Welcome to the Brookfield Business Partners' Third Quarter 2018 Results Conference Call and Webcast. As a reminder all participants are in a listen only mode and the conference is bring recorded. After the presentation there will be an opportunity to ask questions. [Operator Instructions].

Now, I'd like to turn the conference over to Jaspreet Dehl, Chief Financial Officer. Please go ahead Ms. Dehl..

Thank you, operator, and good morning everyone. Welcome to Brookfield Business Partners' 2018 Third Quarter Conference Call. Before we begin I get to remind you that in responding to questions and in 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 risks, risk factors I would encourage you to review our filings with the securities regulators in Canada and the US, which are available on our website. I would like to now turn the call over to Cyrus..

Thanks, Jaspreet. In addition to Jaspreet, our Chief Financial Officer on the call, with me today is Peter Gordon, our Chief Operating Officer, as well as Craig Laurie our Management Partner of Capital Markets.

And after my update on the business Jaspreet will be discussing the highlights of our financial results for the quarter and we’ll turn the call back to the operator and we’d be happy to take your questions at that time. We had a very strong quarter financially and very active quarter as well.

We closed our acquisition of Westinghouse this quarter and immediately following the close turned our attention to working with the management team to strengthen this company and enhance its profitability.

If you were not at our Investor Day in September I would encourage you to listen to our webcast where Denis Turcotte, one of our managing partners in our business operations who gave a pretty detailed account of what we are doing at the company today. You can find the webcast on our website under the Events and Presentation section.

We have assembled the Board of Directors who’ve earned deep knowledge to this sector. We have also spent a lot of time with the senior management team getting to know them explaining our approach and our expectations and we are focused and were focused on all aspects of our strategic plan that were in the cost and proving profitability.

Second we are working to enhance the global supply chain and looking closely where can optimize and deliver capabilities while maintaining the leading product quality of Westinghouse is known for. This is an in depth process that will take time.

It involves taking a close look at what products and services are valuable to customers they are relevant risks and returns for the business which is similar to what we did at GrafTech. We're also looking at snew business development initiatives ended by evaluating both on acquisition opportunities.

Our view is that as a linear and more focused organization Westinghouse will be well positioned to create value over the medium-term, and were targeting EBITDA growth of 25% relative to the $440 generated in their last fiscal year.

In August, we sign an agreement to sell Quadrant our, Australian oil and gas company which we expect to close around yearend that is subject to regulatory approvals, which we have not yet received.

Quadrant has been a really successful investment for us and given the company's great performance and recovering commodity price environment, we thought it's the right side to monetize this mature investment and free up capital to invest in the new opportunities.

As a reminder we acquired Quadrant in 2015 and at the time we acquired it the business entered into contracts to sell substantially all of its natural gas under long-term agreements. We work with management to implement improvements in the business particularly in the areas of corporate finance, technology and human resources.

The company embarked on a targeted exploration program and during the third quarter announced the series of significant oil discoveries.

Quadrants generation of robust cash flows that has enabled that you reduce debt and pay dividends to us and we have recovered virtually all of our original capital I think around 95% to 96% through dividends, all-in-all, on closing this transaction we will make three times are invested capital within 3.5 years and the agreement that we have with the purchaser maintains our your future exposure to the upside in quadrants exploration interest.

Our investment team continues to source attractive value-based opportunities across the globe, and we are beginning to focus on technology services.

Knowing the value created in our own portfolio companies from greater automation, we are looking at investments in businesses that provide essential services for the large productivity benefits which are occurring defensible cash flows good organic growth prospects and higher returns on invested capital.

In October, we acquired a controlling interest in Imagine, which is a provider of high-speed fixed wireless broadband in Ireland. High-speed broadband is not widely available in the rural areas of Ireland and demand for the service is strong, as I'm sure any parent of a teenager can readily relate to.

Imagine has an established presence and experience in the country and is poised to rollout its fixed wireless broadband service into rural Ireland which we will help to fund.

