Corzine slashing staff at MF Global amid losses

By Steve Eder

NEW YORK (BestGrowthStock) – Jon Corzine, the new chief executive of MF Global Holdings Ltd (MF.N: ), said on Thursday the futures and options broker would cut its workforce by up to 15 percent after five straight quarters of losses.

MF Global reported quarterly results that missed analysts’ expectations, sending its shares down sharply before rebounding as investors reacted to the job cuts.

Corzine, who initiated a broad review of MF Global’s businesses when he took over seven weeks ago, called the company’s fourth-quarter results “completely unacceptable.”

MF Global said it would reduce staff by 10 percent to 15 percent in the current quarter, freeze hiring, reduce compensation, and eliminate or postpone initiatives that were not central to the company’s direction. MF Global has a workforce of about 3,200.

“We are taking decisive action to fundamentally improve the earnings profile of this company,” Corzine said in a statement.

Lower interest rates and high compensation costs have weighed on the company’s bottom line.

“When you recruit people you have to carefully manage their payouts in relation to what they are going to be able to generate,” said Chris Allen, an analyst with Ticonderoga Securities. “I don’t think the prior management was as careful.”

Corzine, a former New Jersey governor and one-time Goldman Sachs Group Inc (GS.N: ) chief executive, was named chief executive in March. He succeeded Bernard Dan, who the company said resigned for personal reasons after being in the job less than two years.

According to Ticonderoga’s estimates, MF Global could see net benefits of $59 million to $75 million, or 22 cents to 28 cents per share, from cost-cutting in 2011.

Corzine said financial regulatory reform efforts could be a boon to MF Global, especially as it zeros in on the importance of exchange-traded clearing arrangements, one of MF Global’s strengths.

LOOKING TO FUTURE

For the quarter ended March 31, New York-based MF Global posted net losses to common shareholders of $96.5 million, or 78 cents per share, compared with a loss of $119.3 million, or 98 cents per share, a year earlier.

Net revenue fell to $240.5 million from $257.1 million.

The adjusted loss per share was 17 cents, compared with analysts’ average forecast for a profit of 1 cent, according to Thomson Reuters I/B/E/S.

“These are not the kind of results that MF Global management will tolerate, nor should its shareholders,” Corzine said during a conference call with investors.

Corzine, who lost a reelection bid last year, had proposed thousands of job cuts in 2008 when he was governor.

Analyst Ed Ditmire of Macquarie Capital wrote in a research note that MF Global was “the only company in our market structure coverage universe which is unprofitable.”

He said the revenue outlook for the current quarter appeared to be “very strong” in light of “surging global futures volumes … and a doubling of our key spread indicator for MF’s principal trading business.”

Corzine said that as profitability returns, the company would look to trade more with its own money.

MF Global shares were up 0.25 percent, or 2 cents, at $8.14 in afternoon trading on the New York Stock Exchange.

Investing Research

(Reporting by Steve Eder; editing by John Wallace)

Corzine slashing staff at MF Global amid losses