Monsanto Profit Tops Estimates; 2010 Outlook Repeated

Oct. 7 (Bloomberg) -- Monsanto Co., the world’s largest seed producer, reported fourth-quarter profit that exceeded analysts’ estimates because of higher corn and vegetable seed sales. The company maintained its forecast for 2010 earnings.

Profit in the three months ended Aug. 31 was 2 cents a share, excluding some items, St. Louis-based Monsanto said today in a statement. The average estimate of 13 analysts in a Bloomberg survey was for profit of 1 cent. The net loss widened to $233 million, or 43 cents a share, from $172 million, or 31 cents, a year earlier, largely because of restructuring costs.

Chief Executive Officer Hugh Grant is cutting 8 percent of the workforce as farmers spend less and Chinese competitors sell cheaper generic versions of the company’s Roundup herbicide. Monsanto repeated its 2010 earnings forecast after two earlier cuts in the outlook for the glyphosate-based weed killer.

“People thought they would lower the outlook,” Laurence Alexander, a New York-based analyst at Jefferies & Co., said by telephone. “The outlook for next year is basically in line.”

Earnings in the year that began Sept. 1, excluding some items, will be $3.10 to $3.30, Monsanto said, repeating a Sept. 10 forecast. Profit was projected to be $3.42 a share, the average estimate of 15 analysts surveyed.

First-Quarter Forecast

First-quarter profit will be break even or a “modest” loss because of lower Roundup sales, Chief Financial Officer Carl Casale said on a conference call with analysts. Monsanto was projected to post profit of 40 cents a share in the current quarter, the average estimate of four analysts.

About 60 percent of 2010 earnings will accrue in the second quarter and 40 percent in the third quarter, with a small loss in the final three months, Casale said.

Monsanto fell 99 cents, or 1.3 percent, to $74.38 at 11:52 a.m. in New York Stock Exchange composite trading. The shares gained 7.5 percent this year through yesterday.

Fourth-quarter revenue fell 8.4 percent to $1.88 billion because of lower herbicide sales, trailing the $1.99 billion average estimate of six analysts in the survey.

The fourth-quarter net loss includes 53 cents a share of restructuring expenses and a gain of 8 cents from the sale of the sunflower unit.

Results in Monsanto’s fourth quarter often are weaker than in other periods because farmers in North America and Europe have planted most of their crops.

Gross Profit

Fourth-quarter gross profit declined 11 percent to $857 million as profit from seeds and traits dropped 17 percent and crop chemicals fell 3.5 percent, led by a 23 percent drop in glyphosate herbicides. Corn and vegetable seed sales gained, while cotton, soybeans and other crop seeds declined.

In 2010, gross profit from seeds and traits will rise to $5.1 billion to $5.2 billion, Monsanto said, repeating the September outlook. That’s an increase of as much as 16 percent from $4.5 billion in 2009.

Gross profit in the weed-killer unit will drop to $650 million to $750 million, Monsanto said in a presentation on its Web site, repeating last month’s forecast. That’s as much as a 64 percent decline from $1.8 billion in 2009. Monsanto initially forecast gross profit of $1.9 billion before reducing its expectations in June and September.

The company is cutting Roundup prices in half to as little as $10 a gallon in the hopes of reclaiming lost market share, Grant said in a Sept. 23 interview.

Herbicide gross profit will be as much as $900 million in 2011 before stabilizing at about $1 billion in 2012, Monsanto said in the presentation. Grant in June said he may divest the Roundup business after restructuring and carving it out as a separate unit.

Market Share

Grant said he was “disappointed” with Monsanto’s 36 percent share of the U.S. corn seed sales, unchanged from 2008, after targeting a gain of as much as 2 percentage points. Few companies gained share while Monsanto increased average corn- seed prices 25 percent to capture some of the value provided by crops that resist bugs and herbicides, he said.

“We all ended up about flat,” Grant said. “In a world of flatness, I feel really good because we priced to the value we deliver.”

The Holden’s unit, Monsanto’s licensing arm, lost corn-seed share to ProAccess, a unit of DuPont Co., Scarlett Foster, a spokeswoman, said on the call.

The company’s share of U.S. soybean seed sales fell half a percentage point to 28.5 percent, and cotton-seed sales dropped 2 points to 39 percent of the U.S. market.

DuPont Share

DuPont’s Pioneer unit, the second-biggest seed producer, said Sept. 16 that it grabbed 2 more percentage points of corn- seed share, reversing years of losses to Monsanto, and gained 3 points of U.S. soybean share.

Smartstax corn seed, developed with Dow Chemical Co. to contain eight genetic modifications, will “reinvigorate” share gains when the product is introduced for planting next year, Casale said.

The seeds, which boost yields 5 percent to 10 percent compared with other products, will be planted on as many as 4 million acres in 2010, with a U.S. potential for 65 million acres, Monsanto has said.

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

Last Updated: October 7, 2009 11:53 EDT