Monsanto Shares Rise on Strong Seed Sales

Thursday, 06 Jan 2011 12:56 PM

 

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Monsanto Co. reported Thursday that early orders for spring planting of corn and soybean seeds were up and said it was on track for good growth as it advances an array of new products closer to market.

The company's shares rose 3.2 percent after the rosy outlook from the leading biotech agricultural seed and genetic trait developer, even though its first-quarter results offered few surprises.

For the first quarter that ended on Nov. 30, Monsanto reported earnings of $6 million, or a penny a share, compared with a year-earlier loss of $19 million, or 3 cents a share, that reflected a restructuring. Earnings were 2 cents a share before special items, meeting analysts' expectations.

The company said it benefited from a 9 percent reduction in expenses, due mainly to restructuring moves in the prior year.

Net sales increased 8 percent to $1.8 billion, also matching expectations. All major crop segments reported increases, led by corn seed and trait sales, which rose to $614 million from $569 million.

The primary driver for corn increases was the company's Latin American seed business, due partly to a rise in planted acres in Argentina, Monsanto said.

Soybean seed and trait sales totaled $226 million, up from $201 million a year earlier.

Several analysts have raised their expectations for the company lately as global food prices have surged, sparking ideas about increased plantings of key crops this year.

Food prices hit a record high last month and grain prices could climb even further as weather patterns give cause for concern, the United Nations' Food and Agriculture Organization said on Wednesday.

Monsanto Chairman Hugh Grant said it is too early to tell how much growth the company will see in its seed sales in 2011, but that early orders for spring planting of corn and soybeans in the United States show good customer interest in Monsanto's new soybean and corn products. He added that the company was "well positioned for long-term growth."

"We've seen strong excitement from our grower base," Grant said.

Last year Monsanto cut prices and overhauled its product sales strategy following widespread complaints about high prices and initial disappointment with new corn and soybean products.

Grant said the order pattern for spring planting shows that those problems have largely been overcome. But he did not detail how or when prices would be increased.

Jefferies & Co. analyst Laurence Alexander said Thursday that investors were looking ahead to 2012 and beyond for Monsanto to be positioned to capture greater pricing on its seed products.

"They think the company is being conservative," Alexander said.

Earlier this week, Buckingham Research Group analyst John Roberts raised his target price for Monsanto shares to $80 from $72, saying the market for the types of genetically modified crops the company specializes in should continue to grow as food demand increases globally.

Also on Thursday, Monsanto affirmed its fiscal-year forecast for free cash flow of $800 million to $900 million, reflecting an investment of $600 million to $700 million in capital expenditures.

Monsanto said it still expects full-year 2011 earnings of $2.72 to $2.82 per share before special items, and net income of $2.69 to $2.79.

Monsanto shares were up $2.20 at $71.33 in midday trading.

© 2014 Thomson/Reuters. All rights reserved.

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