Brookfield Business Partners L.P. (NYSE:BBU) Q3 2019 Earnings Conference Call Transcript

Nov 07, 2019 • 11:00 am ET

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Brookfield Business Partners L.P. (NYSE:BBU) Q3 2019 Earnings Conference Call Transcript

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Operator
Operator

Welcome to the Brookfield Business Partners Third Quarter 2019 Results Conference Call and Webcast. [Operator Instructions].

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

Executive
Jaspreet Dehl

Thank you operator and good morning everyone. Welcome to Brookfield Business Partners' 2019 Third Quarter Conference Call. Before we begin I'd like 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 I encourage you to review our filings with the securities regulators in Canada and the U.S. which are available on our website. I'll pass the call over to Cyrus to provide an update on our strategic initiatives. After which I will review our financial results for the third quarter. We will then be available to take your questions.

I'll now pass the call over to Cyrus.

Executive
Cyrus Madon

Thanks Jaspreet. Good morning everyone. Thanks for joining us today. We're very pleased to report we had a strong quarter from an operating perspective and we also progressed many strategic initiatives. We announced that we're acquiring control of Genworth Canada and an interest in BrandSafway as well as the common equity interest in Teekay Offshore that we don't already own. We also announced the sale of North American Palladium or NAP which we expect to close by the end of the year. And I thought I'd provide you with a little bit of overview on each of these transactions starting with the sale of NAP our palladium producer. We acquired NAP in 2015. We worked with management over the last few years to transform this business which included implementing a new underground mining method and improving mill throughput. As a result palladium production has increased by more than 40%.

At the same time, market demand for palladium increased which resulted in NEP generating increasingly robots cash flows, allowing it to pay down debt and increase its dividend. The company's improved performance created an opportunity for us to monetize the business an attractive return, The sale will generate $130 million of net proceeds for BBU which when combined with distributions we've already received equates to about 3.3x our original invested capital. As I mentioned recently at our Investor Day when we sell a mature business like NAP it isn't because we don't believe in the company anymore it's because we've done our job and we see better risk-adjusted returns elsewhere. We currently have 2 great opportunities to invest that capital and we're working on closing these transactions. The first is Genworth Canada where we are acquiring a 57% controlling interest for $1.8 billion which is about equivalent to its tangible book value. BBU has committed to invest up to $700 million. Genworth is Canada's largest private mortgage insurer that provides mortgage default insurance to banks and other mortgage lenders.

We think this