January 4, 2008

 

Monsanto's profit forecast up after more than double Q1 revenues

 

 

Biotech giant and world's largest seed producer Monsanto Co reported more than doubled first-quarter profit, which prompted to increase its earnings forecast for this year after raising demand for food and ethanol boosted corn-seed sales in Brazil and Argentina.

 

In a statement, the company's net income rose to US$256 million, or 46 cents a share, in the three months ended November 30, from US$90 million, or 16 cents, a year earlier. That tops the 35-cent average estimate of 10 analysts surveyed by Bloomberg.

 

Monsanto's profit were increased the most in more than a month, reaching a record in New York Stock Exchange trading as Chief Executive Officer Hugh Grant's push to increase market share in Latin America helped double corn-seed purchases by farmers in Brazil and Argentina.

 

Higher prices for Roundup weed killer and early 2008 orders from US farmers also help boost first-quarter sales 36 percent to US$2.1 billion.

 

According to Mark Demos, who helps manage $21.9 billion at Fifth Third Asset Management, including 442,000 Monsanto shares, said "operating margins just exploded¡­and can come up stronger than executives think in this strong-up cycle". 

 

Monsanto raised its full-year forecast to US$2.50 to US$2.60 a share from a November range of US$2.20 to US$2.40. Previous survey shows that the company had $2.59, on average, excluding a potential per-share gain of 22 to 24 cents in the second quarter should Solutia Inc., a chemical maker spun off from Monsanto in 1997, emerge from bankruptcy.

 

Gross profit rose to 50 percent of sales from 44 percent a year earlier, Monsanto said. The company's Dekalb corn-seed brand may grab as much as an additional 3 percentage points of US market share, extending yearly gains, Monsanto said.

 

Monsanto said earnings may double again in five years because of increased global demand for genetically modified seeds that boost yields of corn, soy and cotton.

 

Brazil, one of the world's biggest soy and corn producers in the world, has already approved the use of genetically-modified corn and soy. Monsanto's Roundup-resistant seeds may account for 95 percent of Brazilian soy market by 2010.

 

Monsanto acquired 10 percent of the corn market in September with the US$100 million purchase of Brazil's Agroeste Sementes.

 

For its research and development department, Monsanto reported that 10 specific projects in its biotech R&D pipeline either advanced from one phase to the next or were added to the pipeline. The update also highlighted the company's first ever transition of four projects from Phase 2 to Phase 3, an important milestone that underscores the commercial viability and success of the projects.

 

The presentation outlined several key measures of progress including several firsts:

 

-- Ten projects either advanced phases or were added to the pipeline - among the largest volume of project

    progress to date.

 

-- Four projects transitioned from Phase 2 to Phase 3, where the probability of success moves above 50 percent 

   and large scale regulatory and variety development work begins, reflecting the last major technical hurdles.

 

-- First ever advancement of a multi-generational family:

 

    Second-generation drought tolerant corn advanced to Phase 2 and first-generation drought tolerant corn

    advanced to Phase 3, making it the industry's first drought project to move into the regulatory and       

    commercial phase.

 

-- Five projects were added to the pipeline this year, including SmartStax corn, soy disease, second-generation

    high-oil soy, high-stearate soy, and high-oil corn.

 

-- Two of three High Impact Technologies (HITs) advanced phases:

 

    Vistive III and drought tolerant corn. The movement, which was based on results from 2007 trials, advanced

    the technologies one step closer to commercial launch.

 

Highlighted soy projects:

 

-- Four years of data continue to validate 7-to-11 percent yield advantage of Roundup RReady2Yield over

   comparable Roundup Ready soy, the first HIT that will reach commercialization.

 

-- Insect-protected soy, Monsanto's first-ever trait developed exclusively for non-US markets, advanced to Phase

   3 after the technology continued to demonstrate excellent Roundup tolerance and effective protection against

   key lepidopteran pests.

 

-- Dicamba-tolerant soy, which are designed to provide a new, unique mode of action for farmers, advanced to

    Phase 3 after demonstrating solid tolerance to dicamba applications. This technology is designed to      

    provide soy farmers with the most effective weed management system available when stacked with Roundup

    RReady2Yield.

 

-- Vistive III, another HIT, not only advanced to Phase 3, but its progress over the last three years has been so

    significant that it supplanted Vistive II, making it the first ever trait to "leapfrog" another product in 

    development.

 

-- Higher-yielding soy showed positive performance. This year, more than 60 events were tested at 18 locations,

    with lead events showing strong yield advantages over the conventional soy controls.