Friday, October 4, 2013


Monsanto's Early 1990s Transitional Period

Monsanto had expected to celebrate 1990 as its 5th consecutive year of increased earnings, but numerous factors - the increased price of OIL due to the Persian Gulf War, a recession in key industries in the United States, and droughts in California and Europe — prevented Monsanto from achieving this goal. Net income was $546 million, a dramatic drop from the record of $679 the previous year. Nonetheless, subsidiary Searle, which had experienced considerable public relations scandals and headaches in the 1980s, had a record financial year in 1990. The subsidiary had established itself in the global pharmaceutical market and was beginning to emerge as an industry leader. The Monsanto Chemical Co., meanwhile, was a $4 billion business that made up the largest percentage of Monsanto's sales.

Monsanto continued to work at upholding hypocritical "The Monsanto Pledge", a 1988 declaration to reduce emissions of toxic substances. By its own estimates, Monsanto devoted $285 million annually to environmental expenditures. Furthermore, Monsanto and the Environmental Protection Agency (EPA) agreed to a cleanup program at Monsanto's detergent and phosphate plant in Richmond County, Georgia.

Monsanto restructured during the early 1990s to help cut losses during a difficult economic time. Net income in 1991 was only $296 million, $250 million less than the previous year. Despite this showing, 1991 was a good year for some of Monsanto's newest products. Bovine somatotropin finally gained FDA approval and was sold in Mexico and Brazil, and Monsanto received the go-ahead to use the fat substitute, Simplesse, in a full range of food products, including yogurt, cheese and cheese spreads, and other low-fat spreads. In addition, the herbicide Dimension was approved in 1991, and scientists at Monsanto controversially tested genetically engineered (GE or GMO) plants in field trials.

Furthermore, Monsanto expanded internationally, opening an office in Shanghai and a plant in Beijing, China. Monsanto also hoped to expand in Thailand, and entered into a joint venture in Japan with Mitsubishi Chemical Co.

Monsanto's sales in 1992 hit $7.8 million. However, as net income dropped 130% from 1991 due to several one-time aftertax charges, Monsanto prepared itself for challenging times. The patent on NutraSweet brand sweetener expired in 1992, and in preparation for increased competition, Monsanto launched new products, such as the NutraSweet Spoonful, which came in tabletop serving jars, like sugar. Monsanto also devoted ongoing research and development to Sweetener 2000, a high-intensity product.

In 1992, Monsanto denied that it planned to sell G. D. Searle and Co., pointing out that Searle was a profitable subsidiary that launched many new products. However, to decrease losses, Monsanto did sell Fisher Controls International Inc., a subsidiary that manufactures process control equipment. Profits from the sale were used to buy the Ortho lawn-and-garden business from Chevron Chemical Co.

Monsanto Reinvents Itself in the 1990s

Monsanto expected to see growth in its agricultural, chemical, and biotechnological divisions. In 1993, Monsanto and NTGargiulo joined forces to produce a (GMO) genetically altered tomato. As the decade progressed, biotechnology played an increasingly important role, eventually emerging as the focal point of Monsanto's operations. The foray into biotechnology, begun in the mid-1980s with a $150-million investment in a genetic engineering lab in Chesterfield, Missouri, had been faithfully supported by further investments in the ensuing years. Monsanto's efforts finally yielded tangible success in 1993, when BST was approved for commercial sale after a frustratingly slow FDA approval process. In the coming years, the development of further biotech products moved to the forefront of Monsanto's activities, ushering in a period of profound change. Fittingly, the sweeping, strategic alterations to Monsanto's focus were preceded by a change in leadership, making the last decade of the 20th century one of the most dynamic eras in Monsanto's history.

Toward the end of 1994, Mahoney announced his retirement, effective the following year in March 1995. As part of the same announcement, Mahoney revealed that Robert B. Shapiro, Monsanto's president and chief operating officer, would be elected by Monsanto's board of directors as his successor. Shapiro, who had joined Searle in 1979 before being named executive vice-president of Monsanto in 1990, did not waver from exerting his influence over the company he now found himself presiding over. At the time of his promotion, Shapiro inherited a company that ranked as the largest domestic ACRYLIC manufacturer in the world, generating $3 billion of its $7.9 billion in total revenues from chemical-related sales. This dominant side of Monsanto's business, representing the foundation upon which it had been built, was eliminated under Shapiro's stewardship, replaced by a resolute commitment to biotech.

Between the mid-1980s and the mid-1990s, Monsanto had spent approximately $1 billion on developing its biotech business. Although biotech was regarded as a commercially unproven market by some industry analysts, Shapiro pressed forward with the research and development of biotech products, and by the beginning of 1996 he was ready to launch Monsanto's first biotech product line. Monsanto began marketing herbicide-tolerant GMO soybeans, genetically engineered to resist Monsanto's PATENTED Roundup herbicide, and insect-resistant GMO BT cotton, beginning with 2,000,000 acres of both crops. By the fall of 1996, there were early indications that the first harvests of genetically engineered crops were performing better than expected (yet WORSE results than traditional and organic crops). News of the encouraging results prompted Shapiro to make a startling announcement in October 1996, when he revealed that Monsanto was considering divesting its chemical business as part of a major reorganization into a life-sciences company.

