KBR has announced strong second quarter 2015 financial results. Net income attributable to KBR was US$62 million, compared to a net loss of US$8 million in the second quarter of 2014. Consolidated revenue in the second quarter of 2015 was U$1.4 billion compared with US$1.7 billion in the second quarter of 2014.
Stuart Bradie, President and CEO, KBR said, “our second quarter consolidated results reflect continued momentum towards achieving the strategic objectives we previously outlined. During the quarter we delivered improved operational and financial performance and continued progress towards our cost reduction targets. KBR’s transformation continues and we are on track to achieve the 2016 targets for segment profit margin percentages and a US$200 million annual cost reduction. To date, the company has identified and actioned more than US$125 million of the US$200 million savings target with the identified savings being realised throughout 2015 and 2016. Also during the quarter, we concluded the sale of our Building Group subsidiary and announced the formation of strategic partnerships to accelerate growth and earnings in our Industrial Services and pipe fabrication businesses.
“Low oil prices continue to impact client capital expenditures, however, KBR’s technology and project delivery capability for natural gas derivative products and associated downstream facilities positions us well for this market. Even with these challenging markets, we had a good bookings quarter led by our joint venture with Kvaerner which was awarded a major contract for topsides for stage one of a multi staged development of the Johan Sverdrup oil and gas field. Our consolidated backlog from our ongoing businesses remained relatively unchanged from Q1. Additionally, we remain in sole source negotiations for two major UK Ministry of Defence contracts and we continue to make good progress in successfully settling a number of legacy, US Government contract disputes. Finally, our strong balance sheet provides flexibility for us to move quickly as our markets continue to evolve.”
Technology and Consulting
T&C gross profit of US$21 million increased US$6 million while revenue was US$80 million, a decrease of US$20 million. Lower revenue is the result of reduced proprietary equipment sales and consulting revenues associated with upstream oil and gas activity, while the increase in earnings and margins reflect a shift in the mix of work to more technology related activities on olefins and syngas projects along with ongoing cost reduction initiatives. Looking forward, the company sees continued global technology opportunities, particularly for syngas, refining and olefins projects including new builds and revamps to improve efficiencies of existing facilities.
Engineering and Construction
E&C gross profit was US$52 million, an increase of US$19 million. Equity in earnings of unconsolidated affiliates increased by US$20 million to US$40 million due to a US$15 million favourable correction of a cumulative error for an unconsolidated offshore maintenance joint venture that occurred throughout the period 2007 to 1Q15, and increased progress on an ongoing LNG project. Looking forward, the company continues to see opportunities for LNG, FLNG, oil and gas, ammonia and chemicals projects, as well as growth in services contracts executed by the company’s recently announced 50/50 joint venture with BCP, Brown and Root Industrial Services.
The company’s previous 2015 fully diluted EPS guidance was a range of US$1.07 – 1.22 after excluding US$18 million – 25 million pretax of legal costs associated with legacy US government contracts. During the second quarter of 2015, the company completed the sale of its Building Group subsidiary and recognised a pretax gain of US$28 million. Accordingly, the guidance range for 2015 fully diluted EPS after excluding the legacy US government related legal costs is increased to US$1.22 – 1.37.
Edited from press release by Claira Lloyd
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