Monsanto backed ideas of an upbeat swansong as an
independent company as it unveiled better-than-expected earnings, helped by a
surge in Argentina corn sowings, and expectations of a jump in US cotton
The US-based group, which is being bought by Germany's Bayer
for $66bn, said that its earnings for the year to the end of August were
expected to come in at the upper end of the range of $3.95-4.44 per share that
it had previously guided too.
The upgrade "reflects the company's increased confidence in
the growth expected for the year", Monsanto said, restating an expectation that
its core seeds division will achieve "mid-single digits" growth in gross profits, in percentage terms.
"We're increasing confidence in the outlook for the rest of the
year," said Huge Grant, the Monsanto chairman and chief executive.
However, Monsanto said that its sprays division, whose
products include glyphosate weedkiller Roundup would now see full-year gross
profits at the lower end of the range of $850m-950m previously guided too.
'Even greater acreage
The comments followed a December-to-February quarter in
which the group reported a 29% rise to $1.37bn in earnings, on revenues up 12.0%
The earnings were equivalent to $3.19 per share, excluding
one-time items, ahead of the $2.79-per-share result that investors had
Headline earnings growth was helped by – besides the sale of
the Latitude wheat fungicide, and comparison with a year-before figure marred
by devaluation in the Argentine peso – a 12.3% rise to $1.93bn in gross profits
from corn seed.
Besides flagging growth in sales in Brazil, Europe and the
US, Monsanto flagged that it was "estimating even greater acreage growth than
previously expected, at more than 40%", above the previous estimate of a 25%
'High grower demand'
The group also reported a quadrupling to $77m in gross
profits on cotton seed, saying it "continues to see high grower demand" for its
Bollgard II XtendFlex product, which is genetically modified for resistance to
insect pests and herbicides.
Monsanto restated that sowings with the brand are expected
to top 4m acres in the US this year, a result which would be equivalent to
roughly one-third of the overall area that farmers are expected to plant with
the fibre, seen by the US Department of Agriculture as rising by 21% year on
In soybeans, the group signalled increased expectations for its
genetically modified Roundup Ready 2 Xtend brand.
After saying in January it was "well-supplied for more than
15m acres of the product", Monsanto on Wednesday said that it "now expects 18m
acres" to be planted in the US, following a series of state approvals.
The announcement received a welcome response from investors,
who sent Monsanto shares higher to $116.37 in early deals in New York, their
highest since June 2015.
The stock stood at $115.98 in late morning trade, up 1.5% on
The rise closed some of the discount in the stock price to the
$128 per share being offered by Bayer – a discount attributed to doubts over the
deal being completed.
"We are heartened to see the deals ahead of us making
progress," Mr Grant said, referring to success by other tie-ups in gaining
regulatory approval, with ChemChina overnight receiving approval from both
European Union and US regulators for its takeover of Syngenta.
Mr Grant added: "The unique thing about this deal is there a
very limited amount overlap," implying a lower chance of antitrust official
imposing measures such as asset disposals as a condition of consenting to the