June 30, 2011

Monsanto Q3 profit Up 77% on buoyant sales



Monsanto Co. on Wednesday (Jun 30) raised its fiscal 2011 profit guidance after buoyant sales of corn and soy seeds though it disclosed that US regulators are probing customer incentives provided by its restructured weed killer business.


The world's largest seed maker by revenue reported a 77% rise in profit for its key fiscal third quarter, beating analysts' expectations and reversing some of the lost share after US farmers last year rejected some of its new high-margin products.


Shares were recently up 3.6% at US$69.32 in early trade.


The St. Louis-based company now expects per-share earnings of US$2.84-US$2.88 for 2011, compared with its prior estimate of US$2.72-US$2.82. The company is trying to re-establish its momentum after a rocky year in which farmers balked at the high price of its new premium corn seed, SmartStax, and prices for its glyphosate herbicide tumbled amid tough competition from generic competitors.


Monsanto said it was cooperating with a previously undisclosed US Securities and Exchange Commission probe into its customer incentive programs for herbicides in fiscal years 2009 and 2010, and had received a subpoena to provide related documents.


With the northern hemisphere seed-selling season all but finished, Monsanto said it has hit its targets for sales of its premium corn and soy seeds this year. Executives have said that is an important step for future years, as farmers who buy the seeds and see yield gains are then willing to pay higher prices.


Gains in seed volume were expected given soaring crop prices that compelled farmers to plant more acres this year, and the company gave no indication of whether it was gaining or losing market share versus rival Pioneer Hi-Bred, a DuPont Co. (DD) subsidiary. Pioneer executives have said they will increase market share in corn and soy for the third straight year in 2011.


The seed business has taken on growing significance as the company has scaled back its focus on weed killer due to a flood of generic competition from China that destroyed profits in Monsanto's glyphosate business. The company stopped selling glyphosate at lower prices to grow volume, and on Wednesday said its strategy has worked.


The company projected its segment that includes glyphosate and lawn-and-garden products will deliver US$700 million in gross profit in 2011, up from a prior estimate of US$550 million to US$600 million.


For the quarter ended May 31, Monsanto reported a profit of US$680 million, or US$1.26 a share, up from US$384 million, or 70 cents a share, a year earlier. The year-earlier period included 11 cents in charges. Revenue climbed 21% to US$3.59 billion.

Video >

Follow Us