Brookfield Business Partners posts record EBITDA in Q4 By

Brookfield Business Partners posts record EBITDA in Q4 By

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Brookfield Business Partners (NYSE:) has reported a robust financial performance for the fourth quarter of 2023, achieving a record full-year adjusted EBITDA of $2.5 billion, which marks an 11% increase from the previous year. This growth has been attributed to improved performance across its segments and recent acquisitions. The company has also focused on strengthening its capital position, generating over $2 billion from capital recycling initiatives, which have been used to reduce corporate borrowings. BBU’s strategic plans include monetizing larger-scale businesses through transactions and IPOs, with a particular emphasis on Clarios, their leading low-voltage battery provider, which is preparing for a potential IPO later in the year.

Key Takeaways

  • Brookfield Business Partners recorded an 11% increase in adjusted EBITDA to $2.5 billion for the full year.
  • The company successfully generated over $2 billion from capital recycling, reducing corporate debt.
  • BBU plans to monetize larger businesses and is preparing for a potential IPO of Clarios.
  • The “Fabulous 5” businesses contributed significantly with EBITDA growth exceeding 10% and margins above 25%.
  • BBU believes its unit price does not reflect its fundamental value and anticipates benefits from a potential decline in interest rates.
  • The company has a strong liquidity position, with $2.1 billion available and a balanced approach to capital allocation.

Company Outlook

  • BBU anticipates opportunities in distressed situations and plans to be selective in new investments.
  • The company is focusing on upgrading technology and incorporating AI at CDK.
  • Organic growth is expected to continue for the “Fab 5” and other segments of the business.
  • Sagen is in a position to generate cash for distributions to BBU.

Bearish Highlights

  • The unit price of BBU is perceived to be disconnected from the company’s fundamental value.
  • Monetization efforts and IPO timing may be influenced by market conditions.

Bullish Highlights

  • Clarios achieved record performance in 2023 with expectations of significant growth in advanced battery volumes by 2028.
  • BRK Ambiental is progressing well with its efficiency program and has potential for further improvements.


  • There were no specific financial misses reported in the earnings call.

Q&A Highlights

  • The company discussed various capital allocation options, including M&A, deleveraging, and cash distributions to BBU.
  • BBU is considering a smaller-scale IPO for Clarios to focus on deleveraging the business.
  • Free cash flow stands at approximately $500 million, with allocation to be determined based on business needs and market conditions.
  • The CEO concluded the call with thanks and an optimistic outlook for the future.

In conclusion, Brookfield Business Partners’ solid financial results and strategic initiatives indicate a strong position as they move into the next quarter, with a focus on capitalizing on market opportunities and enhancing shareholder value.

InvestingPro Insights

Brookfield Business Partners’ recent financial achievements and strategic maneuvers are a testament to the company’s adaptability and forward-thinking approach. To provide further context to BBU’s current financial landscape, InvestingPro offers some key insights and data points.

InvestingPro Data indicates that BBU has a market capitalization of $4.94 billion, which underscores its significant presence in the market. Despite a challenging environment, the company’s revenue for the last twelve months as of Q3 2023 stands at $56.3 billion, with a slight revenue growth of 0.14%. This is indicative of the company’s resilience in generating income amidst market fluctuations. Additionally, BBU’s gross profit margin during the same period is reported at 9.3%, which reflects the company’s efficiency in managing its cost of goods sold relative to its revenue.

An InvestingPro Tip worth noting is that BBU is expected to see net income growth this year. This projection aligns with the company’s strategic focus on monetizing larger-scale businesses and preparing for the potential IPO of Clarios. Another InvestingPro Tip points out that BBU has maintained dividend payments for 8 consecutive years, demonstrating a commitment to providing shareholder returns even through varying economic cycles.

For readers looking to delve deeper into the financial intricacies of Brookfield Business Partners, InvestingPro offers additional insights. There are over 10 additional InvestingPro Tips available for BBU at, including analysis on the company’s debt burden, valuation implications, and profitability forecasts.

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Full transcript – Brookfield Business Partners LP (BBU) Q4 2023:

Operator: Welcome to the Brookfield Business Partners Fourth Quarter 2023 Results Conference Call and Webcast [Operator Instructions]. The conference is being recorded [Operator Instructions]. Now, I’d like to turn the conference over to Alan Fleming, Head of Investor Relations. Please go ahead, Mr. Fleming.

