2nd UPDATE: Monsanto Cuts More Jobs As Protection Unit Weighs On Profits
September 10 2009 - 9:18AM
Dow Jones News
Monsanto Co. (MON) on Thursday announced more job cuts and said
profits from its crop-protection unit would fall more than
expected.
The world's largest seed company by revenue said intensifying
competition faced by its Roundup herbicide would leave full-year
earnings at the low end of its existing guidance. Its first
forecast for fiscal 2010 fell well short of analysts'
expectations.
Roundup had been a moneyspinner that chief executive Hugh Grant
once called a "windfall" to fund research into its core business of
seeds and traits.
However, competition from generic crop-protection products,
notably from China, have weighed on sales and margins.
The company plans to double previously-announced job cuts to
around 8% of its global workforce - some 1,800 jobs - from the 900
indicated in June.
Monsanto will boost a restructuring reserve to a range of $550
million to $600 million as part of cost-cutting efforts aimed at
trimming $220 million to $250 million from annual expenses. It
plans to realize a third of this in fiscal 2010 and the full target
from 2011.
Monsanto said ongoing earnings per share for fiscal 2009 would
be "at the low end" of its previously-announced range of $4.40 to
$4.50, with lower-than-anticipated earnings from herbicides
outweighing "slightly" higher gross profit from seeds and
traits.
Its shares were down 5.5% at $78.90 in early trade.
The company issued the guidance in a statement ahead of a
conference presentation from chief financial officer Carl Casale in
London.
The U.S. company's first indication for fiscal 2010 - with
ongoing EPS forecast at $3.10 to $3.30 - compared with the $4.10
consensus among analysts.
Casale warned in a statement that tough competition from generic
herbicides created "multiple headwinds" in its goal of securing $1
billion gross profit from the segment by 2012. Profits from Roundup
and its other herbicides are forecast at $650 million to $750
million in fiscal 2010. In June, the company said it would earn $1
billion from the range, half their recent peak.
However, Monsanto retained its pledge to double gross profit by
2012 from a 2007 base as it rolls out new genetically-modified corn
and soybean seeds.
-By Doug Cameron, Dow Jones Newswires; 312 750 4135;
doug.cameron@dowjones.com