June 23, 2010 / 6:46 PM / in 8 years

KBR gears up for growth beyond military contracts

* KBR eyeing growth in mining, infrastructure, power, LNG

* KBR shares down in line with rivals, energy prices

SAN FRANCISCO, June 23 (Reuters) - Engineering company KBR Inc (KBR.N) has set its sights on a handful of sectors with mouth-watering growth prospects as it diversifies away from the dwindling military work with which it is often associated.

KBR is targeting an array of opportunities beyond its extensive British defense work and the $700 billion annual U.S. military budget, Mark Williams, president of infrastructure, government and power, told a meeting of analysts on Wednesday.

“We’re not just a wartime contractor,” he said, eyeing the potential in an expanded $3.8 trillion U.S. federal budget. “We’d all like to see that go down maybe a little bit; but the fact is it’s a large budget -- there’s plenty of opportunity.”

KBR also has a strong presence in Britain, where it plans to work on outsourcing opportunities with a new UK government that will be working hard to cut the size of its own budget.

The Houston-based company expects the “addressable market” for non-U.S. government and defense contracts to grow over the next five years, even while the market at home shrinks.

But power and industrial opportunities could triple to more than $50 billion by 2015, liquefied natural gas spending could quintuple to $35 billion, and the infrastructure and minerals market will likely quadruple to $40 billion, KBR said.

The company aspires ultimately to earn $1 billion of annual revenue from the latter market, or more than three times its current level. Executives later explained that all the spending estimates were based on governmental and corporate plans.

KBR’s U.S. military logistics revenue in 2010 will be half of what it was last year, though it has remained in Iraq to serve the energy companies that are now moving in, such as giant oilfield services company Schlumberger Ltd (SLB.N).

    Iraq has been a deeply controversial place for KBR, where the quality and safety of its projects have been scrutinized by legislators, while the company also faces a lawsuit over unlawful kickbacks in the country. [ID:nN05255910]

    Signaling a growing push to settle any lawsuits that KBR does not believe it can win, Chief Executive Bill Utt told the meeting he wants to clean out the backlog of cases.

    “We’re trying to get these matters settled,” he said.

    KBR, which vies with San Francisco-based URS Corp URS.N for the No. 4 spot among publicly traded U.S. engineering companies, saw its shares fall less than 1 percent on Wednesday, roughly in line with URS and sector leader Fluor Corp (FLR.N).

    In a presentation slide, KBR said it would give updated 2010 earnings guidance on its second-quarter conference call. (Reporting by Braden Reddall, editing by Gerald E. McCormick)

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