Alan Fleming: Thank you, operator, and good morning. Before we begin, I’d like to remind you that in responding to questions and 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., both of which are available on our website. We’ll begin the call today with a few opening remarks from Cyrus Madon, our Chief Executive Chairman; Anuj Ranjan, our Chief Executive Officer, will then provide an update on our business performance and strategic initiatives. Anuj will then turn the call over to Denis Turcotte, our Chief Operating Officer, to share an update on operating environment and progress at Clarios. Jaspreet Dehl, our Chief Financial Officer, will finish with a discussion of our financial results. The team will then be available to take your questions. I’d like to now pass the call over to Cyrus.

Cyrus Madon: Thank you, Alan, and good morning, everyone. Thanks very much for joining us on the call today. We’ve been very busy over the last few months. We had a super strong fourth quarter capped off a great year for our business, and I’m very pleased to inform you that our Board of Directors has appointed Anuj, Chief Executive Officer of Brookfield Business Partners. Anuj and I have worked together for nearly 20 years. He’s held a number of leadership roles across Brookfield. He’s been instrumental in many of Brookfield’s activities over that time. And since being appointed President of BBU, nearly two years ago, he’s taken on increasing responsibility managing our day-to-day operations. I can tell you without any hesitation that Anuj is an exceptional investor and I’m confident he will seamlessly transition into the CEO role. I have joined the Board in the capacity of Executive Chairman, where I will continue to remain fully active in the business. I will remain active in our investment process, strategy and supporting Anuj in the broader management team, including maintaining my role on our investment committee. These changes provide a strong foundation for our future. And while you should expect our business to continue to evolve, the guiding principles underpinning our track record of success and strong performance will remain unchanged. With that, I’d like to turn it over to our CEO, Anuj Ranjan.

Anuj Ranjan: Thank you, Cyrus, and good morning, everyone. I’m excited to be here today and join you on my first call as CEO. I’ve had the opportunity to meet many of you over the past years, and I look forward to spending more time with all of our investors. I also want to take this opportunity to thank you for your continued support and interest in our business. We had a very successful 2023. BBU achieved record full year adjusted EBITDA of $2.5 billion, and our adjusted EBITDA margins improved to 19%. These are great results that reflect the quality of our businesses and our hands-on approach to operationally improving them, both of which continue to be our key differentiators. Apart from strong financial results, we generated more than $2 billion of proceeds from our capital recycling initiatives, which has meaningfully reduced our corporate borrowings and further strengthened our capital position. We made a real focused effort to sell a number of our smaller businesses and we are now coming into a cycle of monetizing our larger investments. As you know, we completed the sale of Westinghouse last November, and we are in the process of positioning a few other large businesses for sale subject to market conditions. On that note, our largest businesses are performing exceptionally well. Adjusted EBITDA of our five largest companies, which we call the Fabulous 5, increased by more than 10% over the prior year and the margins exceeded 25%. And together, these Fabulous 5 make up the majority of our earnings and cash flow, and each is an incredible business in its own right. They are market leaders and provide mission-critical products and services to their customers, which cannot be easily replaced. This means they have real competitive advantages, strong pricing power and resilient margins. What’s amazing is that great businesses like these continue to have strong access to capital even in difficult financing markets like today. It truly is a tale of two cities. For example, over the past year, we’ve refinanced more than $17 billion of nonrecourse borrowings in our businesses and also extended their duration with no increase to our overall cost of debt. As the earnings of our business increase, we should be able to prudently increase their borrowing capacity and possibly generate even more proceeds for BBU. While I’m thrilled with our performance, the trading price of our units has been materially disconnected from their fundamental value ever since central banks began tightening interest rates in early 2022. In a sense, our unit price has effectively become inversely correlated with U.S. Treasury rates. And despite increasing 60% from the lows last year, our units still trade at less than 8.5x EBITDA, which compares to the S&P 500 at 14x or businesses that generate similar margins to our trading at 15x. We believe rates have peaked as central banks have signaled an end to the tightening cycle. Over time, as interest rates decline, BBU should benefit in three ways. First, transaction and IPO activity should create opportunities for us to monetize our larger-scale businesses and generate additional liquidity. Second, all else equal, even a 100 basis point decline in base rates should result in a $15 million improvement to our annual cash flow. And third, investors should resume value in our units on a fundamental basis which should materially improve our trading performance. Over the last five years, we’ve invested about $6 billion of capital to acquire a number of high-quality businesses. And today, the quality of our earnings is the best in our history. The prospect for further value creation is strong as we continue to execute our business plans to improve performance and cash flow. When you take all of this together, this provides a great entry point for BBU. I’ll now pass the call over to Denis.

