April 4, 2013

 

 

Monsanto has lifted its forecast for full-year earnings for a second time as it reveals quarterly earnings ahead of Wall Street expectations, and shows a strong start to the critical US spring sowing season.

 

The US-based seeds company lifted to US$4.40 - US$4.50 per share, from US$4.30 - US$4.40 per share, its forecast for earnings in the year to the end of August.

 

The upgrade came as Monsanto unveiled a 22% rise to US$1.48 billion in earnings for the December - February quarter, equivalent to US$2.73 per share, beating analyst estimates of a US$2.58-a-share result.

 

While the guidance upgrade left room for Monsanto to fall short of Wall Street expectations for the full year, with brokers expecting a US$4.58-a-share result, shares in the group rose 0.3% to US$103.99 in afternoon deals in New York.

 

On April 1, Monsanto shares reached US$106.61, their highest level since September 2008 at the start of the world economic crisis.

 

The rise in quarterly earnings, on revenues up 15.2% at US$5.47 billion, was led by corn seed, for which sales alone rise 16.5% to US$3.28 billion.

 

The increase "was driven in part by the conclusion of a successful and record second (safrinha) season in Brazil, where the company continued to achieve strong demand for its latest corn products", Monsanto said.

 

Safrinha corn, planted on land vacated by the soy harvest, has become increasingly popular in Brazil, such that it is expected to exceed the main crop harvest in 2012-13.

 

Revenues from soy fell 17.7% to US$677 million, where Monsanto is in the midst of a long-running legal dispute in Brazil over the patent surrounding its Roundup Ready varieties, genetically modified to withstand glyphosate herbicides and allow farmers to spray off weeds.

 

Brett Begemann, the group's chief commercial officer, said that the company had undertaken an "orderly wind down" of its first generation of Roundup Ready soy in Brazil, pending the roll-out of the follow-up Intacta product.

 

Sales at Monsanto's agricultural productivity division, which sells Roundup herbicides, rose 37% to US$1.13 billion.

 

The group also flagged a strong start to the US spring sowing season for its corn and soy products.

 

Monsanto forecast "another year of strong performance" in corn, saying that it was "on track to reach the high end" of the sales of 36 million - 38 million acres it has forecast for its cutting-edge Genuity reduced refuge seed.

 

With US farmers currently expected to plant some 97 million acres with corn this year, Monsanto's target implies a market share of nearly 40%.

 

In its advanced Genuity RoundupReady 2 Yield soybeans, the group forecast it was on track to achieve sales equivalent to the "high end" of its target of 39 million - 41 million acres, in sowings terms.

 

The data received a mixed response from analysts, who welcomed the announcement of results ahead of forecast, but raised caution over the relatively high contribution from weedkillers, a market which attracts a lower stock market rating than seeds.