Courtney Burke - VP, IR Craig Laurie - CFO Cyrus Madon - CEO.

Geoffrey Kwan - RBC Capital Markets.

Welcome to the Brookfield Business Partners' L.P. First Quarter 2018 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 Ms. Courtney Burke, Vice President, Investor Relations and Finance. Please go ahead, Ms. Burke..

Thank you, operator and good morning, everyone. Welcome to Brookfield Business Partners 2018 first quarter conference call. On my call today are Cyrus Madon, our Chief Executive Officer, Craig Laurie, Chief Financial Officer, and Jaspreet Dehl, Managing Director of Finance.

Craig will start off discussing the highlights of our financial and operating results for the quarter and Cyrus will then give an update on the business. After our formal comments, we will turn the call over to the operator and take your question.

At this time, I would like to remind you that as responding to questions and then talking about our growth initiatives and our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially.

For further information on known risk factors, I encourage you to review our filings with the Securities Regulators in Canada and the U.S., which are available on our website. Thank you and I will now turn the call over to Craig..

Thank you, Courtney and good morning, everyone. We began the year with strong results in the first quarter. Company funds from operations or FFO totaled $138 million representing $1.07 per unit before incentive distribution. This compares to $95 million for the same period in 2017.

Net income attributable to unitholders for the quarter was $74 million compared to $66 million in 2017. I will start with our Industrial Segment where our first quarter results improved significantly over Q1 2017 with the exceptional performance at our graphite electrode manufacturing business, GrafTech.

Company FFO in this segment was $98 million up from $79 million last year. GrafTech’s significantly higher contribution in the quarter recorded was a result of stronger spot pricing and new take or pay sales contracts that came into effect in 2018.

The average realized price for the quarter was $10,100 per metric ton, $7,800 per metric ton higher than in the first quarter last year, or an increase of over 300%.

North American Palladium or Canadian Palladium producer also generated strong results this quarter and benefitted from significantly increased Palladium production and pricing over last year. Based on its improved competitive condition, we are reviewing strategic alternatives for this business including a potential sale.

BRK Ambiental Water Treatment distribution operation in Brazil also contributed positively to our results in the first quarter. We have been working on improving capital allocation and operations and re-establishing the company at the preferred partner to municipalities.

The Business Services segment generated company FFO of $8 million in the quarter up from $4 million in 2017. Our results benefitted from the initial contribution from our gaming partnership after we assumed the operations of three Greater Toronto Area gaming facilities in January.

Our Global Facilities Management Business, BGIS, performed well during the quarter and our Financial Advisory Business generated improved results compared to the first quarter of last year.

Results in this segment were partially offset by lower contribution from our real estate services business, due to a slower start to the year at our re-locations company. Our construction services segment contributed $9 million of company FFO in the quarter, compared to negative $3 million in 2017.

We should start to return to more normalized operating results as a few projects with challenges come to an end. In Australia, substantial majority of projects are relatively new and should generate strong margins. In the UK we have a robust pipeline and continue to win new projects at healthy margins.

We are consolidating our business in the Middle East, refocusing it into a smaller, more bespoke business, and we have strengthen our commercial strategy in the region. New business activity continues to be strong. During the quarter we secured over $1 billion of new work.

Most notably the Quay Quarter Tower, a 50 storey, $600 million commercial power development in Sydney; Melbourne Grand, a $200 million residential development; and the third tower at Transit City, a $90 million residential development in Toronto. Our backlog remains close to a record high of $9 billion.

Our energy segment company FFO was $38 million in the quarter compared to $20 million in the first quarter of 2017. Amber, a Western Canadian Energy operation is focused on sustainable cost production and maximize realize pricing through hedging and diversifying its markets.

Our Australian oil and gas venture quadrant continues to benefit from its long-term fixed price customer contracts for natural gas. This quarter the company paid a dividend of $100 million or $9 million to Brookfield Business Partners.

We have now recovered over 80% of our invested capital quadrant through dividends since it started this joint venture in 2015. Teekay Offshore, a provider of marine oilfield services contributed positively to our results this quarter. During the quarter the company completed three growth projects.

We expect these projects to contribute positively to our results through 2018 and our plans to deleverage the company over the next three years. Turning to the balance sheet, in May we increased our revolving unsecured credit facility by a $325 million to an aggregate of $535 million.

This brought our liquidity to approximately $1.7 billion after accounting for our closed and announced transactions as well as the dividend from GrafTech. We will use the liquidity primarily to fund announced transaction and future growth opportunities.

