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Monsanto misses 3Q mark
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October 21, 1999: 12:33 p.m. ET
Reports say company under pressure to break up drug and ag businesses
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NEW YORK (CNNfn) - Monsanto Co. missed analysts' earnings estimates for the third quarter, amid reports that the board is being pressured to break-up the company.
The St. Louis, Mo.-based agricultural and pharmaceutical company reported Thursday that it earned $58 million, or 9 cents a share diluted, before one-time adjustments and restructuring charges that brought the net income down to $49 million, or 8 cents a share. Analysts surveyed by First Call estimated earnings of 10 cents a share for the quarter.
The company earned $87 million, or 14 cents a share in the year-ago period, before a one-time charge to write-off research and development cost that brought final results for the period down to a $100 million loss, or 17 cents a share, officials said.
Revenue at the company rose 14 percent in the quarter to $1.9 billion, from $1.7 billion a year ago.
The Wall Street Journal's Heard on the Street column Thursday reported that Monsanto management is under pressure from portfolio managers and analysts to break up the pharmaceutical and agricultural business. The paper reported that analysts are estimating a 30 percent gain in the stock price if the parts were separated, and that the board is expected to discuss the suggestions at its Friday board meeting.
The board meeting was confirmed by Scarlet Lee Foster, a spokeswoman for the company, but she said it had no comment on the board's deliberations or speculation on direction the company should take.
The company is planning to sell some profitable operations, such as its artificial sweetener and biogum food additives businesses, but while those plans were announced in July, no deals have been announced. The company's net income from those operations was $27 million in the quarter, compared to $10 million from continuing operations and another $12 million from the gain on sale of other operations.
The reports of a possible break-up of Monsanto (MTC) apparently offset the impact of the missed earnings estimates Thursday, as the stock was up 1/16 to 38-5/16 in midday trading.
Searle, Monsanto's pharmaceutical business, posted a 6 percent growth in income before interest and taxes and extraordinary items to $181 million and a 21 percent growth in revenue to $971 million, helped by the strong initial sales of Celebrex, a new arthritis treatment that the company said broke industry launch records.
But the agricultural business saw only a 10 percent growth in revenue to $951 million, and saw a 53 percent drop in income before interest, taxes and special charges to $91 million, due to increased amortization associated with seed company purchases and a sales reduction associated with a change in distribution patterns for its Roundup herbicide, officials said.
For the first three quarters, Monsanto earned $481 million, or 74 cents a share, from continuing operations before special charges, up from $479 million, or 76 cents a share, in the same period a year ago. With special charges and impact from discontinued operations, total net income was $525 million, or 81 cents a share fully diluted, compared with $353 million, or 56 cents a share diluted, a year ago. Revenue at the company rose 24 percent for the first three quarters to $6.8 billion from $5.5 billion.
Monsanto announced Wednesday the settlement of a lawsuit by Pioneer Hi-Bred International, Inc., a subsidiary of DuPont Co. (DD), over the international seed business that Monsanto purchased last year from Cargill for $1.4 billion, as well as agreeing to compensation from Cargill for problems related to the sale.
The amount of the compensation was not announced, but the Wall Street Journal reported it was worth "hundreds of millions."
Pioneer, which is still suing privately-held Cargill, charged that Cargill had wrongly obtained some Pioneer genetic material.
"We have been very open and forthright with Pioneer and Monsanto from the moment we discovered the problem and have worked with both companies to remedy the situation," said a statement from Fritz Corrigan, president of Cargill's Agriculture and Biosciences Group.
"Both Cargill and Monsanto have thoroughly investigated the problem to ensure that any material that should not be for sale has been removed from our research program and the market," he said. "We deeply regret the situation and are pleased that we have reached this agreement."
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Monsanto Co.
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