Monsanto Co. (MON), the world’s largest seed company, raised its full-year profit forecast and posted third-quarter earnings that topped analysts’ estimates on higher sales of Roundup weed killer and genetically modified seeds.
Net income climbed 77 percent to $680 million, or $1.26 a share, in the three months through May 31, from $384 million, or 70 cents, a year earlier, St. Louis-based Monsanto said today in a statement. That beat the $1.10 average estimate of 17 analysts in a Bloomberg survey.
Profit excluding some items will rise to $2.84 to $2.88 a share in the fiscal year through August, compared with a previous prediction of $2.72 to $2.82. The average estimate of 20 analysts surveyed by Bloomberg was $2.82. Monsanto also said the Securities and Exchange Commission is investigating customer incentives for Roundup.
Roundup, the world’s best-selling herbicide, and other crop chemicals returned to profit after a $175 million loss before interest and tax in the year-ago quarter. Gross profit from seeds and genetics rose 21 percent after Chief Executive Officer Hugh Grant cut prices of new corn and soybean seeds in an effort to stop gains by DuPont Co.’s Pioneer unit.
“Soybeans had better sales and gross profit than expected, which was probably the most upside in seeds,” Chris Shaw, a New York-based analyst at Monness Crespi Hardt & Co. who rates the shares “neutral,” said in an interview. “It will be interesting to see whether the market rewards them for better Roundup earnings or discounts that as a bonus.”
Monsanto rose $2.30, or 3.4 percent, to $69.20 as of 9:35 a.m. in New York Stock Exchange composite trading. The shares declined 3.9 percent this year before today.
Monsanto said the SEC probe involves customer-incentive programs relating to glyphosate products, the generic name for Roundup, in fiscal years 2009 and 2010. Monsanto said it received a subpoena for documents and is cooperating. John Nester, a SEC spokesman, declined to comment.
The company planned to spend as much as $150 million “of incremental price concessions or trade incentives” in the Roundup business to establish the brand in Latin America, North America and Europe, Carl M. Casale, Monsanto’s former chief financial officer, said in a February 2010 conference call.
Sales in the fiscal third quarter rose 21 percent to $3.59 billion, as crop chemicals such as Roundup gained 57 percent and seeds and gene license fees climbed 12 percent.
Monsanto’s loss in the fourth-quarter, traditionally a money-losing period because of crop-planting seasonality, will be 26 cents to 30 cents a share, the company said in a presentation posted on its website. The average estimate of 16 analysts surveyed was for a loss of 18 cents.
Roundup Ready 2 soybeans and reduced refuge corn, Monsanto’s newest modified seeds, will meet forecasts for planting on mid-teens millions of acres in the U.S. this year, the company said.
High crop prices are generating record income for U.S. farmers, according to U.S. Department of Agriculture data. That typically helps boost demand for pricier seeds that Monsanto engineers to kill pests and tolerate applications of weed killer.
DuPont last year tied Monsanto for the lead in North American corn-seed market share, and the Wilmington, Delaware- based company said on June 14 that it gained more share this year in corn and soybeans.
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