Monsanto posts record second quarter, sales jump 15 percent

Wed Apr 4, 2012 4:17pm EDT

Hugh Grant, the chairman, president and chief executive of agricultural company Monsanto, smiles during the Fortune Brainstorm Green conference in Laguna Niguel, California, April 12, 2010. REUTERS/Lucy Nicholson

Hugh Grant, the chairman, president and chief executive of agricultural company Monsanto, smiles during the Fortune Brainstorm Green conference in Laguna Niguel, California, April 12, 2010.

Credit: Reuters/Lucy Nicholson

(Reuters) - Global agribusiness company Monsanto Co (MON.N) posted a higher-than-expected quarterly profit on Wednesday, as the company said early U.S. spring planting and a 15 percent sales jump boosted its full-year outlook.

Shares sagged after an early jump amid a general market slump and as the company said results for the second half of the year would likely be flat.

Still, the company was on pace for a strong year, said Monsanto Chairman Hugh Grant.

"We've seen contributions from growth across crops and geographies, which position us well to deliver high-teens ongoing earnings growth this year," Grant said.

For next year, Grant said even though the company will be looking to leverage strong product performance, Monsanto does not see large price hikes for 2013, a factor that also kept a lid on share gains Wednesday.

Monsanto, which is the world's largest seed company and a leader in development of genetically engineered agricultural corn, soybeans, and other crops, set a record for its seeds and genomics unit, driving net income for the second quarter up 19 percent to $1.2 billion.

Diluted earnings per share came in at $2.24 cents versus $1.88 a year ago. Earnings per share from continuing operations totaled $2.28, up from $1.87 a year ago and above the $2.12 expected by analysts.

Corn sales totaled $2.8 billion, up from $2.4 billion a year earlier, leading all other products as both Latin American and U.S. farmers were eager buyers of Monsanto's genetically modified seed products.

Corn seed sales growth came despite concerns raised last year about the efficacy of a Monsanto corn seed product engineered to resist rootworm.

Soybean seed sales also grew, by 12 percent to $689 million. But cotton sales fell slightly and vegetable seed sales dropped 6 percent due primarily to a decrease in the European market.

As is typical, the second quarter is the critical quarter for Monsanto, and officials said overall earnings for second half of year will be flat compared to last year.

But Grant said the company had regained its "momentum" after a restructuring in 2009 that accompanied market wariness over its products and pricing strategies.

"We believe we have our momentum back. That momentum doesn't stop here," Grant said in a conference call with analysts. "The U.S. continues to be a big opportunity for us."

Latin America offer strong growth potential as well, Grant said. One key new product launch is an insect protection/ herbicide tolerant soybean product with a goal of commercial launch in 2013 in Brazil.

The company raised its full-year ongoing EPS guidance to a range of $3.49 to $3.54 per share. Full-year 2012 EPS guidance on an as-reported basis is expected in the range of $3.45 to $3.50.

The company took a 5 cent per share adjustment in the second quarter for a settlement on litigation involving claims of health and environmental damage tied to former chemical plant operations in West Virginia.

Monsanto also raised full-year free cash flow guidance to a range of $1.6 billion to $1.8 billion. The company expects net cash provided by operating activities to be $2.5 billion to $2.8 billion, and net cash required by investing activities to be $900 million to $1 billion for fiscal year 2012.

MORE ACRES FOR MONSANTO

Monsanto said though spring planting has yet to get into full swing in the United States, it expects acres of its Genuity Roundup Ready 2 Yield soybeans and Genuity reduced refuge corn family to increase by more than 10 million acres each this year.

That would bring the acreage totals into the range the company was projecting for 2012 of a total of 22 million to 24 million acres for the Genuity reduced refuge corn family, and the 27 million to 30 million acres targeted for the specialty Roundup Ready 2 Yield soybeans.

Monsanto officials said they were holding with estimates for U.S. corn acreage to total between 92 million and 94 million acres and were surprised by a U.S. Department of Agriculture forecast for 96 million acres, which would be the highest level since 1937.

Shares rose more than 1 percent early but turned lower at midday to post a loss of 1.1 percent at $80.90 a share.

(Reporting By Carey Gillam in Kansas City; Editing by John Picinich)

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