Denis Turcotte: Thanks, Anuj. I thought I’d begin with a few comments on the global operating environment and then provide an update on our progress at Clarios. Starting with the global operating environment like many, we’ve dealt with a number of headwinds over the past year, but with a few exceptions, volumes at our operations have held up well. We’ve also made progress passing through higher cost in a measured way to support our margin performance. To date, many elements that define the cost structures of our businesses have reset lower or are trending toward long-term norms. That said, global labor markets remain tight in certain areas. We’re also keeping a close eye on a recent geopolitical tension in the Red Sea, which has had a direct impact on ocean freight and container rates as well as certain commodities, including oil. At this point, we have not experienced material disruption to our overall operations. We’re working closely with all our management teams to respond to rapidly changing conditions in the region and to mitigate impacts caused by delays in rerouting shipments of components and finished goods. Turning to Clarios, as many of you know, Clarios is the world’s leading provider of low voltage batteries powering one in three vehicles globally. It’s the only true global player in the market with unmatched scale and geographic reach. About 80% of its profitability is generated from the high-margin resilient aftermarket. The business achieved a record performance in calendar year 2023 and is off to a good start in 2024 with a plan to exceed $2 billion in EBITDA in the near term. Just as importantly, the business generates significant free cash flow each year. In 2023, Clarios repaid more than $850 million of debt bringing its net debt-to-EBITDA leverage ratio down to less than 4.5x compared to 6.5 when we acquired it. It’s important to remember that every single car, whether a full battery electric, hybrid, start-stop, or internal combustion engine requires a low-voltage battery like the ones Clarios produces. Last year, the business was awarded over 40 new electric vehicle platforms and is nearly halfway toward achieving its reasonably increased goal of partnering on 300 electric vehicle platforms by 2027. The shift in automotive electrification is driving increased demand for advanced batteries, which are the low-voltage battery of choice for nearly every electric vehicle manufacturer. In 2023, 29% of Clarios’ units sold were advanced batteries, which is up nearly threefold from 10% of its volumes in 2015. By 2028, the business expects about 50% of its volumes will be advanced batteries. This is a meaningful tailwind for Clarios, given advanced batteries are technologically superior to standard low voltage batteries and 2x as profitable. Given some auto manufacturers are looking for low-voltage lithium-ion solutions, Clarios has invested in development to become a leader in this space with an application on multiple global platforms. Leveraging its global capabilities and 15-plus years of lithium-ion software and systems expertise to work with OEMs to help meet their future requirements. Apart from growth, our team is continuing to work closely with management to advance our ongoing operational transformation plans. We have made meaningful progress on improving our overall equipment effectiveness driven by a focus on attracting and retaining operational talent, increasing our uptime through implementation of predictive and preventive maintenance practices and selective capital investments in state-of-the-art manufacturing technology, in particular, focused on increasing AGM capacity and modernizing the entire manufacturing system while doing so. These enhancements have contributed to improved manufacturing throughput, better inventory management and reduction of in-process and finished goods scrap. In addition, Clarios is revamping its sales, inventory and operations planning process to better account for changing patterns and customer ordering practices and higher on-time delivery expectations. As a result, customers are experiencing improved service levels as the business continues to focus on enhancing its commercial excellence by aligning its strategy and organization to deliver value-added solutions that meet customer needs. Overall, we’re very pleased with the progress achieved at Clarios to date and have uncovered a range of opportunities to increase the EBITDA and cash flow from this point forward. Given the planned deleveraging and accelerated growth, the business will be ready for a potential public offering later this year. Thank you, and I’ll now hand it over to Jaspreet for a review of our financial performance.

