Monsanto's earnings down, 900 job cuts

Monsanto to cut 900 jobs
By Jeffrey Tomich
ST. LOUIS POST-DISPATCH, 06/24/2009
http://www.stltoday.com/stltoday/business/stories.nsf/manufacturingtechnology/story/C2501EC67FAE8E8C862575DF0049B6CB?OpenDocument

A steep, swift decline in sales of Roundup herbicide is leading Monsanto to eliminate 900 jobs, or about 4 percent of its workforce.

The seed giant announced the cuts on Tuesday at the same time reporting a 14 percent decline in fiscal third-quarter earnings.

The job cuts will be made during the coming months and vary by location, the company said. Monsanto declined to specify how many employees at its Creve Coeur campus would be affected.

The moves announced Wednesday are expected to save the company as much as $180 million a year and are part of a restructuring that will include forming a separate division for the herbicide business to better align spending with sales.

Company executives have seen profitability of the Roundup business erode much faster than they thought even a few months ago as a flood of inexpensive Chinese-made herbicide landed in the U.S., triggering deep price cuts by rivals.

Monsanto developed Roundup, a weed killer containing the chemical glyphosate, in the 1970s. For more than two decades, it was the exclusive maker of the herbicide, and capitalized on the product’s success by developing crops that are genetically engineered resistant to its effects.

Today, the herbicide tolerance trait is at the heart of the company’s multibillion-dollar seed business. But the last patents on Roundup herbicide expired nine years ago, opening the door for rivals like Dow and Syngenta to sell competing products and erode Monsanto’s market share.

Chief Financial Officer Terrell K. Crews said Wednesday that Roundup gross profit will peak at $1.9 billion this fiscal year and may decline almost 50 percent to $1 billion in the next fiscal year, which begins in September.

As Monsanto searches for ways to stabilize the herbicide business, its thriving seed and traits business will enable it to meet the earnings targets established by CEO Hugh Grant earlier this year.

Monsanto said profit for the quarter ended May 31 fell to $694 million, or $1.25 a share, compared with $811 or $1.45 a share in the same period last year, the company said. Sales fell 11 percent to $3.2 billion.

The earnings still beat Wall Street’s forecast. Analysts polled by Thomson Reuters expected net income of $1.17 per share and sales of $3.45 billion.

Monsanto will take a charge of $350 million to $400 million, or 41 cents to 47 cents a share, in the fourth-quarter related to the job cuts.

The company’s shares fell $2.90, or 3.6 percent, to $76.40 at in New York Stock Exchange composite trading.