Plant Health Care's exit from direct sales has increased its vulnerability to setbacks at key customer Monsanto, whose slow seed revenues last spring prompted the alternative agrichemicals group to warn on its results.

Plant Health Care revealed on Friday that it was pulling back from parts of its historic strategy, including direct sales, to focus on licensing deals it sees as a more lucrative revenue source.

"If they want to get their products out to as many acres as possible, direct sales isn't really going to achieve that," a person familiar with the company's thinking told Agrimoney.com.

However, the company for now has a limited roster of licensees – albeit including big names such as Syngenta - for its products, which aim to enhance a plant's own capabilities to see off pests or take up nutrients.

Plant Health Care's fortunes appear particularly tied to Monsanto, the world's biggest seeds group, which has a deal to apply the Harpin plant protection product as a seed treatment.

'Key to sentiment'

"The key near-term share price driver is the rate at which revenues from Monsanto pick up over next quarter, which is the main selling period for soybean seeds," Evolution analyst Philip Sparks said.

"Newsflow from Monsanto… will be key to sentiment."

Indeed, Plant Health Care's shares could "meander" until data is forthcoming from Monsanto, whose slow sales last spring prompted the London-listed company to warn revenues would miss targets, sending the stock down by more than one-third.

Investors have higher hopes for Monsanto this year, following a revamp of its pricing structure, and with strong crop prices improving farmers' willingness to splash out on genetically-enhanced seed.

Monsanto shares have rebounded more than 50% from a nadir in late September.

Mr Sparks kept a "buy" rating on Plant Health Care shares with a price target of 1650p.

US disposal 

Plant Health Care's strategic revamp has involved the disposal of a US landscape and retail business which had been in part viewed as a way of enhancing direct sales.

However, the business, sold for $4.65m, has been hit by the downturn in the US housing market, seeing operating profits drop to some $400,000 in the last financial year.

"Investors attach little value to Plant Health Care's products businesses," Mr Sparks said.

"The [group's] long term prospects are unaffected by the sale."

Plant Health Care shares closed 3.4% higher at 77.5p in London.