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MarketScreener Homepage  >  Equities  >  Nyse  >  Monsanto    MON

MONSANTO

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Monsanto Third-Quarter Profit Climbs 35% on Strong Seed Sales

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06/27/2012 | 11:10am EST

(Adds detail, comment from earnings call, clarifies investment in Argentina and updates share price, in the sixth through ninth paragraphs. )

--Monsanto reports 35% increase in third-quarter earnings

--Results driven by higher corn, soybean seed sales

--Earnings beat analyst forecasts

 
   By Ian Berry 
 

Monsanto Co.'s (MON) fiscal third-quarter profit jumped 35% as farmers planted more corn across the U.S. heartland this year.

The world's largest seed company, which last month raised its earnings forecast for the quarter and the full fiscal year, reported growth in both of its top seed businesses: corn and soybeans. Net sales jumped 35% for corn seeds and traits and 15% for soybean seeds and traits.

The jump in corn-seed sales followed a busy spring in which farmers, encouraged by high grain prices, planted the most corn acres since 1937, according to government estimates. Monsanto Chief Executive Hugh Grant also said the company has seen strong farmer adoption of its premium corn and soybean seeds, which have higher profit margins.

The results extend recent strength in the seed business, which has grown in importance as Monsanto reduces its focus on weed-killer offerings amid competition from generic products, especially those from China.

"With our most-significant selling seasons wrapped up, the third quarter gives us a near-complete view of our business for the fiscal year, and I feel very good about where we stand," Mr. Grant said.

Earlier this month, the company said it plans to invest $355 million in Argentina, including construction of a new corn-seed-production plant. The company is looking to the South American country, along with Brazil and Central and Eastern Europe, to drive growth during the next several years.

The company isn't expecting this year's rise in corn acreage to extend to 2013, but Mr. Grant said Monsanto is planning to produce enough corn seed to meet the same demand. This is a challenge, given the drought gripping much of the Midwest, which threatens to curtail seed production for the second year in a row.

Although most of Monsanto's corn-seed production is irrigated, "it would be real nice to see a splash of rain at some point," Mr. Grant said.

Mr. Grant added that the company plans to see a 5% to 10% increase in prices for its corn seed as farmers switch to higher-end seeds. The company is trying to provide a consistent approach to farmers following a backlash in 2010, when farmers balked at high prices for its new premium corn seed, SmartStax. Mr. Grant said seed pricing for next year is "largely decoupled" from commodity prices, and won't fluctuate substantially based on the price of corn.

For the quarter ended May 31, Monsanto reported a profit of $937 million, or $1.74 a share, up from a year-earlier profit of $692 million, or $1.28 a share. Excluding the resolution of a legacy-tax matter, per-share earnings rose to $1.63 from $1.28 a year earlier. In May, the company forecast a per-share profit of $1.57 to $1.62.

Net sales rose 17% to $4.22 billion, while analysts surveyed by Thomson Reuters predicted earnings of $767 million on revenue of $4 billion.

Monsanto's seed business--the company's biggest top-line contributor--saw an 18% increase in sales to $3.13 billion. The segment's growth was led by its corn and soybean portfolios, which offset weaker earnings in its vegetable-seed business. Cotton sales were up slightly.

The company confirmed its per-share earnings guidance for fiscal 2013. Last month, the company had raised its guidance for the third quarter and current fiscal year, resolving questions about whether its strong second-quarter performance was due to an unusually early planting season, rather than actual sales growth.

Shares were recently up 2.3% to $79.64. The stock is up 18% in the last 12 months as of Tuesday's close.

--Victoria Stilwell contributed to this article.

Write to Ian Berry at ian.berry@dowjones.com.

Stocks mentioned in the article
ChangeLast1st jan.
CORN FUTURES (C) - CBR (FLOOR)/C1 -1.20% 371.25 End-of-day quote.0.20%
EURO / ARGENTINE PESO (EUR/ARS) 0.35% 65.911 Delayed Quote.52.27%
EURO / BRAZILIAN REAL (EUR/BRL) 0.89% 4.6419 Delayed Quote.3.95%
MONSANTO 0.00%End-of-day quote.0.00%
NEW YORK COTTON -0.12% 64.88 End-of-day quote.-10.26%
SOYBEAN MEAL FUTURES (ZM) - CBE (ELECTRONIC)/C1 1.29% 307 End-of-day quote.-4.31%
SOYBEAN OIL FUTURES (ZL) - CBE (ELECTRONIC)/C1 -1.14% 30.43 End-of-day quote.11.72%
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