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KBR puts more emphasis on construction

by John PorrettoAssociated Press
May 7th, 2008

KBR Inc.'s proposed $550 million acquisition of an Alabama engineering and construction company is further evidence of its drive to expand its presence in industrial construction, the top executive of the military and engineering contractor said Tuesday.

KBR, well known for its role as the Pentagon's biggest private contractor in Iraq, announced Tuesday it will buy privately held BE&K Inc. of Birmingham, Ala., as part of a strategy to expand its engineering and construction operations.

KBR chairman and chief executive Bill Utt said the acquisition, which needs regulatory approval, will help KBR fill out its offerings to industrial customers, a menu he acknowledged was light on the construction side.

BE&K, which posted $2 billion in revenue last year, has both domestic and international clients and employs about 9,000 people. KBR has more than 50,000 employees.

"We saw a fairly significant gap in the portfolio of service offerings we wanted to have," Utt said after the company's annual shareholder meeting at an upscale Houston resort hotel. "This hits right there. It really puts us back in a very relevant, very meaningful position in construction."

Two shareholders attended the 10-minute meeting.

Afterward, Utt said the company wanted to land more of the industrial work that contributed heavily to its bottom line 20 years ago. As recently as 2000, he said, such work accounted for about $700 million in revenue. Last year, it brought in less than $100 million.

KBR's total revenue for 2007 was about $8.7 billion. Its shares rose $1.14, or nearly 4 percent, to $32.51 in afternoon trading Tuesday.

Utt said KBR could expand amid the flurry of planned or ongoing refinery expansions and upgrades. A recent industry report said global refiners will have to invest significantly in coming years to reconfigure their operations and meet growing supplies of feedstocks other than conventional crude oil.

"There are a lot of changes going on to the underlying infrastructure of our energy sector in the U.S., and we've positioned ourselves to be in all parts of that chain," he said.

For now, the former Halliburton subsidiary continues to get much of its attention for its work with the military, though Utt acknowledged that eventually will shrink when troops begin to come home.

Last month, the Army awarded KBR, DynCorp International Inc. and Fluor Corp. contracts worth up to $150 billion over 10 years to provide food, shelter and other services to U.S. troops overseas, including in Iraq and Afghanistan.

KBR has been under congressional scrutiny after at least four women alleged they were sexually assaulted while working for KBR or its subsidiaries in Iraq. Congress has pressured the Bush administration to force U.S. contractors to better protect their employees.

KBR has repeatedly said reports of sexual assault and harassment are taken seriously and thoroughly investigated.

Utt didn't discuss the allegations directly at Tuesday's meeting. However, when asked by shareholder Pratap Chatterjee, of Berkeley, Calif., how the company keeps tabs on labor and other abuses in Iraq, Utt said KBR encourages workers to call or use the Internet to report abuses.

"We react to all those inquiries very quickly, very thoughtfully," he said. "They do concern us when an employee feels their rights have been violated, and we take the appropriate action with immediate investigation."



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