Monsanto Profit Declines Amid Weak Agricultural Markets

  • Second-quarter net income was company's lowest in five years
  • Falling farm incomes hurt demand for seeds, crop chemicals

Monsanto Co., the world’s largest seed company, posted its smallest fiscal second-quarter profit and sales since 2011 as a global slump in agricultural commodities depressed demand.

Net income fell to $1.06 billion, or $2.41 a share, in the three months through February, from $1.43 billion, or $2.92, a year earlier, the St. Louis-based company said in a statement Wednesday. Profit excluding one-time items was $2.42, matching the average of 20 analysts’ estimates compiled by Bloomberg.

Sales fell to $4.53 billion from $5.2 billion a year earlier, trailing the $4.73 billion average estimate. The company reiterated its forecast for full-year profit, excluding one-time items, of $4.40 to $5.10 a share. The shares fell 1 percent in pre-market trading.

Monsanto EPS, Sales 2009-2016 ($ billions)

Corn and soybean prices have posted three successive annual declines following booming harvests. Net farm income in the America will probably drop a third straight year to $54.8 billion, the lowest level since 2002, the U.S. Department of Agriculture said in February. That’s hurting demand for everything from tractors and fertilizer to weedkiller.

As competitors aggressively discount seeds in the U.S., Monsanto said it has been matching prices and is poised to hold or grow its market share. The USDA said last week in a report that corn plantings will increase 6.4 percent from the prior year. Monsanto’s agricultural productivity segment, which is dominated by sales of the weedkiller glyphosate -- marketed under the Roundup brand -- posted the lowest net sales for the quarter since 2011.

Weedkiller Glut

“Glyphosate prices have been trending down for a number of years now, and should continue to stay at these low levels for now” as generic Chinese producers make more than farmers need, Chris Shaw, a New York-based analyst at Monness Crespi Hardt & Co., said Wednesday by phone.

To diversify its crop-chemicals portfolio, Monsanto continues to explore potential deals with BASF SE and Bayer AG, people with knowledge of the matter said in March. An unsolicited $43.6 billion proposal to acquire Syngenta AG, the world’s largest pesticide producer, was rejected by the Swiss company in August. Instead, China National Chemical Corp. said in February that it reached a deal to buy Syngenta.

The global seeds and pesticides industry is in the middle of a wave of consolidation: aside from the Syngenta deal, Dow Chemical Co. and DuPont Co. announced in December they would merge before breaking into three separate entities, including a Monsanto-size agriculture company.

Monsanto dropped to $85.25 at 9:09 a.m. before the start of regular trading in New York.

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