Engineering News

Monsanto 1Q profit doubles, outlook strong
Wednesday January 7, 2009, 4:33 pm EST

ST. LOUIS (AP) -- Monsanto Co., the world's biggest seed maker, said Wednesday its fiscal first-quarter profit more than doubled on higher sales to Latin America, and raised its expectations for the year.

Shares soared $12.94, or 17.7 percent, to close at $86.16.

The strong results came even during a dismal period in the global agricultural markets, with crop prices plunging from record highs hit this summer. Chief Executive Hugh Grant said the results show that while Monsanto is not totally recession-proof, it can weather wild commodity price swings by wooing farmers with high-tech, high-yield seeds.

"Even in these uncertain times, farmers buy the best," Grant said during a conference call with analysts.

Latin American sales make up the bulk of Monsanto's first-quarter revenue, although most of the company's revenue come from its U.S. business, where sales pick up in the second and third quarters.

The world financial crisis has battered Latin American stocks and currencies, as foreign investors dumped local assets to cover losses at home and sales dropped at the region's biggest exporters amid falling prices for oil, copper and other commodities. But Monsanto saw strong sales in Latin America despite tumbling prices for soy exports. Grant said that validates his belief that despite commodity price swings, farmers will pay more for genetically engineered seeds if they see the benefit of higher yields at harvest time.

The St. Louis-based company said it earned $556 million, or $1 per share, in the three months ended Nov. 30. That compares with profit of $256 million, or 46 cents per share, a year ago. Monsanto said it earned 98 cents per share excluding gains from discontinued operations.

Revenue jumped 29 percent to $2.65 billion from $2.05 billion, as sales of Roundup and other herbicides and corn seeds and traits climbed more than 30 percent each.

The results widely beat estimates of analysts surveyed by Thomson Reuters, who had expected profit of just 59 cents per share and $2.44 billion in revenue.

Monsanto reported strong demand for its weed killers in Brazil, helping drive total herbicide sales up 35 percent to $1.36 billion. Revenue from the company's agricultural productivity unit, which includes lawn-and-garden herbicides, increased 28 percent to $1.55 billion.

The company also made gains in sales of genetically modified seeds. Monsanto said total seeds and genomics sales rose 31 percent to $1.1 billion, including a 34 percent surge in corn seed and trait sales to $628 million spurred by growing demand from Brazil and the U.S.

Monsanto is betting its future growth on selling engineered seeds to farmers pressured to grow ever higher amounts of grain to feed world demand for food and biofuels.

On Wednesday Monsanto Chief Technology Officer Robert Fraley said the company is speeding up its process for developing and testing new engineered crops. Monsanto is developing its first strain of engineered sugar cane, and has advanced six other new products in its commercial pipeline, Fraley said.

Perhaps more importantly, the company submitted its first round of regulatory documents to get approval to sell a new strain of drought-tolerant corn. Monsanto has said the crop could be a strong global seller once it is approved for consumption.

"Our competitive edge has widened yet again," he said.

Soybean seed and trait sales grew 31 percent to $212 million, which Monsanto credited to demand from early growers in the U.S. The company also paid a lower tax rate in the first quarter.

Looking ahead, Monsanto now forecasts an adjusted profit of $4.40 to $4.50 per share in fiscal 2009, up from $4.20 to $4.40 per share. The new outlook includes only results from ongoing operations, and does not include the effects of its purchase of a Brazilian sugar cane business.

Source: Associated Press

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