Monsanto shares ease on cautious earnings outlook

Shares in Monsanto opened weaker in New York after the seeds, unveiling a doubling in quarterly losses, amid a slump in cotton takings, revealed profit forecasts below Wall Street expectations.

Investors had prepared for a steeper loss in the June-to-August period, the fourth quarter of Monsanto's financial year and typically a weak period.

The group unveiled a loss of $229m, twice that a year before, and equivalent to $0.42 per share, in line with Wall Street expectations.

However, Monsanto's forecast of earnings of $4.18-4.32 per share for its newly started 2013 financial year fell below market expectations of a $4.37-per-share result.

Monsanto shares eased 2.9% to $87.97 in morning deals in New York.

'Acre shifts' 

The increased losses in the latest quarter reflected a deeper slide into the red at the group's core seeds and genomics business, reflecting weaker sales of corn and, in particular, cotton seed.

A slump of 84%, to $29m, in cotton seed revenues was "due in part to acre shifts to other crops", Monsanto said, with elevated grain prices contrasting with cotton values standing down two-thirds on last year's record high.

The agricultural productivity division, which sells herbicides such as the Roundup glyphosate product, saw operating profits more than double, to $123m.

'Strong source of growth'

However, Monsanto - while forecasting a slowdown in growth in gross profits in seed for 2013 to 8% from more than 14% in the year to August was upbeat over prospects for sales of its cutting-edge genetically modified corn and soybean products.

For corn, US sowings of its core seed products, of the Genuity Reduced Refuge brands, will soar to some 36m-38m acres next year, from 27m acres in 2012, and implying a market share of more than one-third.

For soybeans, plantings of Roundup Ready 2 yield - genetically modified for traits including resistance to glyphosate herbicides, so allowing weeds to be sprayed out will rise from 32m acres to 39m-41m acres, almost certainly equivalent to more than half US soybean area.

Furthermore, the group said that it "expects Latin America to again be a strong source of growth, complementing the US business, driven by the continued corn opportunity in Brazil and Argentina".

Yield claims

Seed take-up will be boosted in part by the results of this year's US corn harvest, which Monsanto claimed had "reinforced" the "advantage" of its seed over that of competitors.

The Dekalb brand "is outperforming competitive products with approximately an 8 bushels-per acre national yield advantage", Monsanto said.

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