KBR undergoes business transformation

Global engineering, construction and services company KBR, Inc. has announced the results of a major Strategic Review which will, according to the company, see it become a more streamlined, empowered and accountable global organization.

 

The company will have three strategic focus areas:

– Growth through differentiated consulting services and technology targeting oil and gas and chemicals to enhance the technical and financial returns to the customers;

– Enhanced returns through globalized project delivery and differentiated engineering, procurement, construction, commissioning and maintenance services;
– Global government services focused on long-term contracts.

KBR President and Chief Executive Officer Stuart Bradie, who implemented the review upon his arrival in June 2014, said the new organization is designed to simplify the structure, reduce overhead costs and create a more market-focused business.

 “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. 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,” Bradie said.

Effective December 31, 2014, KBR, Inc. will be reorganized into three new businesses that will focus on core strengths in consulting, technology, engineering and construction and government services:

– Technology & Consulting combines all proprietary KBR technologies, knowledge-based services and KBR companies Granherne, Energo and GVA under one customer-facing global business to provide licensed technologies and consulting services to the oil and gas value chain, for wellhead to crude refining and to specialty chemicals production. In addition to sharing many of the same customers, these businesses share their approach of early and continuous involvement to deliver the most optimal solution to meet the customer’s objectives through early planning and scope definition, advanced technologies and project lifetime support. KBR says that this focus allows early customer engagement and continuity through to full project delivery.

Engineering & Construction (E&C) is KBR’s project delivery business. It will leverage KBR’s operational and technical excellence as a global provider of engineering, procurement, construction, commissioning and maintenance for oil and gas, refining, petrochemicals, chemicals and industrial customers. Through a regional structure, KBR says E&C has been designed to be closer to its customers and capable to execute global project delivery on a consistent basis throughout the world.

– Government Services will focus on long-term services contracts with annuity streams particularly for the United Kingdom, Australian and United States governments.

KBR functions at a corporate level will be streamlined. According to the company, this will result in a lean corporate office with responsibility for strategy and governance.

As a result of this Strategic Review, KBR will be divesting or exiting the following non-strategic businesses as it works to streamline global operations and drive efficiency with a goal of reducing annual operating costs of at least $200 million by 2016:

– Fixed Price EPC Power;

– Fixed Price EPC Infrastructure and U.S. Minerals;

– Building Group;

– Fixed Price, stand-alone Construction.

In addition, options for Canadian module fabrication and U.S. military deployed operations support businesses are still under consideration.

Financial impact of the changes 

The above actions are expected to strengthen KBR’s balance sheet by addressing and exiting under-performing and non-strategic businesses. KBR expects to realize annual operating cost savings of $200 million by 2016, but anticipates taking a pre-tax charge ranging from $800 million to $1 billion, the majority of which will be non-cash. The company currently has a cash balance of approximately $1 billion and has received approval from its lenders to amend its credit facility for the impact of the anticipated charge.

 

 

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