This is a value investment where we believe we can ensure earning attractive return and provides us an opportunity to acquire knowledge and expertise in the technology services sector. Well, thank you. And with that Ill given the call -- hand the call back to Jaspreet to talk about our financial results..

Thanks, Cyrus. Our key business partners reported company FFO…reported company FFO for the three months ended September 30, 2018 of 170 million this compares to 46 million generated in the same period last year. Net income attributable to unitholders for the quarter was $93 million compared to $9 million in 2017.

Starting with our industrial segment, we reported company FFO of $76 million, for the third quarter up from $22 million last year. GrafTech's contributed significant increase to our company FFO for the quarter. The company continues to benefit from the multiyear take-or-pay contracts put in place for much of its current production capacity.

In August we realized 230 million of proceeds in the secondary offering and concerned share buyback at the company which bought a realized proceeds to date to 1.1 billion. This compares to our original investment of 295 million just over three years ago. BBUs ownership interest in GrafTech is now 27% valued in the market at approximately $1.4 billion.

This is also the first full quarter of contributions from Schoeller Allibert, our European returnable packaging operations. We are making progress with our integration and operational planning and have appointed a new CEO to lead this effort.

We continue to work closely with the management team to develop a strategic plan and we believe we have an opportunity to improve operational efficiency and to grow the business in commune markets. As Cyrus discussed on August 1st we closed the acquisition of Westinghouse.

We funded 405 million of the 920 million equity purchase price for 44% interest in the business. With the acquisition of Westinghouse we created a new segment called infrastructure services to capture businesses that provides services to infrastructure assets in the key Westinghouse to private plant.

Our new infrastructure services segment contributed 49 million of company FFO in the quarter which represents two months of contribution from Westinghouse. Since the closing the company has performed well.

Results in the quarter were positively impacted by a onetime recovery on the projects partially offset by higher than normal cost associated with our acquisition. The anticipated further impact on cost next quarter has current high cost inventory flow through production.

Moving forward this business will have variability in its quarterly results due to seasonality and the timing of outage cycles as customer plan. Westinghouse generates most of its revenue during the fall and spring when power plants go offline to perform maintenance and replenish the skew.

In addition as maintenance and fuel replenishment at customer plants are carried out on an 18 months cycle they maybe years when more customers go offline guiding higher revenue for the business. This quarter saw a higher than normal number of customers go offline and is considered a large season for the business.

Moving onto our business services segment. We generated company FFO of 26 million in the quarter this compares to 40 million in 2017. This is the first quarter where our business services segment has increased their construction services business. We have presented 2017 on a consistent basis. Our previous year results included our U.S.

brokerage joint venture which we sold in the second quarter this year and current year results reflect a lower contribution from our construction services from our construction and services business. Our construction operations in Australia and UK are performing well and generate a strong results in the quarter.

But as overall construction services is negatively impacted by weak performance in our Middle-East operations. We are working on completing projects in the Middle East and re-focusing the region into a smaller operation.

Our road fuel distribution and marketing business reported softer results that continues to make improvements in key areas of the business. Margins rate impacted by lower volumes in Brazil, lower diesel margin in the UK and competitive pressures at our Canadian gas station.

Also, after quarter end, we signed an agreement to acquire a portfolio of 22 Canadian gas stations with attached convenience stores. We will continue to pursue opportunities to increase the operational scale and diversity of our offerings as we build out this platform. Our gaming operation One Toronto also recorded strong results in the quarter.

We continue to make considerable progress on our plans to develop and expand our three sites. During the quarter we successfully completed an interim expansion and launch table games at Woodbine which is our largest site. Moving on to our Energy segment.

Our Energy segment company FFO was 35 million in the quarter compared to a loss of 5 million in the third quarter of 2017. Our results benefited from the incremental contribution of Teekay Offshore, our provider of marine energy services.

In July, we exercised an option to take a controlling interest of 51% in Teekay Offshore's general partner and are now consolidating this business. Ember Resources, our Western Canadian natural gas operations continues to operate in a very challenging environment with no improvement in near term forward prices in the quarter.