Jaspreet Dehl: Thanks, Denis, and good morning, everyone. We generated strong financial results in 2023. Adjusted EBITDA increased to $2.5 billion, an increase of 11% compared to the prior year driven by increased performance of operations on a same-store basis and contributions from recent acquisitions. Adjusted EFO was $2.9 billion and included $2 billion of after-tax net gains on sales during the year. Turning to our segment performance. Business Services generated full year EBITDA of $900 million compared to $641 million in 2022. Adjusted EFO was $636 million, an increase from $427 million in 2022. Results benefited from increased contributions from our dealer software and technology services operations and strong performance at our residential mortgage insurer. During the year, our residential mortgage insurer generated $140 million of distributions at our share and has now returned 75% of the initial equity that we invested in the business less than four years ago. Moving to our Infrastructure segment, we generated full year adjusted EBITDA of $853 million. Adjusted EFO was $2.1 billion and included a $1.7 billion net gain on the sale of our Nuclear Technology Services operations. Increased contribution from lottery services and resilient performance at our work access services operation benefited results during the year. Finally, our Industrial segment generated full year adjusted EBITDA of $855 million compared to $879 million in 2022. Record results at our advanced energy storage operation, driven by increased sales of higher-margin advanced batteries was offset by reduced contributions from graphite electrode operations and Western Canadian energy-related operations during the year. Adjusted EFO of $492 million included net gains of $148 million during the year. Before wrapping up, I wanted to spend a minute discussing our balance sheet and capital position. We ended the year with $2.1 billion of liquidity at the corporate level. After accounting for the impact of our known funding commitments, and proceeds from recent monetization’s, corporate liquidity is $1.5 billion, which provides us with ample capacity to support our operations and growth. As Anuj mentioned earlier, we completed the sale of Westinghouse in November. Proceeds from the sale were used to redeem $750 million of preferred securities held by Brookfield Corporation and repay $580 million of borrowings on our corporate credit facility. Ongoing distributions and future sales of businesses, several of which could be meaningful should reduce borrowings drawn at the corporate level over time. As a reminder, nearly all our large operations are financed with long-term maturities that have limited or no financial maintenance covenants and no recourse to our business or other operations. We have no significant maturities coming due over the next 12 months. With the majority of our refinancing needs behind us, we have flexibility to opportunistically manage our maturities over the next few years. With that, I’d like to close our comments and turn the call back over to the operator for questions.

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Geoffrey Kwan with RBC Capital Markets.

Geoffrey Kwan: Hi. Good morning. Just wanted to start out on Clarios. The $850 million of debt that was repaid in 2023, is that a level that you think that you can, be able to deleverage in direction kind of future years in terms of that rough ballpark assuming you don’t have any other uses for the free cash flow? And can you remind me, you’ve talked about with the IPO, like what’s the kind of the target leverage that, you’d like to be at, to be able to look at pursuing a potential monetization?

Jaspreet Dehl: Jeff, it’s Jaspreet. I’ll start and then others can join in. So in terms of the $850 million that we paid down debt, if you think about the business generates $2 billion of EBITDA after interest taxes, maintenance CapEx, free cash flow, is anywhere around $70 million, $100 million annually. And then there’s opportunities for growth CapEx in the business. Denis mentioned some of the investments that we’re making on the AGM lines and increasing kind of, the throughput on our facilities. But I’d say between $500 million to $700 million, depending on what we put allocate growth CapEx, we should be able to deleverage. Last year, there was – we did sell a part of a JV that we had that generated some excess cash, which we used to delever. So, it might have been a little bit higher last year, but between that $500 million to $700 million range. And I think – if you should expect that. And then as we look forward, EBITDA is going to continue to grow, cash flow generation is going to continue to grow. So that free cash flow number is also going to continue to grow.

Geoffrey Kwan: Okay. And sorry, just on the leverage of where you’d like it to be? Yes.

Jaspreet Dehl: Yes. So, we’re sitting at about 4.5 times now. I’d say by the end of September, which is the fiscal year end for Clarios, we expect we’ll be slightly below 4 times. And then, I’d say with an IPO and proceeds kind of 3.5 times, maybe a little bit lower, but plus or minus 3.5 times.

Geoffrey Kwan: Okay. No, that’s helpful. On the monetization side, it sounds like conditions are getting better and you’re looking to monetize some of your assets. My question was just on the bid-ask spreads. Are you seeing any movement there in the markets that could help facilitate it? Or are the spreads maybe still relatively wide in terms of sellers’ asking prices?

