UPDATE 3-Monsanto sees FY09 results at low end of forecast

Wed May 27, 2009 12:01pm EDT

* Profit seen at low end of outlook for FY 2009

* Competition on Roundup stronger than expected

* Free cash flow seen at $1.4 billion

* Shares fall more than 5 percent (Updates stock price, adds details)

By Carey Gillam

KANSAS CITY, May 27 (Reuters) - Monsanto Co (MON.N) said on Wednesday that tougher competition in the herbicide business would push fiscal-year results to the low end of its earnings forecast, sending shares of the world's largest seed company down more than 5 percent.

Monsanto now expects ongoing earnings of about $4.40 per share, the low point in its previously announced range of $4.40 to $4.50, for the year ending on Aug. 31.

The company said third-quarter earnings were forecast at $1.15 per share. Analysts were looking for $1.58, according to Reuters Estimates. The company will release its third-quarter results on June 24.

Shares of St. Louis based Monsanto were off 5.1 percent at $80.90 in midday trade on the New York Stock Exchange.

Monsanto had warned earlier this year of stiff competition in the glyphosate-based herbicide arena, where the company's Roundup herbicide has long been a favorite of farmers.

Company officials had said they saw 2009 as the peak for the herbicide business, with future revenue growth driven mainly by innovations in seeds.

Still, retail prices for glyphosate-based herbicide have eroded faster than expected, mostly due to Chinese generics and pricing actions by Monsanto competitors Dow (DOW.N) and Syngenta (SYNN.VX), according to Jefferies & Company analyst Laurence Alexander.

Alexander reported in a note to investors that U.S. spot herbicide prices had fallen to $19-$21 a gallon from about $21-$25 a gallon earlier this year.

Monsanto said Wednesday its Roundup and glyphosate business will likely generate about $2 billion in gross profit, down from its previous forecast of $2.4 billion.

Partly offsetting the bad news on the herbicide business segment, Monsanto said its expects its seeds and traits businesses to deliver gross profit toward the upper end of its prior guidance of $4.4 billion to $4.5 billion in fiscal year 2009.

Within that segment, Monsanto projects that its corn and soybean businesses combined could generate $3.5 billion in gross profit for fiscal 2009, up about 20 percent over the previous year.

The company also said it expected to generate about $1.4 billion in free cash for the full year, down from $1.8 billion. (Reporting by Carey Gillam, editing by Dave Zimmerman)