Given the weak pricing environment, we recorded an impairment of property plant and equipment at Ember which is recorded is an expense in net income. Quadrant our Australian energy operation contributed positively to our results and BBU realized dividends proceeds of 9 million in the quarter.

Given the announce sale of the business we have reclassified our key accounted investment in Quadrant as held for sale. Turning to the balance sheet, we continue to be focused on maintaining ample liquidity at BBU, if you think about our business and spin-off we started with the both 250 million of cash and 575 million of lines.

Over the last two years we've generated over 1.6 billion of liquidity through monetization's and distributions from our portfolio companies. We've invested about 1.7 billion in new businesses so our monetization is essentially funded our acquisitions. We were able to build our business without drawing on our credit facility.

We did complete equity offering which increased our overall liquidity. Today we have about 2 billion in liquidity which we believe is sufficient for us to transact as the scale we want to while maintaining a level of liquidity that will allow us to be nimble to take advantage of market opportunity.

Like the last few years there are always one or two mature businesses that we are selling or considering selling. We expect to close the sale of Quadrant hopefully by the end of the year or early next year which will provide us with an additional 125 million of capital and we will likely sell other businesses assuming we can get a great price.

In addition we also may get opportunity to further monetize public securities. All in all we are very confident that we have a high level of liquidity that will allow us to be member to take advantage of even our scale opportunities and grow our business. That concludes my remarks and I'll turn the call back to the operator for questions..

[Operator Instructions] And your first question comes from Alan Fleming from Citi. You’re your line is open..

Cyrus maybe can you talk a little more about the deal pipeline I mean multiples have obviously come down here in the public markets over the last several weeks.

How are you positioning yourself to take advantage of the dislocation and asset prices? And maybe you could you tell your comments around the Imagine communications deal because it does seem like an interesting foothold for you guys as I'm sure you know high speed fiber is fairly fragmented market.

Do you see opportunities to maybe roll up some of those markets and achieve more scale? And could that include opportunities in the US?.

Why don’t I just start generally, we are doing what we've always done and we are seeing more and more opportunities. And the reason is our investment team is growing. We have got 100 investment professionals now, over 100 now. We are in more regions than we have ever been and I would say we are just seeing more opportunity because we are more active.

The scale of our business is growing and that’s all good for more activity. Yes, markets have been choppy in the last month and we will see if that causes any opportunities to shrink out, it might. There are certain sectors that are perceived to be more vulnerable today that may not be so vulnerable in our view.

And we will see if we are able to find something out of that. I think you should assume that we are constantly looking at things and what you don't see are the opportunities but we spent time on and we didn’t get there alternately for various reasons that often we just couldn’t included that we are buying something on that value basis.

So our pipeline is as active as ever. We are seeing some larger-scale things and smaller scale things looking back to imagine, look we think its a great business its a new sector for us.

We found a low risk weight and they have small investments here and we think the returns could be exceptional and for sure as we get comfortable with this business and sector we will look for similar opportunities around the world.

And I think because we are global we do have tremendous advantage being able to deploy that technology around the world..

And as a follow-up maybe you can talk a little bit Westinghouse. I know it was only a partial quarter of results but the margin looked good I think close to 20%. And I know there was maybe a one-time recovery in there on the projects offset by some of the purchase accounting, you talked about some of that purchase accounting flowing through 4Q.

But is kind of mid-teens margin level the right way to think about that business going forward? And then before layering in synergies and synergies would come in on top of that and as you've gotten in the business over the last two months, three months you put out that $135 million synergy target at your Analyst Day, any more kind of confidence in achieving that and timing around it?.

Yes. So look you did have the opportunity here at Denis one of our partners gave the detail around our plan.

But I'd say what's happening right now, a lot of it is accounting related and as for the future I don’t think we can say anything more than we've already said, we gave an indication of where a historical adjusted EBITDA has been where we see the opportunity for improvement I can't say that the vast majority of improvements in our mine is going a come from efficiencies and cost reduction, some revenue growth, but not necessarily from revenue growth.

So that's why we have some confidence in our ability to get there, as for what's happening specifically in the quarter I'll turn it over to Jaspreet..