Anuj Ranjan: Yes, thanks. It’s Anuj here. I’ll take that one. So, it feels like interest rates have peaked. The market has recognized that and seems to be pricing in a declining rate environment, which is going to be pretty enabling for both valuations and the financing that’s available for them. This will be pretty good for monetization’s. We’re seeing that bid-ask spread, I’d say, start to narrow. And I think that depending – how the year goes with our continued performance, particularly for businesses that generate a lot of cash, like the ones we own, we should be able to get a very good valuation.

Geoffrey Kwan: Okay. Maybe if I can ask one last question is, I think at different points in time, you guys have talked about there may be certain businesses you really like, you might want to hold it longer than your kind of typical hold period. As we’re looking to maybe enter a new monetization cycle, when you take a look at your portfolio and maybe some of your large investments. Are there some that you really like that you may want to hold on and may not necessarily monetize unless you get some fantastic offer?

Jaspreet Dehl: Geoff, I’ll take that. It’s Jaspreet and then pass it on to others. Look, our business model, we want to buy for value. We want to fix the operations that, we buy and eventually recycle capital and reinvest, and earn those kind of high-risk adjusted returns. Yes, every once in a while, you’ll come across the business that is – it’s an amazing business, generates a lot of free cash flow and can be helpful, just broadly for reinvestment purposes as well as providing that stable base of cash for BBU. I’d say the stage in investment in our residential insurance business, just as an example, we bought that business with a view of having a long-term hold. And you could see us hold that for the long-term. But what I’d say to quote Cyrus and what he used to say, is everything is on sale for the right price. So, I’d say just keep that in mind.

Geoffrey Kwan: Okay. Yes, staging was one, I was thinking about in particular, but that’s very helpful. Thanks Jaspreet.

Operator: Thank you. One moment please for our next question. And our next question comes from the line of Gary Ho with Desjardins Capital Markets.

Gary Ho: Thanks. Good morning. Maybe just sticking with the Clarios here. Thanks for providing that update. So just doing the math here, Jaspreet, the getting from 4 to 3.5 turns, so you’re looking for probably a smaller size IPO roughly $1 billion this time around. And maybe share with us what gives you confidence to be able to succeed, versus kind of the prior IPO? And then just on valuation Anuj, its early read, do you think you’ll be able to get similar valuation, when you tried to IPO this at last time?

Jaspreet Dehl: So maybe I can start, and then I’ll pass it on to Anuj to comment on valuation. So look, I think, we’d want to target an IPO at $1 billion or even smaller, I’d say, Gary, the one of the learnings from the process that we undertook in 2021, was just sizing the right level for the market. What we had tried to do last time around, I think, was a bit too large. So, we’re very cognizant of that. And given kind of the strong performance of the business, both EBITDA growth as well as the cash that, we’ve used to paydown debt. We’re in a much better leverage position, and we don’t need to be that large. So, I’d say $750 million to $1 billion should probably, do it from an IPO perspective. And then I’d say kind of more broadly, some of the questions that were raised around the business. I’d say, the performance of Clarios, has exceeded kind of what we had discussed back then. I think the business has outperformed, pretty much on every metric, whether it’s EBITDA, volume, cash flow generation, there was concern around EV penetration, and the impact on the business. The business has done an exceptional job. We are on over 150 EV platforms today. I think that number was 30 or 40 back when we were trying – when we did the – when we tried to do the IPO in 2021. So, I’d say broadly, across all of the metrics, the business performance has been exceptional. And I think, we’re much, much better positioned today and the business is, in a much better position today. And then I’ll hand it to Anuj to talk to valuation.

Anuj Ranjan: Yes. Thanks, Jaspreet. I think on valuation, first, the markets obviously need to open, and we do expect that to happen ideally in the next – in this year. We won’t give this business away. It’s doing very, very well, as Jaspreet said. The business has fundamentally changed and grown. As Jaspreet indicated, we’re now in a number of EV platforms. And so it’s a different business, we’d be taking to market this year than the last time. And I can say we would look for a fair valuation multiple in the context of what the business is today, and also the market environment at the time.

Gary Ho: Okay. That’s very helpful. And Anuj, while I have you here, it was mentioned in your letter to shareholders the, disconnect in your unit price and how undervalued it is versus peers. But then on the other hand, you talked about the number of high-quality assets, or opportunities that may require financing. So, how should we think about capital allocation priorities over the near term?

