Adjusted EBITDA: $591 million for Q1 2025, up from $544 million in the prior period. Adjusted EFO: $345 million, including a $114 million net gain from the sale of offshore oil services shuttle tanker operation and $34 million in withholding tax expense. Industrial Segment EBITDA: $304 million, including $72 million of tax benefits and contributions from a newly acquired electric heat tracing manufacturer. Business Service Segment EBITDA: $213 million, an increase from $205 million in 2024. Infrastructure Services Segment EBITDA: $104 million, down from $143 million in the same quarter last year. Liquidity: Approximately $2.3 billion at the corporate level. Share Repurchase Program: $140 million spent, buying back nearly 6 million units and shares as part of a $250 million program.

Warning! GuruFocus has detected 7 Warning Signs with BBU.

Release Date: May 02, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Brookfield Business Partners LP (NYSE:BBU) generated over $1.5 billion from capital recycling initiatives and committed $370 million to acquire two market-leading industrial businesses. The company significantly reduced corporate borrowings and repurchased nearly 6 million units and shares, returning $140 million to shareholders. BBU's strategy focuses on owning market-leading businesses and enhancing their performance and cash flows, which has historically compounded value through uncertain periods. The company has a strong global presence with over 30 dedicated operating professionals, allowing quick response to evolving global operating environments. BBU's liquidity stands at approximately $2.3 billion, providing flexibility for capital allocation, including buybacks and new investments.

Negative Points

Market fluctuations and potential global growth downturns pose risks, and BBU acknowledges that its businesses won't be entirely insulated from these impacts. Tariffs and trade policy changes could affect cash flows, although BBU anticipates manageable impacts due to its regional sourcing and manufacturing strategies. The Infrastructure Services segment saw a decline in adjusted EBITDA due to the sale of offshore oil services and weak market conditions in work access services. Interest rates in Brazil have impacted the interest costs in BBU's Unidas business, affecting economic free cash flow (EFO). The company is preparing for a more uncertain outlook over the next 12 to 18 months due to potential near-term disruptions from US trade policy changes.

Story Continues

Q & A Highlights

Q: Can you quantify the impact of tariffs on DexKo's EBITDA and how competitors are affected? A: Adrian Letts, Managing Partner, Private Equity: Performance in Q1 was in line with expectations, with some recovery signs in North America. The business has managed costs well, improving margins despite a down market. Tariffs will impact competitors, but DexKo is well-positioned to manage through this.

Q: What is the status of Clarios' 45X tax filing and any policy changes affecting it? A: Jaspreet Dehl, CFO: There is no change in our views on the tax credit. Clarios filed its 2024 tax return in January, and it's being processed normally. We expect to receive the tax benefits from the 2024 return soon.

Q: Could you elaborate on plans to return capital to shareholders, possibly through a larger share buyback program? A: Anuj Ranjan, CEO: We continuously look for monetization opportunities. We've returned $10 billion over two years, and we have options for further monetizations. We plan to renew our buyback program in August, balancing deleveraging, returning capital, and new investments.

Q: Can you provide more context on the realignment at Scientific Games and its value enhancement? A: Adrian Letts, Managing Partner, Private Equity: We're investing in digital, aiming to digitize the $100 billion lottery ecosystem. We've deployed innovative technologies and appointed a new Head of Digital to accelerate growth, which we believe will significantly enhance EBITDA.

Q: Will BBU participate in the Barclays payments business investment, and what is the investment pipeline in the payment sector? A: Anuj Ranjan, CEO: Yes, BBU will participate. Barclays aligns with our strategy in financial infrastructure, where we see opportunities to transform businesses. We've successfully done this with Magneti and Network, and we plan to apply similar strategies with Barclays.

Q: What is the status of Schoeller Allibert's merger with IPL, and does it provide an exit for Brookfield and BBU? A: Adrian Letts, Managing Partner, Private Equity: The merger creates a sustainable packaging producer at scale. The transaction doesn't require additional funding from BBU, and we expect it to close in Q3. It presents a significant value creation opportunity.

Q: How is customer churn at CDK, and what are the impacts on business performance? A: Jaspreet Dehl, CFO: Year-over-year performance is lower due to technology investments. Churn is higher among single-product customers, but stabilizing among core DMS customers. Commercial actions and contract extensions are mitigating churn impacts.

Q: Can you update us on Unidas' performance and any macro impacts? A: Jaspreet Dehl, CFO: Unidas is performing well, with stable fleet management contracts and ongoing transformation activities. While interest rates in Brazil impact costs, the business remains free cash flow positive, and we're optimistic about its long-term prospects.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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