruption program across the organization. We are quite sensitive to do that early on in the process given who we bought the business from. And we are focused on those opportunities, there are several a) within existing concessions and b) there are several new opportunities that we see in the marketplace as well.

So, we are looking at all of those growth opportunities. So, so far so good as we expected, it's a great business, industry dynamics are great. And today, we are one of the few water and waste water companies that has capital behind it to execute a growth plan..

Excellent. Well, thank you very much..

[Operator Instructions] We have a follow-up question from Nick Stogdill with Credit Suisse. Please go ahead..

Hi.

Just one on the business services segment, could you provide a bit of color on the realized gain on the investment security in that segment, was an opportunity to kind of sell, I know in that gain you guys were small, just curious, how many quarter did you get out there?.

Yes. As you mentioned, it was small -- the net gain at our level was about $2 million. This is similar to what we have done in the past, where we will take small positions and assess the situation in CF, if it ends up going somewhere. In this case, it didn't end up going anywhere and so we end up monetizing for a small gain..

And following on that, I mean you guys have a lot of liquidity still, I know you are busy adjusting some larger acquisitions, are there any opportunities you are seeing in the market across any industries to deploy capital in these sort of investments, smaller things that could build into bigger positions?.

Nick, that's just something we do on an ongoing basis and its all market dependent and situation dependent.

So, we see something under value that make sense for us, you might see us take a position, you may not recall but early in 2016, I think in total we invested something like $400 million, quarter of that roughly would have been BBU share into distressed energy debt at the time.

And we made a lot of money on that position markets were covered and it all turned out great for us. So, if we see those opportunities, we'll certainly take advantage of them, but it's situation specific..

Okay. Thank you..

This concludes the question-and-answer session. I will now hand the call back over to Mr. Madon for closing remarks..

Thanks everyone for joining us this quarter and we will talk to you next quarter. Thank you..

This concludes today's conference call. Thank you for participating and have a pleasant day..