Monsanto Lowers Profit Forecast on Corn Drop, DollarJack Kaskey
Monsanto Co., the world’s largest seed company, lowered its forecast for fiscal 2015 earnings and said it will cut spending as farmers plant less corn while a strengthening U.S. dollar erodes foreign sales.
Earnings before one-time items in the 12 months through August will now be at the low end of its previous projection of $5.75 to $6 a share, St. Louis-based Monsanto said Wednesday in a statement.
The company also reported second-quarter profit and sales that trailed analysts’ estimates. The shares fell as much as 2.2 percent in premarket trading in New York.
Monsanto, led by Chairman and Chief Executive Hugh Grant, said it will cut operating spending by as much as 5 percent to counter lower sales and a dollar surge that’s curbing revenue from places such as Brazil, the largest source of sales after its home market. Foreign exchange will reduce 2015 earnings by as much as 40 cents a share, the company said.
“Currency has a big effect on full-year guidance, and the Brazilian real is a big issue for the second half,” Chris Shaw, a New York-based analyst at Monness Crespi Hardt & Co. who recommends holding Monsanto shares, said Tuesday by phone.
Profit excluding one-time items fell to $2.90 a share in the fiscal second quarter that ended Feb. 28, from $3.15 a year earlier. That missed the $2.93 average of 18 estimates compiled by Bloomberg.
Revenue fell 11 percent to $5.2 billion, trailing the $5.59 billion average estimate. The shares dropped 0.6 percent to $111.87 at 8:40 a.m. in New York.
Revenue from sales of seeds and genetic licenses tumbled 10 percent in the quarter, led by a 15 percent drop in corn, Monsanto’s biggest business. The U.S. Department of Agriculture forecast on Tuesday that 2015 corn plantings will drop 1.5 percent to 89.2 million acres (36.1 million hectares), a third consecutive annual decline.
Corn prices have tumbled since their 2012 peak with bin-busting inventories and favorable growing conditions. As of March 1, U.S. stockpiles were 11 percent higher than a year earlier and the most on that date since 1987, the USDA said.
Soybean seed sales were a bright spot for Monsanto, gaining 7.7 percent.
The company is fighting back against an assessment earlier this month from the World Health Organization’s International Agency for Research on Cancer that glyphosate probably causes cancer. Glyphosate is the active ingredient in the company’s best selling Roundup herbicide.
Monsanto says the finding is at odds with regulators in the U.S., the European Union and elsewhere around the world, and has accused the WHO agency of “cherry picking” data.