By Jacob Bunge And Chelsey Dulaney
Monsanto Co.'s fiscal first-quarter earnings topped expectations
on strength in its soybean-seed segment, but the company warned
that declines in global corn acreage would pinch profits in its
current quarter.
The world's biggest seed company by sales warned that farmers
are changing their planting intentions and tightening spending on
farm supplies amid the weakest grain prices in years, translating
to lower-than-expected profits in Monsanto's core corn-seed
business.
"The issue that we're facing really is reduced [corn] acres,"
Monsanto Chief Executive Hugh Grant told analysts on a conference
call Wednesday.
The St. Louis company gave a disappointing outlook for its
second quarter, saying it expects earnings to fall 5% to 10% as
farmers plant fewer acres of corn, the company's largest source of
seed sales, and plant crops such as soybeans instead. Analysts
polled by Thomson Reuters had expected earnings to edge up 1%.
Monsanto shares rose 1.6% to $117.39 in midday trading.
Monsanto said net income in the quarter ended Nov. 30 dropped to
$243 million, or 50 cents a share, from $368 million, or 69 cents a
share a year earlier. Sales fell 8.7% to $2.87 billion.
Analysts polled by Thomson Reuters expected a per-share profit
of 34 cents on revenue of $2.8 billion.
Some farmers in North and South America are shifting acreage
from corn to soybeans--a far-smaller business for Monsanto--after a
roughly 43% decline in corn prices over the past two years. Though
soybean prices also have declined, soybean remains a
more-profitable crop than corn for many growers.
Monsanto warned the shift will trim anticipated profits in its
seeds-and-genomics division this year, with growth now expected to
be in the "high single digits," versus double digits
previously.
In the first quarter, Monsanto's corn seed and trait sales fell
12% to $928 million compared with the year-ago quarter.
Sales in Monsanto's soybean seed and traits segment grew 48% to
$396 million.
Sales in the agricultural productivity business, which consists
of crop-protection products and herbicides, fell 15% to $1.25
billion.
The company in October had forecast earnings about half of what
it posted a year earlier as market conditions resulted in lower
planted acres for cotton and corn.
Mr. Grant said Monsanto believes corn prices will rebound over
time as demand from China for feed grains, as well as continued
consumption by ethanol producers, chips away at the massive
stockpiles produced by back-to-back bumper U.S. crops.
"I continue to be bullish on corn," Mr. Grant said. "The next
season or two, we think that there's going to be a continued
acceleration on demand."
Write to Jacob Bunge at jacob.bunge@wsj.com and Chelsey Dulaney
at Chelsey.Dulaney@wsj.com
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