Monsanto reaps profit on corn
marketwatch.com, tax cut Profit forecast comes up short of estimates; analyst warns of rivals
By Laura Mandaro, MarketWatch
Last Update: 2:35 PM ET Jan 4, 2007
A previous version gave the incorrect growth rate for net income from the year-ago quarter. It has been corrected.
SAN FRANCISCO (MarketWatch) -- Monsanto Co.'s first-quarter net income increased 53% as more farmers used its genetically modified corn seeds and Roundup weed killer, the company reported Thursday.
forecast earnings at the upper end of its previous forecast of $1.50 to $1.57 a share for fiscal 2007. That fell short of analysts' estimates of $1.60 a share. Monsanto's shares were last down 1.9% at $50.70.
The company said that net income for the three months ended Nov. 30 reached $90 million, or 16 cents a share. Analysts polled by Thomson First call had expected earnings per share of 10 cents, on average.
Monsanto's first-quarter sales rose 10% to $1.54 billion, topping estimates of $1.53 billion.
The top-line growth reflected U.S. appetite for specialized corn seeds, which contain genetic traits to ward off insects, as well as greater U.S and Brazilian demand for its Roundup herbicides.
"Corn was the bright spot in the quarter," said Terrell Crews, Monsanto's chief financial officer, in a conference call with investors.
Helping Monsanto's profit, its tax rate dropped to 10% from 37% due to the conclusion of a tax audit.
Monsanto currently has the edge over rival DuPont in the race to sell more genetically modified corn seeds. Its so-called triple-stack product contains genetic traits that protect the plant from above- and below-ground insects, plus the effects of herbicides like Roundup.
It reiterated that more than 35% of its national corn seed sales sold under the Dekalb and Asgrow brands could be in triple stack during the 2007 growing season, up from about 20% last year.
"Based on what our primary competitor said publicly, the best of the national competition seems to be able to offer is around 10% of its volume in a triple stack this year," said Chief Executive Hugh Grant during the call. "We think we've established a clear competitive advantage."
Still, Monsanto's edge over its rivals in agricultural engineering may not hold for long.
DuPont, which rolled out its triple-stack corn seeds later than Monsanto, expects its triple-stack corn to make up about 10% of its North American corn seed sales by volume this year, up from 1% last year, and for that portion to continue growing. It is developing its own genetic trait to rival Monsanto's herbicide resistant Roundup Ready trait.
Given these pressures, Banc of America Securities analyst Kevin McCarthy kept the equivalent of a hold recommendation on Monsanto shares after the report's release.
"We remain neutral considering increasing competition from DuPont and Syngenta, emerging market risk and price concessions in Brazil and India; and potential for deceleration of growth in fiscal 2008," he wrote in a morning note to investors.
Monsanto said that its seeds and genomics sales gained 3.7% to $680 million, boosted by a 35% rise in its corn seed and traits business and offset by lower cotton seeds sales to Australia due to that country's severe drought. Also, its vegetable and fruit seed business' revenue dropped 20%.
It expects total soybean acres under production may decrease slightly during the growing season, as farmers increase the number of acres planted to corn in the United States.
The herbicides and animal agricultural products division's sales rose 15% to $859 million. End of Story |
