Seed maker Monsanto reports 1Q loss as herbicide sales plunge, backs full-year forecast

By Christopher Leonard, AP
Wednesday, January 6, 2010

Seed maker Monsanto posts 1Q loss, sales sag

ST. LOUIS — Monsanto Co., the world’s biggest seed maker, said Wednesday it lost $19 million in the first quarter as global sales of its Roundup herbicide sank in the face of generic competition.

As Roundup results have flagged, Monsanto has shifted focus to its growing biotech seeds division. The company is betting its future on developing new, patented crops that yield higher profits.

Chief Executive Hugh Grant said Wednesday that the company expects seed orders to increase as the year goes on. He said Monsanto has moved 11 new crops one step further to commercialization over the last year.

It takes decades to move biotech seeds from the laboratory to farmer’s fields, and Grant said the company’s research progress will make Monsanto profitable in the coming decade.

“Our job continues to be to deliver innovation to the farm,” Grant told investors and analysts during a conference call.

Chief Technology Officer Robert Fraley said the research advancement during 2009 was the fastest ever for Monsanto, and its new products include the first biotech seed developed for international markets, which have been slower to adopt the technology than the United States.

“Our breeding pipeline is really humming,” as Monsanto tries to pull ahead of competitors who are also racing to bring new seeds to market, Fraley said.

Still, plummeting Roundup sales have made Monsanto’s short-term performance volatile.

The company said Roundup sales were particularly weak in Brazil and Europe, where a global glut of generic Roundup herbicide, called glyphosate, depressed prices.

Monsanto’s loss amounted to 3 cents per share in the quarter ended Nov. 30 versus a profit of $556 million, or $1 per share, a year ago.

Analysts had been looking for a break-even quarter, and typically exclude one-times items.

Monsanto reaffirmed its previous forecast for earnings of between $3.10 and $3.30 per share for all of 2010.

Revenue fell to $1.7 billion from $2.65 billion a year ago. Analysts expected almost $2 billion in revenue.

Sales fell 57 percent in the St. Louis company’s chemical division to $666 million.

Sales also slipped 6 percent to $1.03 billion in the seed and traits division during the quarter. Corn seed sales fell 9 percent to $569 million for the quarter, while soybean sales fell 5 percent to $201 million.

Sagging Roundup sales could continue to deflate Monsanto earnings in the short run, but the company’s research progress is positioning it for profitability as it shifts from the chemical to seed business, said Daniel Ortwerth, a senior research analyst at the St. Louis firm Edward Jones.

“Technical leadership is the key to long-term growth in this business,” Ortwerth said. “There is so much pressure on farmers globally to increase yields, and better seed technology is the key.”

After trading as low as $82.46 earlier in the session, Monsanto shares rose $1.27, or 1.5 percent, to close at $86.27.

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