Monsanto Says Earnings May Rise 17%, Trailing Estimates

Monsanto Forecasts 2013 Profit May Rise 17%, Trailing Estimates
The Monsanto Co. seed plant stands near Rojas, Argentina. Photographer: Diego Giudice/Bloomberg

Monsanto Co., the world’s largest seed company, forecast fiscal 2013 earnings will rise as much as 17 percent on sales of the newest genetically engineered corn and soybean seeds in the U.S. and Latin America.

Profit for the year that began Sept. 1 will rise to $4.18 to $4.32 a share, from $3.70, St. Louis-based Monsanto said today in a statement. The average of 18 estimates compiled by Bloomberg was for profit of $4.38. The shares fell 2.2 percent to $88.59 at the close in New York.

The forecast is consistent with Monsanto’s previous comments, even though “the Street is a bit ahead,” Kevin W. McCarthy, an analyst at Bank of America Corp. in New York, said in a report today. Monsanto typically raises its outlook through the year, Don Carson, a New York-based analyst at Susquehanna Financial Group, said in a Sept. 30 report. Both analysts recommend buying the shares.

Since 2010, Monsanto Chairman and Chief Executive Officer Hugh Grant has targeted annual percentage profit increases in the “mid-teens” as the company raises prices on some genetically modified seeds and expands in Latin America and Eastern Europe. Monsanto stands to gain from the worst U.S. drought in more than five decades as competitors face seed shortages, the company said in June.

Quarterly Loss

“This outlook is the underlying base growth they think they can do, so there is upside,” such as higher prices for Roundup herbicide, Chris Shaw, a New York-based analyst at Monness Crespi Hardt & Co. who rates the shares hold, said today by phone. “Nothing in this suggests anything worrisome.”

Monsanto’s net loss widened to $229 million, or 42 cents a share, in the three months through August, from $112 million, or 21 cents a share, a year earlier, as corn and cotton seed sales fell, according to the statement. The fiscal fourth-quarter loss excluding a one-time benefit was 44 cents a share, wider than the 43-cent average of 18 estimates compiled by Bloomberg.

Sales in the quarter fell to $2.11 billion from $2.25 billion, trailing the $2.23 billion average estimate.

Monsanto’s fourth quarter is typically its weakest period because farmers in North America and Europe haven’t begun purchasing seed and herbicide for spring planting.

The company grabbed another 1 percentage point of market share in soybeans during 2012 and more than 1 point in corn, President Brett Begemann said on a conference call.

Capital Spending

Gross profit from seeds and genetic licenses will rise 8.1 percent to $6.55 billion in fiscal 2013, from $6.06 billion, with half the growth occurring outside the U.S., Monsanto said. Average corn seed prices will rise as much as 10 percent as farmers upgrade to the newest genetic technologies, Begemann said.

Capital spending will rise to as much as $1 billion, from $646 million in 2012, for investments in Latin America and Eastern Europe, Chief Financial Officer Pierre Courduroux said on the call.

First-quarter earnings will see “significant growth” as farmers in Latin America buy corn seed with added genetic traits and U.S. seed orders come in early, Courduroux said.

U.S. farmers in 2013 probably will match the 96 million acres of corn sown this year and may exceed this year’s 76 million acres of planted soybeans, Begemann said.

Corn Seeds

Sales of so-called reduced-refuge corn seed engineered to produce insecticide will rise to 36 million to 38 million acres in 2013, from 27 million acres, Monsanto said. The updated version of Roundup Ready soybeans, designed to survive herbicide applications, will be planted on 39 million to 41 million acres, compared with 32 million acres in 2012, the company said.

DroughtGard corn seeds, which will be available in the Western Corn Belt next year, yielded an average of 5 bushels an acre more than DuPont Co.’s Aquamax seeds in more than 250 trials, Monsanto said. Aquamax yielded 8 percent more than competing hybrids in “water limited” fields this year, DuPont said on Oct. 1.

Gross profit from the unit that makes Roundup herbicide will be about $1 billion, compared with $986 million in fiscal 2012, the company said.

Monsanto should benefit from prices for glyphosate, the generic form of the company’s Roundup herbicide, that have climbed about $3 a gallon in recent months, Shaw, the Monness Crespi analyst, said in a note today.

“Guidance will be a low bar that Monsanto should be able to exceed in 2013,” Shaw said. “Seed availability, higher glyphosate prices and strong yield performances by its seeds in 2012 all should drive earnings growth above the mid-teens levels.”

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