Brookfield's $12.5 billion of carry has spent years almost arriving.
Brookfield's release is headlined 15% earnings growth. Consolidated net income fell 33%. Between the two sits $12.5 billion of unrealised carry, of which the firm converted $121 million after selling $40 billion of assets.
Two profit numbers came out of Brookfield Corporation this morning. Only one of them made the headline.
The release is titled Brookfield Corporation Reports 15% Increase in Earnings. The 15% refers to distributable earnings before realisations per share, which rose to $0.61 from $0.53. On the other measure, the one prepared under IFRS and approved by the board, consolidated net income for the quarter was $703 million against $1,055 million a year earlier. Down a third. Both numbers sit in the same document, a few paragraphs apart.
To be fair to Brookfield, the fall is concentrated in interests it does not own. Net income attributable to Brookfield shareholders actually rose, to $364 million from $272 million, because non-controlling interests absorbed most of the decline. That still leaves diluted earnings of $0.14 a share against distributable earnings of $0.66. Investors are being asked to value the company on a figure roughly five times the one the accounts produce.
The bridge between them is worth seeing at full size. Getting from $703 million of net income to $1,427 million of distributable earnings before realisations means adding back $2,711 million of depreciation and amortisation, $1,029 million of equity accounted fair value changes and $262 million of other fair value moves, then subtracting $3,144 million for non-controlling interests. Over the last twelve months the depreciation addback alone is $10.7 billion. This is not net income with a tidy adjustment on top. It is a different number assembled from different parts, and Brookfield has a better case than most for making it, because depreciating a hydro dam on a forty year schedule tells you very little about the cash it produced this quarter.
