KANSAS CITY — Monsanto Co., the world's biggest seed maker, said Wednesday that profit fell by 19 percent in the second quarter, as prices continued to stagnate for its popular herbicide Roundup.
Monsanto Chief Executive Hugh Grant said income will be crimped in the next two years because the company will be forced to cut seed prices. He acknowledged for the first time that Monsanto is unlikely to meet its goal of doubling 2007 gross profit by 2012.
Since making that pledge, Roundup prices have plunged worldwide as generic competition has flooded the global market. Sales fell $351 million, or 35 percent, during the quarter in Monsanto's agricultural productivity segment, which includes it herbicides and chemicals.
At the same time, Grant said farmers appear unwilling to pay premium prices for the company's new lines of biotech seeds, some of which are twice as expensive as the varieties most farmers grow today. Grant said he went on a recent "listening tour," meeting with more than 1,200 farmers. Many were upset about higher prices.
"The feedback I am hearing from farmers is that if our prices were different, their adoption curve would be different," Grant told analysts during a conference call. "I'd like to say it's purely altruistic."
Grant would not specify how far prices will drop, but said Monsanto will gradually raise prices again once it gains customers and they see the crops are worth it.
The St. Louis company said its profit amounted to $887 million, or $1.60 per share, in the quarter ended Feb. 28. The company earned $1.09 billion, or $1.97 per share, in the same period a year ago.
Revenue fell to $3.89 billion from $4.04 billion a year ago.
Analysts surveyed by Thomson Reuters expected a profit of $1.73 a share on revenue of $3.9 billion, on average.
Monsanto affirmed it's full-year 2010 ongoing earnings-per-share guidance, saying it will be in the low end of the $3.10 to $3.30 range. Rather than doubling its profit by 2012, the company will now deliver "mid-teens" annual profit growth.
Shares fell roughly 3 percent initially but recovered most of the loss in morning trading, falling 54 cents to $69.