Maybe what I've just add to part of this comments is that there is seasonality in the business and we do expect some variations quarter-over-quarter and this is really driven by the outage season at our customers and typically spring and fall is kind of when the outage season is and that's when you see the revenues kind of Q2 and Q3.

The other things to highlight is that there is some cyclicality in the business, seasonality year-over-year, because again it's based on the outrage cycle as the customers products and which goes on an 18 months cycle, so this quarter a very strong quarter for the business it's what considered kind of the life season with the number of customers going off-line and as that Alan, there's also a pick up from one-time kind of the project settlement and some additional cost related to our purchase price accounting that flow through..

Your next question comes from Geoffrey Kwan from RBC Capital Markets. Geoff, your line is open..

For such a ways on multiplex you previously had talked about as we entered now into the second half of 20185 we would start to see the results kind of get back to historical. I know you guys have talked about the issues in the Middle East and same-store I guess and wait on the Q3 results.

Just wanted to get a sense on as if is there any sort of update in terms of did half of getting back to historical results on the multiplex side..

Yes, Geoff. I'll give you a little bit of commentary. First I would say we are disappointed in the results I would hope that they would be better but they are most definitely getting better and I'll give you little color around that.

We are pretty well I would now say it's fully recovered from our issues that we have in the past in the UK and Australia whatever they were and were largely on track there, there are still less but we are on track there. But we do have risks continuing in the Middle-East.

If couple of projects there taking long-than we had anticipated they are more challenged than we had originally thought.

We are working through them mainly impacts the balances this year and next year but as we get closer with the completion on the projects they get the risk de-risk because the extension scale of going over budget reducing that the project that's completed.

I will say just to give you a little bit of comfort on our UK and Australia…comfort our UK and all the operations. We did book losses in the Middle East this quarter. So that is masking the strong results we had.

So we are refocusing the Middle East business and we have mentioned before, the business is shrinking we will have a smaller operations in forward way. And these problem projects should be largely completed sometime in 2019..

And then maybe more of a -- the way you are talking about is that maybe like a mid to second half of 2019 or kind of see these issues dissipate and discrete in Australia and UK?.

Yes. That’s right. I think that’s probably right. I wouldn’t want to say specifically because the exact completion timing is a little bit uncertain but I think that’s probably right..

And then on Greenergy, you guys had flagged last quarter this year that we are temporarily reducing the profitability there.

What you saw in the Q3 results and even incrementally for Q4? Are you still comfortable with your view that we should start to see these improvements into beginning of 2019 kind of getting back to that historical or the expectation you have for that business?.

Yes, that’s right. Look we still have some uncertainty in what's happening in business particularly in Brazil. We did mention in the last quarter that there is a scheme put in place by the former government now.

Its schemes basins will be end of this year and we are hoping there will be a change in the regulations that will cause a return to more market based pricing. That’s our hope..

And you touched on the other question I had with respect Brazil election.

The result I think was generally expected but do you have any thoughts and insights on what means for like you have also got the OV leasing business from the BRK standpoint when you might hopefully get the season or traction you get stronger revenue growth out of there?.

So let me -- I'm going to leave the BRK question for Peter, who is very, very close to that business. But I do want to comment on OB Jeff we continue to have this business under contract. What has happened is that founder has been charged with some form of proceedings under some form of police proceedings. We don’t know the detail.

We are not aware of any related issues at the company or with the company's management. We are still very keen on the industry. We are very keen on the business. But we are working through some structures in light of what happened to the founder.

And we can't ultimately get comfortable we will walk away from this transaction but we are hoping we can find a way to make it work. So that’s the comment on OV and I'll turn it over to Peter to talk about BRK..

Peter Gordon here. Look with respect to the election I would say at this time we are optimistic. The President elect has made some positive comments with respect privatizations and the importance of a strong sanitation policy for the country. But it's probably too early to say more.

