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KANSAS CITY, MO—Agrochemical company Monsanto Co. (MON) on Wednesday said its quarterly loss widened and it would cut its work force by up to 9 percent next year in a restructuring aimed at focusing the company's resources on its seeds and biotech traits businesses.
But Monsanto shares fell as much as 6 percent as the company projected 2004 earnings below current estimates.
"The stock is reacting to the modest growth (projection)," said Buckingham Research analyst John Roberts. But "everything seems to be moving in the right direction."
To trim costs, Monsanto will cut its global work force of 13,200 by 7 to 9 percent next year. It said it plans to cut costs tied to its slowing herbicide business, exit a European breeding and seed business for wheat and barley, and end its research in plant-made pharmaceuticals.
Monsanto said the cutbacks could yield compound annual earnings growth of 10 percent in 2005 and 2006.
"Unlike many past Monsanto restructurings... our decisions were made from a position of strength and growth," CEO Hugh Grant he said in a conference call with investors. "We're making strategic choices that will contribute to our mid-term growth."
Restructuring charges are expected to total up to $155 million after tax, or 59 cents a share, in fiscal 2004. The company should then see after-tax savings of $80 million to $95 million in fiscal 2005 and about $90 million to $105 million in fiscal 2006, with continued savings going forward.
In its first earnings guidance for fiscal 2004, Monsanto set a range of $1.40 to $1.50 per share. Analysts on average expected Monsanto to earn $1.57 per share next year, according to Reuters Research, a unit of Reuters Plc.
The company said its forecast excludes the cost of restructuring, estimated at 59 cents per share, and a goodwill write-off up to $80 million tied to the European business.
Monsanto's fourth quarter ended Aug. 31 was costly as the company posted a 96 cent-per-share charge related its August agreement to settle several lawsuits for $390 million.
The litigation involved a Monsanto chemical plant that made polychlorinated biphenyls, or PCBs, decades ago in Alabama, that residents claimed caused property and health damage.
The charge put the quarterly net loss at $188 million, or 72 cents a share, compared with a net loss of $27 million, or 10 cents a share, in the same period for 2002.
Analysts on average expected Monsanto to earn 23 cents a share, according to Reuters Research.
Sales increased 10 percent to $1.3 billion in the fourth quarter on increased sales of branded corn seed and higher revenues for specialty biotech corn and soybeans, the company said.
But sales for the year were flat at $4.9 billion as the higher seed revenues were offset by lower sales in the company's Roundup herbicide and other chemical businesses.
For the year, Monsanto reported net income of $68 million, or 26 cents per share, compared to a loss of $1.8 billion, or $6.67 a share, for fiscal 2002.
Wednesday's results were complicated by Monsanto's switch to a fiscal year ending in August from its historic fiscal year-end of Dec. 31.
Monsanto's bread and butter for years has been its Roundup family of herbicides. But the patent on the chief ingredient expired in the U.S. three years ago, and the company has been attempting to shift its business focus to seeds and biotechnology traits for corn, soybeans, and other crops.
Monsanto shares were off $1.26 at $24.75 in afternoon trading on the New York Stock Exchange (search).
source: http://www.foxnews.com/story/0,2933,100172,00.html 15oct03
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