KBR announces restructure

December 12, 2014

Less than one year into his tenure as the President and CEO of KBR, Stuart Bradie will spend up to US$1 billion to streamline and reorganize the energy engineering and construction giant following the results of a strategic review he initiated in June.

The Houston-based KBR said in a statement that its goal is to shave at least US$200 million off its operating cost by 2016 through streamlining its global operations and increasing efficiency. As a result, it will exit four “non-strategic businesses”: Fixed price EPC power; Fixed price EPC infrastructure and US minerals; Building group; and Fixed price, stand-alone construction.  

To achieve the proposed lower operating costs, the company will concentrate on three areas of strategic focus: consulting and oil and gas and chemical technology; engineering, procurement, construction, commissioning and maintenance series; and governmental services. Effective 31 December, it will reorganize into three new business units that align with these areas, slimming down from its five existing business groups.

Its Technology & Consulting unit will incorporate all proprietary KBR technologies and knowledge based services to provide technology and consulting services. The project delivery business will be known as Engineering and Construction (E&C). Government Services will focus on long-term service contracts with annuity streams. KBR specifically named the UK, Australia, and the US governments.

KBR currently has five business segments: Gas Monetization; Hydrocarbons; Infrastructure; Government, and Power; and Ventures.

“The restructure we are announcing today will create a new KBR focused on its core strengths structured along delivery lines that will enable us to meet the expectations of our customers and other stakeholders," ,” Bradie said in a statement. "This, combined with reduced complexity, will provide a more robust balance sheet and greater accountability and empowerment for our people. KBR will be well placed to meet the challenges of the future."

Recent financial woes

Financially, the company has been struggling over 2013-2014. In November, it slight gains to its earnings per share (EPS), although Bradie said that it was still not where the company wanted to be.

“EPS improved to $0.21, which is not acceptable, albeit an improvement of over, I guess a loss of $0.32 on the same period last year and a loss of $0.06 in Q2,” he said in the company's Q3 2014 earnings call. The company’s Hydrocarbon-related revenue was up $195 million, but the Infrastructure, Government and Power unit performed poorly, with a gross profit loss of $40 million.

The statement the company provided did not mention workforce cuts. When reached for comment, a KBR spokesperson said: “Yesterday’s announcement was the initial announcement of an initiative that will take many months to complete.”

Image of KBR President and CEO Stuart Bradie.



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