Updated at 8:30 a.m.
Monsanto Co., the world’s largest seed company, announced it plans to lay off 2,600 people as part of a restructuring program to grapple with a continued commodity slump.
The job reductions amount to almost 12 percent of the Creve Coeur-based company’s workforce. The cuts are part of a global restructuring plan aimed at trimming expenses by up to $300 million a year through the end of the 2017 fiscal year, Monsanto said in a statement Wednesday.
Monsanto said the decision is based on opportunities to optimize its operations, drive efficiency and reduce costs.
“The 2,600 employees, as you look across, is really across the company. So it doesn’t necessarily break out by segments,” Brett Begemann, Monsanto’s president and chief operating officer, said in a conference call on Wednesday. “This is an opportunity to take our company to a whole different operating model, thinking about how data and analytics drives our company.”
The seed giant is working on further plans to cut spending by an additional $100 million. The headcount reduction is scheduled to occur in the following 18 to 24 months, according to the statement.
As of August 2014, Monsanto had 22,400 regular employees and 4,600 temporary workers, according to its 2014 annual report.
Jeffrey Stafford, a Chicago-based analyst with Morningstar Investment Services, said the cutbacks were expected in the face of tougher agriculture markets and lower farmer net incomes.
The company posted a loss of 19 cents per share in the fiscal fourth quarter and cut its profit forecast for fiscal 2016 to $5.10 per share from $5.60 per share, trailing analyst estimates compiled by Bloomberg. Shares fell 2 cents to $88.06 at market close in New York.
Like other major corporations, Monsanto is working to weather a commodity rout that weakened agricultural and currency markets around the globe. In the past few years, the seed maker has also been facing strong Chinese competition for its popular glyphosate herbicide, Roundup.
Stafford said although these factors are likely to hold back growth in 2016, “we don’t think they damage Monsanto’s long-term growth prospects.”
Restructuring plans and cutbacks should allow Monsanto to return to per-share earning growth of more than 20 percent a year starting in 2017, the company said. Monsanto also maintained its target of doubling its 2014 earnings per share by 2019.
Management is basing its optimistic projections on expectations of an increase in glyphosate prices and the introduction of next-generation products such as Intacta and Xtend, according to Jonas Oxgaard, a senior analyst with Sanford C. Bernstein & Co. He said doesn’t think glyphosate prices will rise.
“Management are trying to paint a picture as rosy as they can for the distant future, to some extent to buy time for their next generation to really take hold and drive the next wave of growth,” Oxgaard said by phone from New York.
Xtend is an upgraded biotechnology product that helps soybean plants be resistant to both glyphosate and dicamba. Its launch is pending regulatory approval, according to the company’s website.
Intacta is another soybean product that allows the plant to protect itself against worms. Monsanto expects Inacta’s use to double to 30 million acres in South America, but the company warned that profits will be offset by a weak Brazilian real.
The company is also invested in so-called “precision agriculture,” or the use of advanced data and analytics to help farmers boost yields. In 2013, Monsanto paid $930 million to buy The Climate Corporation, a San Francisco-based data analytics company.
“I think there’s a lot of promise in this approach,” Oxgaard said.
However, Monsanto CEO Hugh Grant reiterated the company’s focus on genetically engineered seeds.
“There’s been a lot of conversation about Monsanto is pivoting, or you’re changing,” Grand said. “The core strategy remains the same.”
The announcement of layoffs comes six weeks after Monsanto officially ended its pursuit of acquisition target Syngenta, an agricultural chemicals producer based in Switzerland. Monsanto CEO Hugh Grant said his company will continue looking for deals as consolidation in the industry is “inevitable.” The company has been looking to add pesticides to its core business of genetically modified seeds and Roundup herbicide, the CEO said.
Monsanto will be pursuing $3 billion of share buybacks over the next six months, according to its earnings statement.
Update: October 8 at 8:30 a.m.
This story was updated to include additional information from Monsanto’s conference call and opinions from industry analysts.