AgroPages-Monsanto to cut 2,600 jobs, braces for worse-than-expected results-Agricultural news

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Monsanto unveiled plans to cut one-in-eight staff and slash up to $400m in costs as the seeds giant unveiled a bigger quarterly loss than Wall Street had forecast, and braced investors for a worst-than-expected performance ahead.

The US-based group, which in August ditched plans to buy Swiss-based rival Syngenta, said that it was "over the next 18-24 months" to ditch 2,600 employees, out of a workforce the company says on its website is some 21,100 strong.

Monsanto, which in June revealed it was mulling plans for cost savings, said the reductions would be undertaken amidst a "global restructuring" expected to cut $275m-300m in spending by August 2017, with the potential for a further $100m in reductions.

The savings will be achieved through measures including "streamlining" some commercial and research operations, besides ditching its sugar cane operations, which have been developing a variety genetically modified to resist insect attacks and applications of glyphosate weedkillers.

Short of expectations

The announcement came as Monsanto - which had in June forecast a "breakeven" result for the June-to-August period, the fourth quarter of the group's financial year � unveiled an after-tax loss of $495m, up from $156m a year before, equivalent to $1.06 per share.

While, on an underlying basis, the loss was equivalent to a more modest $0.19 per share, that was still above Wall Street expectations of a $0.02-per-share loss.

And the group forecast underlying earnings of $5.10-5.60 per share in its newly-started financial year, potentially taking it below the $5.22 reported for the previous period, and a figure well below the $6.20-per-share result that investors have been factoring in.

Monsanto said that its guidance reflected "continuation of several global and industry headwinds", including allowance for setbacks from a strong dollar, reduced prices for its agrichemicals products, which include weedkiller Roundup, and an allowance of elevated costs of corn seed.

Better times ahead?

The statement represents a third setback within hours for the agricultural inputs sector, after Platform Specialty Products, the owner of sprays group Arysta, cut its forecast for full-year results, and Macquarie forecast lower fertilizer prices ahead.

However, Monsanto forecast better times ahead, foreseeing a return to growth in underlying earnings per share of more "than 20%" in its 2017 financial year, which starts in September 2016, "as the current macro environment stabilises".

The forecast assumes the spread of the group's Intacta RR2 genetically modified soybean seed is planted on "the majority" of the 100m acres targeted, besides the "absence" of headwinds from the likes of currencies and elevated corn costs.

In the agrichemicals market, "generic glyphosate prices are expected to make a small, but steady, recovery over time," Monsanto said.

Corn downturn

for the June-to-August quarter, the group reported an 18.7% drop in operating profits in the key seeds and genomics division, on revenues down 9.1% at $1.25bn, reflecting a decline in the popularity of corn in many major growing countries.

Although Monsanto claimed it had grown market share in "every major corn market" over the year, its profits from corn for the quarter fell by 25% to $208m, on revenues down 9.8% at $598m.

Profits in soybeans, the main alternative to corn for farmers, fell too although remained higher over the full year.

In agrichemicals, quarterly profits fell by 20% to $492m, on revenues down 12.0% at $1.01bn.

Agrichemical profits in the new financial year were forecast to fall sharply, to $900m-1.1bn, from $1,91bn, reflecting "continuing low" prices of generic glyphosate weedkillers, and the absence of a one-time $274m licensing deal which boosted profits in the latest year.

Monsanto shares fell 4.8% to $83.85 in opening deals in New York.