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Ceres raises cost savings target, as initial cuts bear fruit

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Ceres revealed it was deepening a cost cuts drive as the biotech seed group, which has ditched bioenergy markets to sidestep pressure from Brazil, unveiled a narrowing in losses and soaring revenues.

The California-based company, which like many seed companies has struggled amid tough agriculture markets, said that it was raising to $8m-10m its target for cost cuts, from a previous forecast of $6m-8m.

"We have identified significant opportunities to reduce operating expenses, and are rapidly implementing our realignment plan," said Paul, the Cere chief financial officer.

Recovery drive

The move represents the latest effort to boost prospects for the group, which in June revealed it was ditching bioenergy markets to focus on fodder crop, reducing its exposure to a Brazilian market which has caught out many of its larger peers.

Indeed, Mr Kuc said that "on an operational basis, we have completed our shift away from bioenergy and Brazil", where Cere has been developing sweet sorghum as a feedstock, in a project with cane-and-energy giant Raizen.

The tumble in the Brazilian real has reduced the appeal of imported agricultural inputs to farmers in the South American country, hurting companies from farm equipment groups to fertilizer manufacturers.

Ceres also last month completed a $7.6m fund raise from shareholders after its cash pile dwindled to $8.1m.

Losses narrow

And the group revealed that its efforts to cut costs were already bearing fruit, with operating expenses for the September-to-November quarter, at $4.75m, falling by $1.6m year on year,

Most of the decline came in selling and administrative expenses, although research and development costs fell markedly too.

Meanwhile, sales more than doubled to $942m for the quarter, from $400m a year before, helping losses narrow by 43% to $3.42m.

While the improvement was fuelled a one-off benefit from the completion of software agreements, Ceres was upbeat on its potential for improving its underlying fortunes through its focus on feed crops, saying that it plans in the forthcoming season "to increase the number of companies distributing its forage sorghum seed".

"We look forward to continuing to deliver on our milestones," Richard Hamilton, the Ceres chief executive, said.

Sorghum area prospects

The comments come amid expectations of a sharp drop in US sowings of sorghum itself next year, with the US Department of Agriculture last month forecasting a drop in area of 1.4m acres to 7.3m acres.

The estimates reflect weakened price prospects for sorghum, with the USDA this week cutting to $3.05-3.55 a bushel, from $3.20-3.80 a bushel, its forecast for farmgate values for the 2015 harvest.

Farmers received an average of $4.03 a bushel for their 2014 sorghum crop.

However, separate USDA data on Tuesday showing that growers planted 2.9m fewer acres with winter wheat have raised expectations that extra area will be diverted to spring-planted crops, notably corn and soybeans, but also the likes of sorghum too.

By Agrimoney.com

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