ST. LOUIS, Mo. — Stung by the global decline in seed and corn sales, biotech seed giant Monsanto Co. is slashing 11.6 percent of its 22,500 workforce and restructuring its operations to cut $100 million in costs, for an annual savings of potentially $400 million by the end of 2017.
Industry observers also say the company’s international image may have been hurt by its unsuccessful attempt to take over Swiss seed rival Syngenta AG this spring, as the company’s stock price was on decline, falling off by nearly $20 from its July high of $107.08. The stock was trading on Oct. 16 at $89.97.
In announcing that the company’s net sales fell by 5.4 percent from a year ago, to $598 million from $630 million, Monsanto said it plans to eliminate 2,600 jobs over the next 18-24 months. As part of the report, the St. Louis company also plans a $3 billion stock buyback program, to be completed within the next six months.
"As we look to 2016, focus and discipline become increasingly important," Monsanto CEO Hugh Grant said. "We will continue to focus on executing on key milestones within our core seeds and traits business, and we plan to remain disciplined in our agricultural productivity strategy."
Monsanto reported a net loss of $495 million in the fourth quarter of 2015, compared to a reported net loss of $156 million in the same period last year. Net income for 2015 was $2.314 billion on net sales of $15 billion, down from $2.7 billion in net income for 2014.
The company did not identify what types of jobs would be cut, nor where. Its last round of layoffs came in June 2009, when the company slashed 900 jobs.
Agricultural analyst Brett Wong, of Boston’s Piper Jeffray consulting firm, was surprised Monsanto has had to take such drastic actions, but added he wouldn’t be surprised if other firms don’t take similar measures. "It is the downturn in agriculture, and materials overall, that we have seen on the global scale," he said.
Several farm industry organizations and associations declined to comment to Farm World on Monsanto’s moves. The National Corn Growers Assoc. and American Seed Trade Assoc. did not comment, and Will Rodger, director of policy communications for the American Farm Bureau Federation, declined comment, saying it was an "internal matter for them."
Grant told reporters and investor groups the company expects to see corn prices rebound in about a year. Corn seeds are the company’s biggest source of profit.
Stabilized corn prices could help Monsanto’s earnings to grow more than 20 percent in its 2017, he said.
Monsanto’s reliance on its Roundup herbicide sales has also been hit by the World Health Organization’s IARC (International Agency for Research on Cancer) and California’s ban on the chemical glyphosate, the main ingredient in Roundup, saying it is probably carcinogenic.
Swiss and German retail outlets are pulling Roundup off its shelves because of customers concerns about the chemicals and their health. The French minister has also asked retailers to stop selling Roundup. Lowe’s and Home Depot have stopped selling it around Europe, but it’s still being sold in the United States.
The drop in Roundup sales has been attributed as part of the company’s 12 percent drop in its agricultural productivity unit to $1.1 billion, the most dramatic decrease coming over the past three months.
A lawsuit filed last month in California by a U.S. farm worker and a horticultural assistant claiming Roundup causes cancer could also hurt sales as the case gathers momentum. Monsanto fired back, saying the cancer claims are without merit and that glyphosate is safe for humans when used as labeled.
Part of Monsanto’s restructuring and streamlining plan, company finance chief Pierre Courduroux said, involves shutting down its Brazilian sugarcane operation, CanaVialis brand, a move that will result in a $493 million restructuring change for the quarter.
The company will invest $150 million this year on its seed and crop protection business in Brazil. The company will also try to transfer as many of CanaVialis’s 150 workers to other units in Brazil, where the company has 2,700 employees.
Monsanto dropped its $46 billion bid to acquire Syngenta in August after four months of an aggressive pursuit to convince the Swiss agribusiness giant it would be a good deal. Syngenta’s board rebuffed the offers.
