Strong sales in South America boosted Monsanto Q4 result

Date:10-07-2011

Strong sales in South America boosted Monsanto Co.'s fourth-quarter sales above analysts' expectations, the company said Wednesday.

The company also announced that it will have to restate earnings from the past two years because of a federal investigation related to sales of its Roundup herbicide.

The Creve Coeur-based biotechnology and seed giant announced that the company's fourth-quarter net loss was $112 million, or 21 cents a share, which beat analysts' estimates of 27 cents a share. Sales were $2.25 billion, besting analysts' estimates of $1.91 billion.

"It was good news for the company. A solid quarter," said Jeffrey Stafford, an analyst with Morningstar. "Their seeds and genomics business, which is definitely the more important side of their business, had a good quarter."

Seeds and genomics net sales were $1.4 billion for the quarter, a 39 percent increase over last year. For the fiscal year, the seeds and genomics business hit $8.6 billion, a 13 percent increase.

In a conference call with analysts, Monsanto CEO Hugh Grant said 2011 "was a year of re-establishment for Monsanto and with what we've accomplished this year, we've turned a corner. We've reignited the core momentum in our business and we've returned to growth mode on a wide scale."

The company said its 2012 gross profits from the seeds and genomics business could rise by 10 percent, hitting the $5.7 billion to $5.85 billion range, up from $5.31 billion in 2011. Profits in the agricultural productivity business, which sells Roundup, should be about $800 million.

"They've been selling corn in Brazil and Argentina for a while now, and now they're beginning to sell more stacked traits," Stafford said. "So when that happens, that moves up the technology curve, and Monsanto's able to generate more margin. That should be a driver for future growth for them."

Sales of the company's "refuge" products in the U.S. were also strong. Record-setting farm income, of about $103.6 billion, will likely bode well for future sales. The company will begin selling "refuge-in-a-bag" corn next year, which allows farmers to plant seed without the usual refuge requirements.

Earlier this year, the Securities and Exchange Commission announced it was investigating the company because of incentives it gave to dealers who sold Roundup, which had taken a hit when generic versions hit the market. The incentive programs are no longer in place.

"Whenever they get this straightened out, and they restate earnings, I don't think too many people are going to care because the driver of the business is the seeds and genomics business," said Bill Selesky, an analyst with Argus Research.

Prompted by the investigation, the company will adjust financial statements from 2009 to 2011, but, Grant said, "Ultimately, total revenues and total costs for the company for these years taken as a whole do not change."