April 3, 2014
Monsanto reports high quarterly earnings on strong corn, soy demand
Monsanto Co., which specialises in developing genetically engineered crops that withstand herbicides and ward off insects, reported higher-than-expected quarterly earnings as its corn and soy businesses expanded globally.
The company said the profit margin in corn, its top revenue producer, increased 2.5 points in the second quarter ended on February 28. The corn business was on track to post record volume for the fiscal year, despite lower plantings expected in the US this spring.
Growing market opportunities in Eastern Europe and advancements in Latin America are helping the company''s corn business. Monsanto said it sees demand for corn worldwide surging with population and income growth over the next several years despite year-to-year fluctuations in output and demand.
"This is a year where everyone in agriculture recognises the market realities of softer commodity prices, more volatile global currencies and some decrease in corn acres in key markets like the Americas," MonsantoChairman Hugh Grant said on a conference call with analysts and reporters.
Analysts said there were both positive and negatives with the quarterly performance, including weaker-than-expected growth in herbicide earnings. And some investors were disappointed that the company did not raise its outlook, citing expectations for flat results this quarter.
Shares of Monsanto were up 1.4% at US$115.17 in afternoon trading after falling 2% earlier in the session.
Monsanto said it had earned US$1.67 billion, or US$3.15 a share, in the second quarter, up 13% from US$1.48 billion, or US$2.74 a share, a year earlier. Analysts on average were expecting US$3.07 a share, according to Thomson Reuters I/B/E/S.
Net sales rose to US$5.8 billion from US$5.5 billion, in line with analysts'' expectations.
Corn remained the key driver despite lower commodity prices and expectations by the USDA of plantings on 91.7 million acres in 2014, the smallest area since 2010. After a nearly 40% drop in corn prices since last summer, US farmers are expected to switch some of their acreage to soy.
Monsanto said its corn portfolio was expanding globally, helping sales of corn seed and traits rise 4% to US$3.4 billion in the quarter. And in the next five years, the executives said that they saw opportunities for net sales growth of US$1 billion in that business due to global demand.
Also strong, sales of soy seeds and traits rose 21% to a record US$820 million. Monsanto is undertaking its largest-ever soy product launch now, rolling out offerings in Latin America that combine tolerance to glyphosate herbicide, protection against caterpillars and yield improvement.
The company also sees a US$1 billion net sales growth opportunity across five years for soy, executives said. Sales of vegetable seeds rose 10% to US$219 million, while sales of cotton fell 18% to US$49 million.
Overall, sales in Monsanto''s seeds and genomics segment totalled US$4.6 billion in the quarter, up almost 7% from a year earlier. The company''s agricultural productivity segment, which includes the Roundup herbicide business, contributed US$1.2 billion, up from US$1.1 billion.
The company said it still expected full-year earnings per share of US$5.00 to US$5.20 on an ongoing basis and US$5.02 to US$5.22 on a net basis.