Anuj Ranjan: Yes, good question. We always maintain a balanced approach. Focus continues to be on deleveraging our balance sheet today and ensuring we have sufficient liquidity. We did touch on in the letter, the distressed investing landscape. And the opportunities we are seeing, which is our pipeline is very robust. But the bar is high, and we continue to be selective. And in some cases, we even, for example, repurchased shares in the past years. So, I think between further share repurchases, new investments in deleveraging, we’ll continue to maintain that sort of balanced approach.

Gary Ho: Okay. Great. And Jaspreet, if I can just sneak in one more, just a clarification question. In your pro forma liquidity of $1.5 billion, there’s a $900 million adjustment for acquisition and investment. Can you remind me what that is for again?

Jaspreet Dehl: Yes, sure. So a number of the acquisitions that we’ve made over the last year, or 18 months, is because we make them alongside Brookfield’s private equity funds, we fund those acquisitions based on timing of capital calls that, come in from the funds. So, we haven’t funded everything, for the recent acquisitions. So in early January, we received a capital call it included part of our funding for CDK and some of the other more recent acquisitions. So that’s what those adjustments are for.

Gary Ho: Okay. Got it, that’s all.

Jaspreet Dehl: Yes, just to be clear, like it doesn’t change where we – the total amount that we said we’ve invested in CDK, but like that remains the same. It’s just kind of the timing of the actual cash going out.

Gary Ho: Okay. Make sense. Okay. Thanks very much.

Operator: Thank you. One moment please for our next question. Our next question comes from the line of Devin Dodge with BMO Capital Markets.

Devin Dodge: Thanks. I wanted to pick up on one of the earlier questions on capital deployment. So, the letter talked about leveraged loans and high-yielding public debt. Are you starting to see distressed situations, to become more near-term opportunities with active discussions? Or is it more about monitoring the situation? And just — maybe more just probably – where are you seeing – where are you most optimistic about capital deployment over the next six to 12 months?

Anuj Ranjan: Sure. It’s Anuj here. I’ll start with that. Hi Devin. We’ve – today, we’re monitoring, and I’d say that it looks like things might become actionable in the medium term. So, I wouldn’t say that there are immediate opportunities coming out of those businesses that, we’re watching, but things are advancing more so than, they have in the past. And this really is a medium-term opportunity.

Devin Dodge: Okay. Thanks for that. Okay. And then I have a question on CDK. Look, a lot of progress that’s already been made. But one of the remaining goals that you’ve mentioned previously is to upgrade the technology stack. Can you help us better understand the focus there? I’m just trying to understand whether it’s improving the existing product, or bolting on new offerings, and if you expect this effort to be done in-house, or via tuck-in M&A?

Denis Turcotte: Yes. We have been very focused on that over the last eight to 10 months, in particular, starting with hiring two new professionals, one on the product development, one on the technology development. In a nutshell, it’s really transforming from a more historic, structural ERP-type model into something that is more advanced, modern, may incorporate some AI. Definitely much easier user interface. That’s all going to be led internally. We feel we’ve built a very strong capability in particular with these two individuals, so are pressing forward on that as we move forward.

Devin Dodge: Okay. Thanks for that. I’ll turn over.

Operator: Thank you. One moment please for our next question. And our next question comes from the line of Jaeme Gloyn with National Bank.

Jaeme Gloyn: Yes. Good morning. First off, congrats Anuj on the appointment and Cyrus on moving to the EC Chair. Just wanted to start off on the Fab 5 EBITDA. I think I heard this correctly, I just want to clarify. The organic growth in EBITDA for the Fab 5 was 10% year-over-year for – versus the prior year period. And would you have at your fingertips the organic growth of the, let’s say, rest of business?

Jaspreet Dehl: Yes. It’s Jaspreet. On a same-store basis, if you look at the entire business, we’re up about 14%. And adjusted for the dispositions that we’ve done. So on a same-store basis, if you look at Q4 last year versus Q4, 2022, it’s about 14%.

Jaeme Gloyn: That was for the Fab 5?

Jaspreet Dehl: No, that’s for the entire business and the Fab 5 was around 10%.

