Cool, wet weather cited in decline in Monsanto earnings

Wednesday, May 27, 2009 | 1:51 p.m. CDT; updated 4:06 p.m. CDT, Wednesday, May 27, 2009

ST. LOUIS — Monsanto shares declined Wednesday after the St. Louis-based company said it now expects to meet the low end of its fiscal 2009 earnings guidance.

Shares for the agricultural products company dropped $4.30, or 5 percent, to $80.95 in midday trading.

Monsanto previously forecast earnings per share of $4.40 to $4.50. The company on Wednesday forecast earnings closer to $4.40 per share, citing stronger-than-expected competition for its Roundup herbicides business. Also hurting the Roundup business was cool, wet weather in parts of the U.S.

Analysts polled by Thomson Reuters had forecast earnings of $4.58 per share for the fiscal year that ends in August.

Monsanto still expects to grow 20 percent for the fifth straight year.

Monsanto earlier projected $2.4 billion in gross profit for its Roundup and other glyphosate business. It now expects $2 billion in gross profit.

But continued strength in the seeds and traits business, combined with lower spending for marketing, administration and incentives, are helping the company offset the decline in Roundup's profitability, Monsanto said.

The seeds and traits segment is expected to reach the upper end of the $4.4 billion to $4.5 billion prior guidance, an increase of more than 15 percent year over year. Monsanto projected its corn and soybean businesses combined could generate $3.5 billion in gross profits in fiscal 2009 — up about 20 percent from the previous year.

"Regardless of the business or world area, our strategy is focused on delivering value to farmers while maximizing share and penetration," said Hugh Grant, Monsanto president and chief executive officer, in prepared remarks at the Sanford Bernstein conference in New York.

The faster-than-anticipated decline in Roundup means the company now expects third-quarter earnings of about $1.15 per share. That's well short of analyst projections of third-quarter earnings of $1.56 per share.

Monsanto said cool, wet weather in the U.S. Corn Belt delayed the application timing of Roundup and other herbicides. The company also cited increased competition from generic and other branded competitors.

"We predicted that Roundup was hitting its peak in terms of gross profit contribution this year, and that forecast has proven to be accurate, albeit at a lower level than we originally forecast," Grant said.

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