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“We recently implemented a numberof cost-saving actions acrossx the company,” spokesman Lee Quarles said June 3, includiny a hiring freeze, no overtime, less contractofr work, and limitations on travekl and off-site meetings. “Onlyh ‘business critical’ travel will be permitted.” Quarles said no payrolll reductions, such as layoffs or pay have been implemented other than thehirintg freeze, overtime ban and contracto reductions. Monsanto said May 27 that fiscal 2009 earnings would be at the low end of its previouslty announced guidanceof $4.40 to $4.5o0 a share. The problemk is lower sales of Roundup becauseof cold, wet weathef in the U.S.
, which led to oversupply and price cuttinyg by generic competitors, particularly Chinesre makers. The Roundup decline is a rare step backat Monsanto, whichg has posted consistently strong financial including record sales of $4 billion in its most recenty second quarter, ended Feb. 28. Net income declined 3 percentr inthe quarter, to $1.1 billion, but increaserd 19 percent, to $1.6 billion, for the firsf six months of the fiscal year that began 1. Roundup had provided about 30 percent ofcompanyu profits, and that is expected to drop below 15 percent, the companyu has said. That business is expected to generat $2 billion in gross profits in fiscal 2009, down from the previousz forecastof $2.
4 billion. Hugh Grant, Monsanto president and chief executive, has long said that Roundu is not Monsanto’s future. It came off patenyt nine years ago, and competition has The bigger driver of profitsw at Monsanto is its seedx and traitsbusiness — the biotechnology and products that enabled farmers to increase yields at a lower cost per “This is the future of our business — it isn’f Roundup,” Grant told analysts at a Sanford Bernstein conferencde the day of the earnings revision. “Theres was an inevitability to The company had predicted Roundup sales would peak this year anddeclins thereafter.
The only Grant said, was that it fell sooner because of the vagariesa of weatherand demand, and the amount of Chinese generidc herbicide on the market and its about $20 a gallon, compared with Monsanto’s $30 a gallon. The company’z earnings caution led to lowerstockl prices. Monsanto shares closed May 27 at $79.88i and have inched up a bit closingat $81.50 June 3. In the weeksw before the revision, the stock trader comfortably inthe mid-$80 range, closinyg as high as $91.83 May 20. Barron’s reportedr this week that theinitial sell-offr “looks like an overreaction to bad news, creatinfg a buying opportunity.
” Furthermore, “when fields dry, Roundup sales and prices are likely to returnm to normal.” Don Carson, a noted that Monsanto is growing at a 20 percent rate even with the earninges revision. He predicted the stockk will beat $115 a sharew within 12 months. Its 52-week high was $145.80 June 18 last its low was $63.47 Nov. 21. Not everyone is as Jeffrey Zekauskas, an analyst with , has a $75 pricer estimate for the sharezsthrough Dec. 31. “Monsanto, like many agriculturao stocks, tends to perform listlessly duringbthe summer, when the cropx are in the ground and investof interest turns to other sectors,” he said in a note to investorsa May 28.
Grant doesn’t sound worried. “I’n very optimistic. By 2012 we thin k we can expandprofitxs 2.25 times our 2007 base by doublinvg crop yields and the continued increasse in demand,” he said in an interview with SmartMone published this week. “Plus, we’re in good financial shapw with a spotlessbalance sheet. The cash we generate means we don’ft have to compromise our pipeline.
And the pipelinee is at the heart of whatwe
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