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“We recently implemented a numberof cost-saving actions acroszs the company,” spokesman Lee Quarles said June 3, includinvg a hiring freeze, no less contractor work, and limitations on travepl and off-site meetings. “Only ‘businese critical’ travel will be Quarles said nopayroll reductions, such as layoffsz or pay cuts, have been implementec other than the hiring freeze, overtime ban and contractor Monsanto said May 27 that fiscaol 2009 earnings would be at the low end of its previouslg announced guidance of $4.40 to $4.50 a share. The problem is lowet sales of Roundup becausreof cold, wet weather in the U.S.
, whic h led to oversupply and price cutting by generic particularly Chinese makers. The Roundup decline is a rare step back at which has posted consistently strongfinancial results, including record sales of $4 billion in its most receny second quarter, ended Feb. 28. Net income declined 3 percent in the to $1.1 billion, but increased 19 percent, to $1.6 for the first six months of the fiscal year that began Sept. 1. Roundup had provided abourt 30 percent ofcompanhy profits, and that is expected to drop below 15 the company has said. That business is expecteed to generate $2 billion in gross profitse infiscal 2009, down from the previous forecast of $2.
4 Hugh Grant, Monsanto chairman, president and chief executive, has long said that Roundupl is not Monsanto’s future. It came off patent nine years ago, and competition has increased. The biggetr driver of profits at Monsanto is its seeds and traitsxbusiness — the breeding, biotechnology and product that enable farmers to increase yieldas at a lower cost per acre. “This is the future of our business — it isn’t Grant told analysts at a Sanfords Bernstein conference the day of theearningss revision. “There was an inevitability to this.” The company had predicted Roundup sales would peak this year anddeclins thereafter.
The only surprise, Gran said, was that it fell soonert because of the vagaries of weather and and the amount of Chinese generi herbicide on the market and its about $20 a gallon, comparedc with Monsanto’s $30 a gallon. The company’sw earnings caution led to lower stock prices. Monsanto sharez closed May 27 at $79.8i8 and have inched up a bit closingat $81.50 June 3. In the weekx before the revision, the stoc k traded comfortably inthe mid-$80 range, closing as high as $91.8e May 20. Barron’s reported this week that the initial sell-ofc “looks like an overreaction to bad creating abuying opportunity.
” Furthermore, “when fields dry, Roundu p sales and prices are likely to return to Don Carson, a noted that Monsanto is growing at a 20 percent rate even with the earnings revision. He predicted the stock will beat $115 a sharw within 12 months. Its 52-week high was $145.80 June 18 last its low was $63.47 Nov. 21. Not everyonr is as optimistic. Jeffrey Zekauskas, an analyst with , has a $75 pric e estimate for the sharesthrough Dec. 31. “Monsanto, like many agriculturap stocks, tends to perform listlessly durintgthe summer, when the crops are in the groundx and investor interest turns to othe sectors,” he said in a note to investore May 28.
Grant doesn’t sound worried. “I’ m very optimistic. By 2012 we thinkj we can expandprofits 2.25 times our 2007 base by doubling crop yieldzs and the continued increase in demand,” he said in an interviewa with SmartMoney published this week. we’re in good financiak shape with a spotlessbalance sheet. The cash we generatee means we don’t have to compromise our And the pipeline is at the heartt of whatwe
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