We have been in Brazil a long time and we remained positive on the long-term prospects but BRK from the long-term prospects with and in respect to the company situation our operational plan remains on track and since closing the transaction in 2017 we've been focused the on senior management team which is now largely complete and we are advancing a broad capital investment plans across 22 municipal concessions that we own and I think you will note that did acquire a small portion this quarter which is have began to see despite some in the political uncertainty that had in the country up until the election..

And your next question comes from Andrew Kowski of Credit Suisse. Andrew, your line is open..

I guess the first question is for Jaspreet and it's just could you provide any granularity or by the biogeography on the backlog of the construction business, the 8 billion as your geographic breakdown of that..

Sure. So the backlog is primarily in our Australia and UK business I think Cyrus had mentioned in his letter that over 85% of the backlog is sourced to geography, the Middle-East is fairly small and then there is small portion in India and Canada as well..

And then just on GrafTech and I'm aware they have a also reported this morning and the call was earlier today but what kind of commentary can you give us about this expected pricing our actual contracts that have been locked into by GrafTech, on graphite electrodes..

Andrew I think it’s best that we don’t comment on that and I would encourage you to listen to their earnings call and their review public materials..

And maybe just shifting gears back to Westinghouse, if we can just maybe dive in a little bit more of the seasonality comments that you both made and just can you rent into a bit more detail So if I just look at quarter I mean there's a partial quarter you said it's very active but as a bit of accounting noise in there if we accept the accounting noise let's call it a 60ish quarter on EBITDA what is the real seasonal impact and what would be how many reactors were done in the quarter versus a less active quarter if you want to put it that way?.

So Andrew just in terms of seasonality I don’t have the exact number but the number of rectores but there is the one in the 18 months outage by quarter and this quarter was a lot more reactors will off-line and that's very typical I think for the business where Q2 and Q3 would see a higher revenues just because of the numbers outages but this quarter was kind of a stronger quarter just as we enter your seasonality as well.

And then we don’t really kind of provide guidance on a quarterly basis in terms of expectation on EBITDA but the business is performing well and we are -- Denis and his team are in there working with the management team on out there operational improvement opportunity..

And then maybe just on the operation…and then maybe just on the operational improvement opportunities and synergies.

Should we expect those more back half of '19 rather? A - Unidentified Company Representative Yes, so I assume that Denis went into quite a bit of detail in terms of what our plans are and what are medium and long-term view is on potential EBITDA that we can achieve in the business.

The company have identified a number of cost savings opportunities and they hadn’t implemented some of them at our acquisition and we are in the process of implementing others. There is a other cost improvement opportunity that we identified when we did our due diligence and review of the business around manufacturing efficiencies procurement.

And those will be implemented and -- so through results overtime..

It’s going to take a little time Andrew, so be patient..

And your next question comes from the line of Geoff Kwan from RBC Capital Markets. Your line is open..

I had a question on the loan to Cardone. Is it something where you are just getting a really good rate or is it maybe potential stress situation? Just wanted to get some color on that as to how you are looking to generate a good return off of that capital deployed..

Geoff as you know from time to time we make loans its something we have done for many, many years and we are in a great position. We have a bunch of excess liquidity sitting in the company.

So we decided to make a couple of loans to Indian department -- Indian apartment developers sometime ago we decided to make this loan to Cardone Industries simply to earn a great deal for I would say short and medium period of time. These aren’t long-term loans. Then we should earn an exceptional risk adjusted return.

So definitely not a distress situation. We are just going to be able to return on a return in sort of our targeted range. That’s all I think..

And then just one last question I had was you merged the construction services with business services. I'm wondering with the segmentation you gave on the income statement and some of the cash hold.

Are you able to give what the Q3 ending cash and debt was on the construction side?.

Yes Geoffrey -- Geoff. So it was -- the cash -- the net cash balance was about 230 million. And we don’t have much -- any long-term debt in this business, a few kind of shorter term payables I think. But it was net about $230 million. And we will include that in the MD&A, so you will see it there..

And there are no further questions at this time. I will turn the call back over to Cyrus Madon for some remarks..

Well. Thanks everyone for joining us. And we look forward to speaking to you next quarter. Thank you..

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