Reuters Summit-KBR sees margins up on next US military contract

(For other news from the Reuters Global Energy Summit, click here)

HOUSTON, June 2 (Reuters) - KBR Inc (KBR.N) expects margins on the next round of U.S. military logistics contracts to rise as it is split up between different companies, according to the engineering and services company's chief executive.

KBR is competing with Fluor Corp (FLR.N) and DynCorp International (DCP.N) for the next Logistics Civil Augmentation Program, or LOGCAP IV, and expects to find out whether it has won one of two contracts for Afghanistan in July.

But Chief Executive William Utt said the previous LOGCAP contract, which includes food, mail, laundry and trucking among other services, was the lowest-margin business KBR had.

"If you start taking the scale away, generally people's margins are going to go up, particularly as we approach more traditional government contracting margins," Utt told the Reuters Global Energy Summit in Houston.

Utt said the recent rise in oil prices and better economic signs had improved the outlook for its other businesses, which include offshore energy and natural gas production, and refineries.

"Fewer people every day are thinking crisis, and we're seeing recovery now," he said. "It's still a tough environment but we are seeing some initial loosening up of the hydrocarbon markets."

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(Reporting by Braden Reddall; Editing by Phil Berlowitz)

((braden.reddall@thomsonreuters.com; +1 415 677 2543; braden.reddall.reuters.com@reuters.net)) Keywords: ENERGY SUMMIT/KBR

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