Monsanto Reports Better-Than-Seen Results--Update
October 05 2016 - 11:34AM
Dow Jones News
By Jacob Bunge and Anne Steele
Monsanto Co. said it anticipates a return to higher profits next
year as the biotech seed maker rolls out new soybean varieties.
The St. Louis company, which agreed last month to sell itself to
rival Bayer AG for $57 billion in cash, said lean times in
agriculture were set to continue. But Monsanto anticipates more
farmers in North and South America migrating to its latest seeds in
a bid to stay profitable.
Monsanto on Wednesday reported an unexpected profit for its
fiscal fourth quarter. While the company will continue pursuing
research into high-tech seeds and data science to improve harvests,
executives said the main focus has shifted to closing the sale to
Bayer.
"We recognize what matters most to our owners now is delivering
2017 and closing the deal," said Hugh Grant, Monsanto's chief
executive and chairman, on a conference call discussing the
results.
Monsanto, along with competitor seed developers like DuPont Co.
and farm equipment makers like Deere & Co., has struggled
against a three-year slide in major crop prices, spurred on by good
weather and bountiful harvests. Cheaper agricultural commodities
have translated to sharp declines in farmers' income, forcing some
to hold off on purchasing new combines, switching to generic
chemicals or shopping for cheaper seeds.
That decline helped drive Monsanto, which on Wednesday reported
its second straight year of declining profits, and other seed
makers to pursue mergers the companies say will bolster research
capabilities while reducing costs.
For fiscal 2017, Monsanto projected earnings of $3.83 to $4.35 a
share, up from the $2.99 a share earned in the company's fiscal
2016. Soybeans are expected to power much of the growth, with
profits in that division -- where sales fell 5% to $2.2 billion in
the past fiscal year -- expected to rise by more than one-fifth
next year. Monsanto said it is counting on higher sales of
insect-resistant soybeans in South America and a new soybean
variety resistant to tougher herbicide formulations, which were
introduced in the U.S. this year.
The outlook was weaker than analysts expected. BMO Capital
Markets called the 2017 projections "disappointing." Investors
remain mixed on Bayer securing regulatory and antitrust approvals
for the deal, with Monsanto shares continuing to trade at a steep
discount to the $128-a-share sale price. The stock recently gained
0.7% to $102.33 in early trading Wednesday.
Mr. Grant reiterated his confidence that Monsanto can complete
the Bayer deal. He said it was too early to discuss which of the
companies' businesses may need to be divested to secure antitrust
approval. Monsanto and Bayer both operate major businesses in
cotton and canola seeds, as well as herbicides designed to kill a
wide variety of weeds.
A September hearing of the U.S. Senate Judiciary Committee
examining the potential effects of the merger deals on farmers and
other players, "bolsters" Monsanto's confidence in the deal, Mr.
Grant said.
"It showed the indication of a broader understanding of the
factors and the regulatory process," he said.
In all for the August quarter, Monsanto reported a loss of $191
million, or 44 cents a share, compared with $495 million, or $1.06
a share, a year ago.
Excluding certain items, adjusted per-share earnings swung to a
profit of 7 cents from a loss of 19 cents a year earlier. Total
sales shot up 8.8% to $2.56 billion. Analysts, on average,
projected an adjusted a per-share loss of 3 cents on $2.36 billion
in sales.
Revenue from seeds and genomics, Monsanto's biggest business,
surged 25% to $1.57 billion. Sales in its agricultural productivity
segment, meanwhile, slid 9.7% to $997 million.
Monsanto also addressed a long-running legal battle around
health concerns over polychlorinated biphenyl, or PCB, chemical
compounds manufactured by its former corporate iteration that for
decades were widely used in electrical wiring, caulking and other
industrial functions.
The company on Wednesday said it reached a deal to potentially
settle all personal injury claims around PCB. Monsanto stopped
making the product in 1977.
Write to Jacob Bunge at jacob.bunge@wsj.com and Anne Steele at
Anne.Steele@wsj.com
(END) Dow Jones Newswires
October 05, 2016 11:19 ET (15:19 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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