Monsanto will trim work force by 1,700
Friday, January 22, 1999
By Robert Steyer
Of The Post-Dispatch
Monsanto Co. said Thursday that it would cut 1,700 jobs this year, far more than
the company had identified last fall when it announced a financial independence
plan.
The dismissals -- up from the original estimate of 700 to 1,000 -- are part of the
cost-cutting and money-raising strategy developed after Monsanto and
American Home Products Corp. canceled a merger in October.
Monsanto moved quickly to raise more than $4.2 billion in stock, debt and other
securities late last year. It also is trying to raise at least $1 billion -- and take
1,300 to 1,500 more people off its payroll -- by selling several businesses.
The financing plan resulted in virtually no changes in Monsanto's credit ratings
from three rating agencies.
Monsanto expanded the layoffs because "we did a more thorough analysis," said
Lori Fisher, a company spokeswoman. "In November, it was a rough estimate."
She declined to say how many jobs would be lost among the 3,200 employees in
the St. Louis area. The company has 28,500 employees worldwide.
Fisher also declined to say how many people would take early or accelerated
retirement and how many would be dismissed. Job cuts will "occur across the
board," she added. "We're in the very early stages now. The first portion will
happen later this month."
The divestiture goals remain the same, Fisher said. In a deal that closed
Thursday, Monsanto sold its lawn-and-garden division for $300 million.
The job cuts were revealed as Monsanto released its year-end financial results,
which were in line with analysts' estimates. Still, the company's stock fell $1.31
to $38.63 a share.
In a tumultuous year filled with many deals, the busted merger and one-time
charges, Monsanto lost $250 million on revenue of $8.65 billion. In 1997, the
company earned $470 million on sales of $7.51 billion.
If one-time charges were excluded, Monsanto would have reported 1998
earnings of $580 million from continuing operations.
Monsanto recorded nearly $1.1 billion in pre-tax charges for 1998, most of them
in the fourth quarter. That included $625 million related to upcoming job cuts, a
write-down of assets and the divestiture of some assets and product lines. It also
included $233 million to cover write-offs of research and development related to
buying three seed companies.
Monsanto also warned that "additional cost-saving actions are being considered
that may require future charges."
The future impact of last year's financial wheeling and dealing troubles some
analysts. "It seems like they bit off more than they could chew after the merger
collapsed," said William Fiala, who follows Monsanto for the Edward Jones
brokerage.
"They are taking a risk that they could cut too deep in terms of personnel or
could sell things out of necessity that are still good investments," said Fiala, who
maintains a 'buy' rating for aggressive investors. "Their debt is beyond
Monsanto's comfort level and beyond most analysts' comfort level."
A. Nicholas Filippello, Monsanto's chief economist, said his company must
continue cutting costs to reduce the debt. Last year's debt-to-total-capitalization
ratio ballooned to 59 percent from 47 percent in 1997.
In recent years, this ratio has hovered between 35 percent and 38 percent.
Filippello said he wants to get the ratio "into the 40s." "We have good
cash-generating businesses, and we expect Celebrex to be another one," said
Filippello, referring to the new arthritis drug being shipped to some pharmacies
this week.
Monsanto's 18 percent gain in sales last year was due primarily to record
revenue at its drug business and continued growth in farm products. The
Roundup
family of herbicides remains a weedkilling juggernaut, boosting its worldwide
volume last year by more than 25 percent.
Copyright (c) 1999, St. Louis Post-Dispatch
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