At the corporate level, our facilities are currently undrawn and our intention at this time is not to use corporate debt, except as a bridge for acquisitions or working capital needs. We intend to place longer-term debt at the operating company level. I now pass the call to Cyrus to speak to us strategic and growth initiatives..

Thanks Craig and good morning, everyone. We are happy with the improved performance in all of our segments this quarter. We have stronger fundamentals, greater scale, more diversification compared to a year ago on our business.

In the businesses we recently acquired are contributing to our results and of course we continue to work with the management teams of all our businesses to enhance value.

The largest improvement was in our industrial segment with an exceptional performance at GrafTech and this is the first quarter where our results fully reflected benefit from the contracting and operational initiatives we have implemented at GrafTech over the last two years. As a reminder, we acquired this company in 2015.

BBU share of the equity purchase price was $295 million for 34% stake in the business. We bought this business close to the trough of graphite electrode pricing and while the market was down, our management team reduced the operating cost by over a $100 million and improved productivity.

As markets recovered, our management team negotiated multiyear take or pay agreements for much of GrafTech's production at a weighted average contract price of $9700 per metric ton and that’s over the next five years, and that is also about double historical average pricing.

With those contracts in place, GrafTech successfully raised capital through a debt issuance of $1.5 billion and then IPO on the New York Stock Exchange. GrafTech also issued a note payable of $750 million to us prior to the IPO and will issue a cash dividend this week.

Including this week’s dividend, Brookfield business partners has received $610 million in cash and $259 million note receivable from GrafTech, and all of this compares to our acquisition cost of $295 million less than three years ago.

What is perhaps more remarkable is that the business is worth $7 billion at the IPO price representing a gain of 6.5 times to us, and we continue to own 30% of this business which is worth $1.4 billion at the IPO price, and the price has moved up a little bit since that IPO.

Moving on to our business service segment, our residential real estate brokerage business operates in both the U.S. and Canada through own brokerages and franchise operations. In over the years, we found this business to be remarkably stable. In the U.S., we operated primarily through a joint venture with Berkshire Hathaway HomeServices.

in February, Berkshire Hathaway chose to exercise their option to acquire our one-third interest in this business. We closed this transaction in April and we have received proceeds of approximately $130 million.

As I mentioned, we like this business and under normal circumstances we choose to continue the joint venture; however, this arrangement was made several years ago in the context of a broader, very successful real estate services initiative, and I will try to provide a little bit of color on that in our long history in this segment.

After holding a controlling interest in Canadian real estate broker Royal LePage for more than 10 years, we privatized that company in 1999. We then transition the operation to a franchise model which reduced the risk, and we subsequently monetize most of the business by taking a public and then selling its commercial brokerage operations.

In 2006, the residential real estate market in North America entered a multiyear decline at which point we executed series of highly complementary acquisitions of U.S. franchise and brokerage companies, including GMAC and Prudential real estate and relocation.

We tripled the size of our real estate services business through the bottom of the housing cycle. In 2012, we sold our U.S. franchise business to Berkshire Hathaway for $119 million in cash and a one-third ownership of the combine Brookfield Berkshire U.S. operations.

This transaction returned almost all of the cash we invested through the downturn and provided us with an expanded global employee relocation business, as well as a one-third interest in the U.S. operations.

In total we have invested $225 million in the real estate services and based on what we believe the remaining operations are worth, we generated an IRR of more than 25% over a 20-year period.

With our Berkshire partnership successfully transitioned, we now have the opportunity to grow this business in the U.S., much like we did in facilities management when our Johnson Controls partnership ended. I am now going to move on to -- I will give you an update on our strategic initiatives where we made clear progress.

We closed our transaction with the Ontario Lottery and Gaming Corporation to operate three Toronto area gaming facilities and successfully transition the operations of the sites to our new partnership. We have secured about $1 billion, Canadian dollars, of financing to transform these sites into attractive premier entertainment destinations.

In April, we received approval from the city to redevelop Woodbine, our largest site, into a multiuse development, with enhance gaming hotels, a performance venue, restaurants, and retail shopping. At our two smaller segments, plans and approvals are more advance and we expect our first redevelopment to be completed by the end of the year.

Following our announcement in January 2018 of our agreement to acquire Westinghouse for a purchase price of about $4.6 billion, we been working through the regulatory approval process and bankruptcy court procedures necessary to close this transaction.

