Monsanto Co. (MON:US), the world’s biggest seed company, boosted its full-year forecast as it posted fiscal first-quarter earnings that surpassed analysts’ estimates on higher sales of corn seed and Roundup herbicide.
Profit was 62 cents a share, excluding income from a divested unit, St. Louis-based Monsanto said in a statement today. That beat the 36-cent average of 18 estimates compiled by Bloomberg. Monsanto said adjusted full-year earnings will be $4.30 to $4.40 a share, up from a prior projection of $4.18 to $4.32. The average of 21 analysts’ estimates was $4.40 a share.
Chairman and Chief Executive Officer Hugh Grant is boosting sales in Latin America with new corn and soybean seeds engineered to tolerate herbicides and ward off insects. Farmers in the U.S. are placing early seed orders after the worst drought since the 1930s threatened supplies. Prices rose for glyphosate, the generic form of Roundup herbicide.
“Price increases on Roundup drove the majority of the upside relative to our model,” Michael E. Cox, a New York-based analyst at Piper Jaffray & Co., said today in a report. “Corn seed and trait revenues increased 27 percent, driven by strength in Latin America.”
Monsanto rose 2.7 percent to $98.50 at the close in New York. The shares have gained 27 percent in 12 months.
The company lifted its guidance for free cash flow to a range of $1.8 billion to $2 billion, from a prior forecast of $1.7 billion to $1.8 billion. Cash on hand rose to a record $4.64 billion (MON:US) at the end of the quarter. Monsanto may be “more aggressive” in repatriating cash to reward shareholders, Grant said on a conference call with analysts.
“We are focused on returning cash to our owners,” Chief Financial Officer Pierre Courduroux said on the call. “We are considering all our options right now.”
Net income more than doubled to $339 million, or 63 cents a share, in the three months through November, from $126 million, or 23 cents, a year earlier. Sales rose 21 percent to $2.94 billion from $2.44 billion, led by gains in corn seed and Roundup herbicide, exceeding the $2.64 billion average of 13 estimates.
Monsanto said the profit forecast excludes an estimated 20 cents to 25 cents a share of earnings from soybean sales in Brazil, which are the subject of a legal challenge. Monsanto suspended royalty collections for Roundup Ready soybeans, engineered to tolerate herbicide, from mid-October to early December because of a legal dispute over patent expiration.
Gross profit from seed sales (MON:US) and genetic licenses increased 12 percent in the quarter to $1.03 billion as higher corn-seed sales more than made up for lower revenue from soybean, cotton and vegetable seeds. Gross profit from crop chemicals more than doubled to $372 million on higher prices for Roundup, Monsanto said.
Monsanto raised its gross profit forecast for the year by $100 million to $7.65 billion, Courduroux said. That reflects a gain of $200 million to $300 million from higher herbicide prices and lower seed profit due to the decision to omit profit from Roundup Ready soybeans in Brazil because of the legal dispute, Courduroux said on the call.
Monsanto later this year plans to begin commercial sales in Brazil for Intacta soybeans, which are engineered to tolerate Roundup and also produce insecticide, pending import approval from China, Grant said. The market opportunity for Intacta exceeds 100 million acres, including Brazil, Argentina, Paraguay and Uruguay, he said.
The company advanced a record 18 projects in its annual review of the research and development pipeline, including DroughtGard corn, developed with BASF AG. Commercial sales of DroughtGard, which boosts yields in low-water conditions, will start this year, targeting 10 million acres from the Dakotas to Kansas, Chief Technology Officer Robb Fraley said on the call.
Results in Monsanto’s first and fourth quarters are typically weakest because farmers are between planting seasons in North America and Europe. Latin America accounted for 23 percent of sales (MON:US) last year.
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