Written by Chris McCullough
US agriculture and biotech giant Monsanto has announced plans to axe 2,600 jobs, or 11.4 per cent of its workforce, due to falling commodity sales. The company, that manufactures genetically modified (GM) seeds, recorded a US$495m loss for the fourth quarter, compared with a reported net loss of $156 million in the same period last year. The job losses will be part of a complete restructuring plan over the next 18-24 months, according to the company, and will save $275-$300m by 2017. Monsanto said the changes are designed to transform and innovate the way the company operates resulting in a more agile and focused organisation prepared to continue to lead the agriculture industry. There are also plans afoot for Monsanto to exit the sugar cane industry in a bid to further streamline the business.
Low maize prices, falling farm incomes and the rejection of GM seeds in some European countries has forced the sharp decline in seed sales which fell by 5.1 per cent to $598m this year. Soya sales fell 19 per cent to $162m and sales of Roundup (glyphosate) weedkiller also slumped by about 12 per cent to $1.1bn. Hugh Grant, Monsanto’s chief executive, said:
“When you narrow the lens to the next 12 months, the industry continues to face a challenging macro environment and we’ve moderated our outlook.”
Following the announcement, Monsanto shares fell by more than four per cent but later stabilised. To try to shore up investor confidence, the company announced a $3 billion accelerated share repurchase program that Hugh Grant said would be completed in the next six months. The initial phase was expected to lead to annual savings of $275 to $300 million by the end of fiscal year 2017, at a total cost of approximately $850 to $900 million. Additionally, the company said it is developing further plans to reduce its operating spending by an additional $100 million, which would bring the total annual expected savings to potentially $400 million.
Mr Grant added:
“The fundamentals of our business are strong and Monsanto remains the best positioned company in the industry.
As we look to 2016, focus and discipline become increasingly important.”
Grant said the company will continue to focus on executing key milestones within the core seeds and traits business. Additionally, the company plans to remain disciplined in its agricultural productivity strategy, drive further optimisation in spend through strategic restructuring actions and accelerate its progress toward its targeted capital structure.
“A focus on these priorities will set the foundation for expected rapid growth, with our strong core business and several growth drivers continuing to underpin our confidence to meet our target of more than doubling fiscal year 2014 ongoing EPS by fiscal year 2019,”
said the chief.
This article is written by Chris McCullough, a freelancer journalist who lives in Ireland.