Monsanto 1Q Profit Rose 53 Percent

The Associated Press
Thursday, January 4, 2007; 5:07 PM

ST. LOUIS -- Monsanto Co. reported Thursday its fiscal first-quarter earnings surged 53 percent and the world's biggest seed company said strong early orders for next year's crop suggest it will hit the high end of its earnings guidance for the full year.

But its shares slumped 89 cents, or 1.7 percent, to $50.79 in trading on the New York Stock Exchange as the full-year projection was still below Wall Street expectations.

The company, which makes Roundup herbicide and genetically engineered crops, earned $90 million, or 16 cents per share, for the three months ended Nov. 30, up from $59 million, or 11 cents per share, last year. Sales grew 10 percent to $1.54 billion from $1.41 billion a year ago.

Analysts polled by Thomson Financial expected earnings of 10 cents per share on sales of $1.53 billion.

Chairman and Chief Executive Officer Hugh Grant said first-quarter growth was largely driven by a big boost in corn seed orders.

Monsanto is aggressively taking market share in the corn seed sector from old-school seed companies like Pioneer Hi-Bred International Inc., a division of the chemical giant DuPont Co., based in Wilmington, Del.

"I worry about the competition in every corner of the world. We face powerful competitors with deep pockets who are actively pursuing the same markets," Grant said during a conference call with investors. "Complacency continues to be our biggest enemy."

Monsanto's fiscal year is built around the agricultural calendar, so the first quarter begins after the summer farming season. The autumn months are an early indicator of how Monsanto's year will play out as farmers start placing orders for next year's crop, Grant said.

Chief Financial Officer Terrell Crews said Monsanto expects to hit the high end of its full-year 2007 earnings estimate range of $1.50 per share to $1.57 per share.

Analysts are predicting 2007 earnings of $1.60 per share, on average.

Monsanto shares fell 92 cents, or 1.8 percent, to $50.76 in midday trading on the New York Stock Exchange.

While Monsanto's quarterly sales beat expectations, the overall performance "appears uninspiring," according to Kevin McCarthy, an analyst with Bank of America Equity Research in New York.

Too much of Monsanto's sales boost came from older products like Roundup, McCarthy wrote in a report on the earnings. The performance was disappointing in the higher-growth, higher-profit segment of biotech seeds.

"Operating income in (the Seeds and Genomics division) declined for the second consecutive quarter, although both were seasonally weak periods," McCarthy wrote.

Still, McCarthy remained optimistic Monsanto would see strong seed sales in coming months.

Monsanto said latest quarter results also reflected a lower tax rate, stemming from the conclusion of an ex-U.S. audit.

Monsanto forecasts that total soybean acres under production may decrease slightly during this growing season as farmers increase the number of acres planted to corn in the United States, given that corn is fetching higher market prices due to demand for alternative fuels such as ethanol.

Monsanto Chief Technology Officer Robert Fraley gave investors an update Thursday on the company's research and development pipeline. He said the firm is moving ahead on eight varieties of new crops that will feature traits like drought tolerance and healthy oil content.

© 2007 The Associated Press