KBR looking to diversify business

KBR Inc., the former Halliburton subsidiary whose work for the U.S. military in Iraq has prompted congressional inquiries, plans to place greater emphasis on domestic industrial construction and other parts of its business, the company's top executive said Thursday.

The Houston-based company also hasn't ruled out potential acquisitions to expand its base, Chairman and Chief Executive Bill Utt said.

Speaking to reporters after KBR's first shareholder meeting, Utt acknowledged the military contractor and engineering/construction outfit was likely to continue to do less work in Iraq as troop levels decrease. KBR provides food, laundry and other support services for U.S. personnel.

As such, KBR will focus on getting back to its roots, Utt said, looking to land more industrial construction and other projects that contributed heavily to its bottom line 20 years ago. Such work accounted for several hundred million dollars a year in revenue in the early 1990s, he said, but had shrunk to less than $100 million a year ago.

"We see an opportunity with all the capital investment that's going on in the U.S., particularly in this Gulf Coast region, for us to re-establish our position as a constructor," Utt said minutes after adjourning the quiet gathering at a resort 30 miles south of Houston.

Before KBR split from Halliburton in April, such shareholder meetings typically attracted 100 or more protesters upset with KBR's war-generated profits and Halliburton's association with Vice President Dick Cheney, who once led the company. Democrats in Congress have claimed KBR has benefited from ties to Cheney and congressional Republicans.

KBR's inaugural gathering drew only about 10 shareholders and no protesters, though security was still extremely tight. And even though Houston-based Halliburton now focuses on its profitable oilfield services operations, about 200 demonstrators held a protest last week as its staff recruited at the University of Wisconsin.

For now, KBR continues to get much of its attention for its work with the military.

The Army said last month it will examine as many as 18,000 contracts awarded over the past four years to support U.S. forces in Iraq, including awards to KBR, to determine how many are tainted by waste, fraud and abuse.

Government officials didn't specify which KBR contracts would be examined or their value.

Utt acknowledged similar Congressional scrutiny and said "we've been very pleased with the degree of interaction we've had with Congress."

"We've participated willingly," he said. "With what we've seen to date, it really hasn't affected our operations at all or our prospects for growth."

In fact, KBR's business has been quite good of late. In trading Thursday, KBR shares hit an all-time high of $40.38 before closing at $39.93. The share price has risen roughly 50 percent since the start of the year.

The company reported last month its second-quarter earnings rose 52 percent versus a year ago, helped in part by the sale of its stake in a British shipyard.

Utt has said that sale is part of an initiative to focus on energy, chemicals and KBR's government and infrastructure arm _ considered to be the drivers of future earnings growth.

KBR has announced several new contracts in recent months, both in the U.S. and overseas, where it currently does 75 percent to 80 percent of its business.

Last month, Saudi Arabian oil giant Aramco and Dow Chemical Co. awarded KBR a contract to manage construction of a chemicals and plastics production complex in Ras Tanura, Saudi Arabia _ a plant that's expected to be among the world's largest petrochemical facilities.

The companies didn't say how much KBR's contract was worth, but analysts have estimated the cost of the project is $20 billion and KBR's management portion could be worth several hundred million dollars.

That news came a few days after KBR said it received a $2.8 billion contract for construction of an Algerian liquid natural gas project.

On the military side, KBR in June was one of three companies awarded respective $5 billion contracts from the Army to provide food and shelter to U.S. troops in Iraq, Afghanistan and Kuwait.

Another contract, announced in May, to provide program and construction management services for the new Panama City-Bay County International Airport in Florida is indicative of the type of domestic work Utt said he hopes to increase.

If doing so means making appropriate acquisitions, the company is open to such transactions, Utt said.

"Where we can find opportunities to jump-start our growth a little bit better through an acquisition, we're going to be interested," he said.