Monsanto Co., the world's biggest seed maker, said Wednesday its third-quarter profit fell 14 percent and disclosed plans to cut 900 jobs, or about 4 percent of its work force.
The layoffs and declining profits were a stark turnaround for Monsanto, which has reported improved earnings over the last few years by selling patented, genetically engineered crops worldwide.
Executives said they were caught off guard by the deteriorating performance of the herbicide Roundup, which was once a mainstay revenue source. A flood of generic products gutted prices for the herbicide and Monsanto expects profit from Roundup to drop by half this year.
Monsanto shares fell $3.14, or 4 percent, to $76.16 in trading Wednesday.
Chief Executive Hugh Grant said Monsanto will consolidate its Roundup operations into a new division of the company, dedicating less money and fewer workers to an increasingly volatile herbicide market.
Monsanto expects to reap the vast majority of its future profits from genetically modified seeds, releasing one or two new varieties every year, he said.
Company spokesman Lee Quarles said each new strain of engineered seeds generates $300 million in annual revenue for Monsanto.
Genetically altered seeds also hold another advantage for Monsanto. Unlike Roundup, the company still has patents on the genes and seeds, giving it a monopoly over their sale. The company plans to replace existing lines of seed with aging patents with new versions, staying ahead of the curve that allows generic brands to enter the market.
"In most of the world, we'll be replacing old technology acres with new," Grant said.
The restructuring and layoffs will reduce fourth-quarter profit by 41 cents to 47 cents per share, the company said. Its expects to complete the restructuring in 2010.
It also said its full-year profit will be on the low end of its previous forecast of $4.40 to $4.50 per share.
"The rapid change we've seen in the marketplace has been unprecedented," said Quarles.
He said the company will decide which jobs will be trimmed before the end of the year. The restructuring is expected to cost between $350 million and $400 million, but will save as much as $180 million in overall costs going forward.
Monsanto said it earned $694 million, or $1.25 per share, in the three months ended May 31, down from $811 million, or $1.45 per share, a year earlier.
Revenue fell 11 percent to $3.16 billion from $3.54 billion a year ago. Declining revenue from herbicides like Roundup were only partially offset by increased revenue from seed and trait products sold through its U.S. soybean, cotton, corn and vegetable businesses.
Analysts polled by Thomson Reuters had been looking for even lower earnings of $1.17 per share but higher revenue of $3.45 billion.
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AP Business Writer Vinnee Tong in New York contributed to this story.
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