Monsanto to cut 2,600 jobs, buyback shares

October 8
8:37 PM 2015

As part of its restructuring plan to reduce costs, Monsanto Co has decided to cut 2,600 jobs. The slashing of jobs accounts for 11.6 percent of total employees at Monsanto. With an objective of boosting confidence for investors, Monsanto has taken up share buyback exercise.

The slump in commodity market has hit the one of the world's largest seed and agrochemical companies. Monsanto has also decided to exit from sugar cane business. The restructuring plan includes streamlining and reprioritizing research and development (R&D) in a more commercial way.

Monsanto is an American multinational agrochemical and agricultural biotechnology corporation. Headquartered in Creve Coeur, Greater St. Louis, Missouri, Monsanto will repurchase shares from its investors to the tune of $3 billion.

The share buyback program is scheduled to be completed in next six months. However, Monsanto's stock fell over four percent after the buyback news hit the market. Monsanto suffered huge losses during and its outlook is well below the market forecast. 

The restructuring costs are estimated to be in the range of $850-900 million. Once the restructuring exercise is completed, this will help Monsanto save $400million per year.

The restructuring plan came at a time when the shares were trading five percent lower this year. The slump in agricultural commodities and currency crisis in Brazil are taking a toll on the Monsanto's performance. 

Monsanto's earnings per share (EPS) are expected to be in the range of $5.10 to $5.60 for the current year beginning from 1 September. Market analysts forecast EPS of $6. Monsanto suffered losses of $1.06 per share during the fourth quarter ended August.

Monsanto is expected to save $275-300mn in initial phase of restructuring plan by 2017. The operating costs are estimated to come down by $100mn making the total cost savings per annum to $400mn. 

Monsanto's competitors in the global market Syngenta and DuPont are focusing on seed development operations. The Swiss firm Syngenta AG is planning to increase vegetable seed business and implementing $2-bn share buyback. Monsanto made efforts to acquire Syngenta during the last summer. However, DuPont has also revised lower its outlook.

Monsanto's prime products com seeds and traits prices dropped over five percent during the fourth quarter. Sales of Monsanto's agricultural unit fell 12 percent to $1.1bn. Despite poor performance during the quarter, Monsanto is optimistic saying fundamentals are still strong. 

Monsanto is confident of reachingt the target of doubling EPS by 2019. The corn seeds sales dropped to $598mn from $630mn during the quarter. The net sales for the whole year fell five percent for seeds and traits and seven percent for herbicides and other agricultural products.

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