Westinghouse as a reminder is among the world's leading suppliers of infrastructure services to nuclear power-generating facilities, providing engineering maintenance, facilities management, and repair services to its global customer based. Most of its profit is generated from regularly-scheduled services provided under long-term contracts.

Westinghouse has exited its unsuccessful construction business which had forced it to seek bankruptcy protection last year. In March, we received court approval for the amended plan of reorganization, which is a significant milestone and we expect to close during the third quarter.

We are also working to close our acquisition of Schoeller Allibert for a total consideration of €205 million, with the minority interest remaining to be held by the Schoeller family. Brookfield Business Partners will fund approximately €40 million of this transactional closing.

As one of Europe's largest manufactures of returnable plastic packaging systems, Schoeller Allibert has a strong competitive position serving a diverse customer base and we believe our global platform will help drive value and grow the business. We expect to close this acquisition during the second quarter.

In closing, we have had very successful first quarter. We are very pleased with the performance of our operations as well as the progress we have made on our strategic initiatives. Thanks very much for joining us today and with that I will turn it back to the operator for questions. .

[Operator Instructions] Your first question comes from Geoff Kwan of RBC Capital Markets. Your line is open..

Hi, good morning.

The first question I had was the increase in the credit facility I have and I know you have mentioned that its undrawn, but just was wondering what the thought process around increasing it, given liquidity seems to be quite good right now and even I would say fine in the context of alternating some of that for the Westinghouse transaction..

Good morning, Geoff, this is Craig. I mean, to your point, we obviously did have a strong liquidity position and this only just frankly makes it stronger and a better position, thus to continue to grow the company and make acquisitions.

As we have always talked about, it’s not our intention to have corporate debt for anything other than the acquisitions or working capital needs. We tend to put the actual debt within the operating companies, but it just puts us in a much stronger position..

Okay, and the interest drawn on the Westinghouse side, you have talked about willing to commit up to 500 million, do you have any update in terms of what might get syndicated inthird-party investors?.

We are still working through that, Jeff, so we don't have a definitive update for it yet..

And the second, maybe ask you a couple of questions on the GTA Bundle. I think right now is that the process is working through those call phase zero.

If I remember correctly, Woodbine’s got about 3000 slots and no tables; with this phase zero development, do you have information on what is going to be added in terms of slots and/or tables, while you do the bigger redevelopment?.

Yes, so at Woodbine specifically and our plan is to add an additional 1000 slots in a 100-table games, and so when it's finished it would have up to 5000 slots and 400 tables..

I am sorry, the 5000 and the 400 is after the bigger redevelopment is done, correct?.

That would be upon completion of the entire redevelopment, and what's happening Jeff is there is, I call it, an interim stage as well, an interim expansion and development that's going on now within the existing venue, and that would add an additional 1,000 slots and a 100-table games, and when the full expansion is completed, it would be up to 5,000 slots and 400-table games.

That compares, as you rightly said, 3,000 slots today and no table games..

Got it, thanks. And then the other question I had on the bundle was, I think Toronto City Council Fillings kind of suggested to mention this kind of phase zero should be done by Q3 ’18.

I just wanted to consent like is that, and within that time if it is accurate, is that something where its take by the end of September or is it something that might be August or some other timing potential there?.

Yes, I cannot tell you specifically other than that’s our understanding is what you guessed at..

Okay, so I believe that the plan is at least the end of September, which shall be the intent. Okay.

Maybe if I can ask one last question is just, if you can talk about BRK, there is some progress in terms of since the acquisition, any sort of new concessions, expanding current concessions, and anything else you think is actually relevant to kind of talk about in terms of a progress update on that investments.

I will admit, it is a little bit tougher from me as Portuguese is not my first language..

Yes, so first of all operationally we have made enormous progress at BRK. We have decentralized a lot of the operations that were previously de-centralized. We have changed virtually the entire senior management team, really brought a lot of discipline to capital allocation, and we are very happy with our progress.

At growth opportunities, we are now turning our attention to that, we are starting to see – starting to look at several opportunities. We will pursue one or two or three of them, you know, if we can find the right value there.

Perhaps what’s more interesting is just more broadly in the country, the NDS is helping manage a process whereby many state water companies will be privatized over the next several years.

So that’s a longer-term initiative that's happening in the country, but it's very much in line with our thesis here that this is a great vehicle in a growth platform and a growth industry in that country..

Okay. Perfect, thank you..

[Operator Instructions] There are no further questions at this time. I will return the call to our presenters..

Thanks very much and look forward to speaking to you next quarter..

This concludes today’s conference call. You may now disconnect..