Monsanto Co., the world’s largest seed company, reported a fiscal third-quarter profit Wednesday that topped analysts’ estimates as higher prices for its Roundup weedkiller helped make up for lower corn and soybean earnings.
Net income dropped to $909 million, or $1.68 a share, in the three months through May, from $937 million, or $1.74, a year earlier, St. Louis-based Monsanto said in a statement. Per-share profit excluding a legacy tax matter was $1.66, exceeding the $1.59 average of 15 estimates compiled by Bloomberg.
Monsanto last month raised its full-year earnings forecast for the third time in 2013 on expectations of record corn-seed volumes and higher prices for glyphosate herbicide, which the company markets under the Roundup brand. Gross profit in the unit that makes Roundup herbicide gained 31 percent while profit in the larger seed unit declined 10 percent.
“The strength in glyphosate has helped gloss over what appears to be a somewhat tepid third-quarter performance from the seeds segment,” Chris Shaw, a New York-based analyst at Monness Crespi Hardt & Co., said in a note Monday.
Retail glyphosate prices have gained about 42 percent from a year ago, Shaw said.
Monsanto shares fell 56 cents to close Wednesday at $100.84.
Sales rose 0.7 percent to $4.25 billion, missing the $4.43 billion average of 16 estimates. Gains were limited by a reduction in planted cotton, Monsanto said, and a patent dispute in Brazil that eroded soybean revenue. In addition, higher seed-production costs related to last year’s drought in the U.S. trimmed earnings, the company said.
Gross profit in the agricultural productivity unit, which makes Roundup, rose to $447 million from $342 million on higher sales, Monsanto said. Gross profit from the seed unit fell to $1.82 billion from $2.02 billion amid declines in corn, soybeans, cotton and vegetables.
The company reiterated its May forecast for full-year earnings of $4.50 to $4.55 a share, excluding some items, trailing the $4.58 average estimate of 23 analysts. Monsanto said it continues to anticipate that earnings in the fiscal year that begins Sept. 1 will increase by a percentage in the “mid-teens.”
This year’s U.S. corn harvest will increase 30 percent to a record 14 billion bushels and cover the most acres since 1936 as yields recover from the drought, the Department of Agriculture said June 12.The government will update planted acreage estimates on June 28.
Excluded from this year’s forecast is an estimated 20 cents to 25 cents a share of earnings from soybean sales in Brazil, which are the subject of a legal challenge. The company suspended royalty collections for Roundup Ready soybeans late last year because of a legal dispute over patent expiration.
Chairman and Chief Executive Officer Hugh Grant is counting on demand outside the core U.S. market, particularly Latin America and Eastern Europe, to drive earnings growth in the coming years.
China this month approved imports of Intacta soybeans, the first beans engineered to control insects, creating a 100 million-acre sales opportunity for beans grown in Latin America, Monsanto President Brett Begemann said Wednesday on a conference call.
Business, Pages 26 on 06/27/2013