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Monsanto (MON)
Monsanto Reports 14% Decline in Profit
The Monsanto Company (MON: Charts, News, Offers), maker of the popular weed-control herbicide Roundup, reported a 14% decline in its quarterly profit today. The herbicide producer reported that its profit fell to $694 million from $811 million a year earlier. Despite beating Wall Street expectations for the quarter, Monsanto has decided to initiate some drastic, internal adjustments as it tries to halt declining profit. What caused Monsanto's drop in performance? How will this quarter's results impact the company's future?
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Monsanto attributes a slowdown in herbicide sales as the main cause for its disappointing quarter performance. Roundup and herbicide sales fell 47% during the quarter. The Monsanto Company stated that the recent influx in wetter weather has really hurt herbicide sales. In addition, Monsanto has faced increased competition from cheaper Roundup alternatives, especially from China. These new competitors have slowly chipped away at Monsanto's herbicide market share. The Monsanto Company has identified the problem. But how does it intend to remedy the situation?
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Monsanto has decided to shift its strategic focus from herbicides to better performing market segments such as seeds, traits, and biotechnology. Its seeds and genomic segment revenue increased 9.8% while corn and soybean sales rose 4.6% and 21% respectfully. The Monsanto Company plans to spin off its herbicides business into a separate division, and gradually decrease its role in revenue contribution. It will also cut 900 jobs as part of the strategic transition. Monsanto is hoping that restructuring from an herbicide company to a biotechnology company will improve profit.
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Monsanto has pinpointed the source of its problem and seems to have set a plan in motion to solve it. The Monsanto Company is optimistic that a shift in resources from herbicides to seeds, traits, and biotechnology offerings will lead to a turnaround in performance. Although Monsanto is best known for its Roundup herbicide, it has had promising feedback in other industries. As a result, the Monsanto Company is committed to reducing its revenue dependency on herbicides by siphoning more resources to these developing market segments. Monsanto appears confident that seeds, traits, and biotechnology are the company's future and not herbicides. Only time will tell if Monsanto can keep the grass green with decreasing involvement from its herbicide business.
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