June 1, 2012

 

Monsanto sees better profits on positive corn seed sales

 

 

For the second time in less than two months, Monsanto raises its expected earnings, with forecasts of higher weedkiller sales and a sure jump in US corn seed sales.

 

Hugh Grant, the Monsanto chief executive, said that the seed group would achieve earnings per share of US$3.73-$3.78 in the year to the end of August, implying growth of at least 26% on-year.

 

The estimate was higher than previous guidance upgraded early last month to US$3.45-$3.50 a share, and market expectations of a US$3.56-a-share number.

 

The latest revision reflected in part a sales beat by its herbicides division, owner of the Roundup brand, which had been a drag on the company's performance as makers of generic alternatives took market share.

 

However, Monsanto also flagged that an early uptick in sales corn was down to more than the unusually-early sowing season, notably in the US, the top grower of the grain.

 

All but 4% of the US crop was planted by May 20, after which yield potential is typically seen as being compromised to the tune of about one bushel per acre per day's delay.

 

"Now that we have a more complete view on the greater planted acres from the US and Europe, it is clear our performance reflects an even greater component of business strength and momentum versus timing of a historically-early selling and planting season," Grant said.

 

Indeed, sales had remained "strong" in the group's third quarter, which ends on Thursday (May 30), leaving the group to forecast earnings per share for the period of US$1.69-$1.74.

 

Analysts have forecast a US$1.29-a-share result.

 

Furthermore, Monsanto upgraded by two million acres to 24 million acres one-quarter of national plantings the area of US corn sown with its top-of-the-range Genuity Reduced Refuge genetically modified seed.

 

US sowings with the group's Roundup Ready 2 soy seed genetically modified for herbicide resistance, to allow farmers to spray off weeds without damaging the crop - will come in at the upper end of the range of 27-30 million acres Monsanto previously guided too.

 

The group also gave an outline forecast of "mid-teens" earnings-per-share growth in its 2013 financial year, which starts in September, in line with long-term growth guidance.

 

"We feel very good that the fundamentals driving 2012 carry into next year as well, and we have the strategic growth drivers in place to support continued growth in 2013," Grant said.

 

Monsanto shares rose 2.2% to close at US$76.41 in New York.