April 6, 2012

 

 

 

Monsanto raised its guidance for full-year earnings following reports of forecast-beating - and record - quarterly profits, aided by the rapid start to the US spring planting season.

 

The group, the world's largest seed company, said that its earnings per share for the year to the end of August would come in at US$3.45-3.50 a share, above the previous target of US$3.39-3.44 a share.

 

The upgrade followed a 19.0% rise to US$1.21 billion in earnings for the December-to-February quarter, and equivalent to US$2.24 a share.

 

Wall Street had expected a US$2.12-a-share result.

 

The rise in profits reflected the "strong performance" of the group's core seeds business, which benefited from "the timing of an early US season", Monsanto said.

 

US corn plantings, which farm officials estimate will hit a 75-year high, have got off to rapid start, if not quite as fast as investors had expected, data on Monday (Apr 2) showed.

 

Indeed, corn sales rose 17.5% to US$2.82 billion in the quarter, leading a 14.7% increase to US$3.92 billion in sales in the seeds business overall.

 

"Second quarter growth was led by the strength of Monsanto's corn business, with the strongest contributor being the US corn business," the group said.

 

Sales of cutting-edge "reduced refuge" genetically modified corn seed now looked on track to reach "the high end" of a target range of 22-24 million acres.

 

"Sales are tracking well for the expected increase in the company's newest corn platform in the US," the group said.

 

And even if sowings do not hit the 95.9 million acres forecast by a USDA farmer survey, with many analysts predicting a switch to soy, this will not affect profits much, Monsanto said.

 

"With brands in corn, cotton and soybeans, Monsanto is positioned to meet demand regardless of normal fluctuations in crop planting patterns in any given year."

 

Corn is more profitable to the group than soy, but less so than cotton, on the basis of gross profit per acre planted.

 

The company also upgraded its forecast for free cash flow for the full year, to US$1.6-1.8 billion, from US$1.3-1.5 billion, "reflecting strong business results, strong collections from a healthy ag environment, and the benefit of working capital management".

 

Nonetheless, Monsanto shares closed down 2% at US$80.58 in New York.