Jaeme Gloyn: Got it. Okay. Great. Shifting to the Sagen business, obviously, a really great year, and still loss ratio is running below average and good enough to provide a distribution up to BBU. Just wondering, if you could provide a little bit more details on the capital position at Sagen, and perhaps what you have forecasted for ’24 and ’25 in terms of what could be potential distribution from that business?

Jaspreet Dehl: Yes. It’s Jaspreet, again. So look, on kind of full cycle basis, Sagen generates circa CAD 500 million to CAD 600 million there of earnings and cash. They need to make sure they have cash within the business, to meet their regulatory requirements. But on average, that’s been the size of distributions that the business has been doing. So, we don’t expect that, that will change in the near term. The capital position within Sagen is extremely strong today. I don’t know the exact numbers, but against my CAD requirement of 165%, I think they’re in the high 175% or 180% even. So, there’s quite a large buffer. There’s significant cash in the business, which allowed us to do the special distribution. So given kind of the broad market dynamics, if interest rates start to trend downwards, we’re seeing housing activity start to pick up a little bit more. I think the loss ratios over the long-term will start to creep up and go back to long-term averages. But the business is very well positioned, and I think should continue to be able to generate cash up for BBU.

Jaeme Gloyn: Okay. Great. Understood. And then carrying that question to other businesses, I recall in the past, we kind of talked about some other businesses that had the potential to deliver some distributions. Are you able to provide any more insight, or clarity on what other businesses might be able to distribute to BBU in the near term?

Jaspreet Dehl: Yes. And look, if you look at our business and adjusted EFO takeoff maintenance CapEx, like across the board, the businesses generate significant free cash flow. And we saw a little bit of pressure last year just with the higher interest rates, but it’s still in that $500 million range of free cash flow that’s generated on a run rate basis. So the question really for us is, what is the best allocation of that capital? If there’s opportunities within the business to do bolt-on M&A, delever within that business, or distribution up to BBU. Like in the case of Sagen, that cash is best distributed up to us, and that’s what we do. So there’s, call it, $500-ish million of run rate free cash flow that could come up from the businesses. And then it’s a bit of a decision on a case-by-case basis of what we do.

Jaeme Gloyn: Okay. Understood. I’ll turn it over there.

Operator: Thank you. One moment please for our next question. And our next question comes from the line of Nik Priebe with CIBC Capital Markets.

Nik Priebe: Okay. Thanks for the question. Just going back to the Clarios IPO. It sounds like you’re contemplating a smaller-scale IPO than what might have been attempted a few years ago. In that context, should we expect both the treasury and its secondary component to an IPO? Or would you consider doing an offering entirely from treasury to help facilitate the accelerated repayment of debt? Just wondering if you’ve given some thought to the composition of that yet?

Jaspreet Dehl: Yes. I’d say our focus right now, Nik is very much in making sure that we delever Clarios, to an appropriate level. This is a phenomenal business, and we want to make sure that it’s set up, to trade well in the market. So, we expect the first – the IPO and the offering, will be primary, and it will be used to delever Clarios.

Nik Priebe: Understood. Okay. And then just around mid-last year, I think you had indicated that BRK Ambiental was in the midst of an efficiency program that was progressing, but might have another six months or so to go. Are you able to just update us on the status there and maybe the outlook for a potential realization event on that investment?

Denis Turcotte: Sure. Things are going – Denis here. Things are going very well at BRK. One of our partners in Brazil has moved in as acting CEO a few quarters back, and he and the team have done a phenomenal job, taking cost out. And frankly, streamlining the business, so it runs much more effectively. In parallel, they focus on concession management, and have done what was originally intended and recirculated certain of the contracts there, in a way where we now have increasing margins. We have EBITDA less CapEx, free cash flow for the first time. And we’re moving in a very positive direction. And frankly, we feel there’s a lot more to be gained there. So, I wouldn’t necessarily just look at the next six months, we see this as a continuing initiative with lots of room for improvement. As far as monetization, again, that all down there, it will be a function of the markets, and it’s hard to predict what will happen.

Nik Priebe: Understood. Okay. Very good. That’s it from me. Thank you.

Operator: Thank you. I will now hand the call back over to CEO, Anuj Ranjan, for any closing remarks.

Anuj Ranjan: Thank you, everyone, for being on the call, and look forward to speaking with you again next quarter.

Operator: Thank you for participating. This concludes today’s program, and you may now disconnect.

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