By the end of 1996, when Shapiro announced he would spin-off the chemical operations as a separate company, Monsanto faced a future without its core business, a $3 billion contributor to Monsanto's annual revenue volume. Without the chemical operations, Monsanto would be reduced to an approximately $5-billion company deriving half its sales from agricultural products and the rest from pharmaceuticals and food ingredients, but Shapiro did not intend to leave it as such. He foresaw an aggressive push into biotech products, a move that industry pundits generally perceived as astute. "It would be a gamble if they didn't do it," commented one analyst in reference to the proposed divestiture. "Monsanto is trying to transform itself into a high-growth agricultural and life sciences company. Low-growth cyclical chemical operations do not fit that bill." Spurring Shapiro toward this sweeping reinvention of Monsanto were enticing forecasts for the market growth of plant biotech products. A $450 million business in 1995, the market for plant biotech products was expected to reach $2 billion by 2000 and $6 billion by 2005. Shapiro wanted to dominate this fast-growing market as it matured by shaping Monsanto into what he described as the main provider of "Agricultural Biotechnology".

As preparations were underway for the spin-off of Monsanto's chemical operations into a new, publicly owned company named Solutia Inc., Shapiro was busy filling the void created by the departure of Monsanto's core business. A flurry of acquisitions completed between 1995-1997 greatly increased Monsanto's presence in life sciences, quickly compensating for the revenue lost from the spin-off of Solutia. Among the largest acquisitions were Calgene, Inc., a leader in plant biotech, which was acquired in a two-part transaction in 1995 and 1997, and a 40% interest in Dekalb Genetics Corp., the second-largest seed-corn company in the United States. In 1998, Monsanto acquired the rest of DeKalb, paying $2.3 billion for the Illinois-based company.

By the end of the 1990s, Monsanto bore only partial resemblance to the Monsanto company that entered the decade. The acquisition campaign that added dozens of biotechnology companies to its portfolio had created a new, dominant force in the promising life sciences field, placing Monsanto in a position to reap massive rewards in the years ahead. For example, a rootworm-resistant strain under development had the potential to save $1 billion worth of damages to corn crops per year. Monsanto's pharmaceutical business also faced a promising future, highlighted by the introduction of a new arthritis medication named Celebrex in 1999. During its first year, Celebrex registered a record number of prescriptions. As Monsanto entered the 21st century, however, there were two uncertainties that loomed as potentially serious obstacles blocking its future success. The acquisition campaign of the mid- and late-1990s had greatly increased Monsanto's debt, forcing Monsanto to desperately search for cash. Secondly, there was growing opposition to genetically altered crops at the decade's conclusion, prompting the United Kingdom to ban the yields from GMO crops for a year. A great part of Monsanto's future success depended on the resolution of these two issues.

Monsanto's Financial History & Corporate Instability

Monsanto had a difficult time during 2002. Its share price had been steadily falling and, in spite of an upturn in sales in the fourth quarter, total sales for 2002 were only $4,673m, compared to $5,462m for 2001. The primary causes, according to the company, were lower volumes of RoundUp sales in the U.S. due to drought, lower prices for RoundUp due to it going off-patent and facing increased competition from competitors, and lower sales of RoundUp and seeds in Latin America.

Events in Argentina also affected the company in other ways: Monsanto's Argentine unit lost $154 million in the 2002 fiscal year, due to the collapse of the Argentine economy and a deepening recession which forced the government to default on most of its public debt, and devalue the peso in January 2002. The government also converted what was a dollar economy into a peso economy and, as a result, Monsanto received devalued pesos for products it had sold in dollars, slashing its sales income.

In December 2002, CEO Hendrik Verfaillie resigned after he and the board agreed that his performance had been disappointing and the company had faced extensive criticism for failing to deal more honestly and effectively with its difficulties. 'This is a company that has been optimistic on the borderline of lying,' said Sergey Vasnetsov, senior analyst with Lehman Brothers in New York. 'Monsanto has been feeding us these fantasies for two years, and when we saw they weren't real,' its stock price fell.

In 2009, Monsanto profited about $2 billion. After much controversy... in 2010, Monsanto profits dove 50% to about $1 billion. GMO crops are massively failing, some even seedless at harvest time. Subsidized crops are LOSING MONEY annually. The USDA is calling it a "yield-drag" but we all know the GMOs do NOT outperform organic crops... unless you're an accountant for Monsanto.

No matter what weaknesses Monsanto has, it is worth bearing in mind the following: Global sales of Roundup herbicide exceed those of the next 6 leading herbicides combined. Monsanto holds the #1 or #2 position in key corn and soybean markets in North America, Latin America, and Asia. Monsanto also holds a leading position in the European wheat market. Monsanto is the world leader in biotechnology crops. Seeds with Monsanto traits accounted for more than 90% of the acres planted worldwide with herbicide-tolerant or insect-resistant traits in 2001.



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