Monsanto Co., the world’s biggest seed company, plans to eliminate 12 percent of its workforce to reduce expenses as it forecasts fiscal 2016 earnings that trailed analysts’ expectations amid weaker commodity markets.
Profit will fall to $5.10 to $5.60 a share in the 12 months that began Sept. 1, excluding restructuring costs, from $5.73 a year earlier, St. Louis-based Monsanto said Wednesday in a statement. That compares with $6.22, the average of 23 estimates compiled by Bloomberg. The shares dropped in pre-market trading in New York.
Monsanto plans to eliminate 2,600 jobs as it re-prioritizes some research and development efforts, including exiting the sugar-cane business, to save as much as $300 million a year. Like most of its competitors, Monsanto is struggling to increase earnings amid two straight years of depressed commodity prices that have reduced farmer incomes. Still, the company said it plans to meet its goal of doubling per-share earnings in five years from 2014.
“It’s hard to see where growth will come from next year,” Chris Shaw, a New York-based analyst at Monness Crespi Hardt & Co. who rates the shares neutral, said in a telephone interview on Tuesday. “The seed environment doesn’t seem entirely robust here or in South America.”
On Monday, DuPont Co., Monsanto’s largest competitor, cut its forecast for 2015 earnings, citing weak agriculture markets in Brazil and the dollar’s strength against the real. DuPont Chairman and Chief Executive Officer Ellen Kullman abruptly stepped down. Also on Wednesday, Platform Specialty Products Corp., another U.S. rival, cut its earnings forecast.
Monsanto said it will accelerate $3 billion of share repurchases under a program that was suspended during its failed $46 billion bid for Syngenta AG.
The cost savings, buybacks and improved agriculture markets as well as sales of a new genetically modified soybean called Intacta Pro should allow a return to per-share earnings growth exceeding 20 percent a year by fiscal 2017, the company said. Additional restructuring plans being developed could reduce expenses by an additional $100 million, Monsanto said.
Fourth-quarter profit also missed expectations. The loss in the three months ended Aug. 31, a seasonally weak period dependent on sales in South America, was 19 cents a share, compared with the 3-cent loss estimated on average by 19 analysts.
Monsanto fell 3.2 percent to $85.25 at 8:43 a.m. before the start of regular trading in New York.