Monsanto’s Changes Pay Off In The Fourth Quarter

Monsanto Co. said its fourth-quarter earnings rose 1.1 percent, in line with expectations, to cap a year in which the company moved to shed its remaining chemicals business and establish itself as a dominant force in agricultural biotechnology.

Profit from operations rose to $90 million, or 15 cents a share, from $89 million, also 15 cents a share, in the year-earlier period. The results were just short of the 16 cents a share forecast by analysts surveyed by IBES International Inc. Revenue rose to $2.2 billion from $2.1 billion.

St. Louis-based Monsanto took a fourth-quarter charge of $500 million, or 84 cents a share, to cover the cost of spinning off its chemicals operations and firing up to 2,500 workers. The company announced in December it would take a charge of $400 million to $600 million.

“The challenge for Monsanto is how to effectively use its cash flow to build the long term future of the business and at the same time meet its earnings goals,” said Sano Shimoda, president of BioScience Securities Inc., an Orinda, California-based investment company. “They’ve spend a lot of dollars to build this company long term and they’ve made many acquisitions which will carry earnings penalties near term.”

Monsanto shares fell $1 to $37.50 Friday.

Over the past year, Monsanto has spent about $1.8 billion on acquisitions, including its agreement earlier this month to buy Holden’s Foundation Seeds Inc., a Williamsburg, Iowa-based corn seed company with an estimated $45 million in revenue, for $1.02 billion. The acquisition, which will give Monsanto a distribution network for its plant biotechnology, didn’t affect fourth-quarter results.

The charge for the spinoff resulted in a loss for the latest quarter of $410 million, or 69 cents a share. That compares with net income of $80 million, or 13 cents a share in 1995. The 1995 figure included a charge of $9 million, or 2 cents a share.

For the year, Monsanto posted record profit from operations of $885 million, or $1.48 a share, up 22 percent from $728 million, or $1.25 a share. After the $500 million charge, net income was $385 million, or 64 cents a share, down 48 percent from $739 million, or $1.27 a share. Increased spending on acquisitions, research, technology and product introductions reduced net income in 1996 by about $150 million, the company said.

Monsanto said operating income rose in all its businesses for the year. Agricultural product sales were driven mainly by continued growth of the company’s popular Roundup herbicide, mainly outside the U.S.

Record operating income for pharmaceuticals was boosted by sales of its Ambien insomnia medicine and Daypro and Arthrotec arthritis treatments. Profit from food products were lifted by increased sales of its NutraSweet sweetener, while chemical sales rose as capacity expanded and prices for some products rose.

Some stocks that traded heavily or moved substantially Friday.

NYSE

PepsiCo, down $1.62-1/2 at $33.87-1/2.

The stock pulled back after surging before late Thursday’s announcement that it plans to spin off its sluggish restaurant business, which includes the KFC, Pizza Hut and Taco Bell chains.

Eastman Kodak, down $2.87-1/2 at $85.62-1/2.

The Rochester, N.Y.-based company said its will no longer make Kodak Gold disc film for its disc cameras after 1998. The disc cameras, introduced in 1982, have not been sold since 1989.

NASDAQ

XLConnect Solutions, down $14.87-1/2 at $8.75 and Intelligent Electronics, down $3.75 at $3.87-1/2.

XLConnect, an Exton, Pa.-based information technology services provider, said late Thursday that it expects its fourth-quarter earnings to fall below forecasts. Intelligent Electronics owns a majority stake in XLConnect.