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Monsanto reports fourth-quarter loss, will restate earnings

Wednesday, October 5, 2011 | 1:07 p.m. CDT

ST. LOUIS — Monsanto Co. reported a fiscal fourth-quarter loss that beat Wall Street expectations on Wednesday and said that it must restate the last two years' earnings because of a federal investigation into its herbicide sales.

But investors focused on Monsanto's stronger corn seed sales, which rose 58 percent from last year, and on its pledge Wednesday to deliver earnings growth in the mid-teens.

Its shares jumped $2.08, or 3.3 percent, to $65.03 in midday trading. The stock rose as high as $65.80 in earlier trading. The stock is still more than 15 percent below its 52-week high in late July.

The world's biggest seed company said a probe by the U.S. Securities and Exchange Commission prompted it to restate earnings due to incentives it paid dealers of its Roundup Herbicide. The investigation is ongoing, and Monsanto is making the changes voluntarily.

The earnings restatement news came as Monsanto said sales of its corn and soybean seeds have been strong. Farmers are willing to pony up more money for Monsanto's newer, more expensive lines of genetically altered seeds that contain several patented traits that kill pests and boost yields.

Many analysts had worried that farmers would switch to cheaper brands, but CEO Hugh Grant said customers are seeing value in the pricier products.

"They're looking to trade up and derive more bushels per acre. ... rather than break new ground," Grant told analysts during a conference call.

The St. Louis company reported a net loss of $112 million, or 21 cents per share, for the quarter that ended Aug. 31. Monsanto Co. said, adjusted for one-time items, the loss was 22 cents per share. Revenue amounted to $2.25 billion.

Surveyed analysts had expected a bigger adjusted loss of 27 cents per share on lower revenue of $1.91 billion.

Monsanto said fourth-quarter sales in its seeds and genomics division jumped 39 percent compared with last year, hitting $1.4 billion. Monsanto said the earnings restatement will not affect its seeds and genomic division. Corn seed sales jumped 58 percent to $671 million from $424 million last year.

Monsanto didn't provide revenue or income comparisons to last year's fourth quarter because of its pending earnings revisions. Last year, the company reported a quarterly loss of $233 million, or 43 cents a share, on $1.95 billion in revenue.

For the full year, Monsanto said its net income was $1.61 billion, or $2.96 a share, on $11.82 billion in revenue. Last year, it reported net income of $1.1 billion, or $2.01 a share, on $10.5 billion in revenue.

After reviewing its records in light of the SEC investigation, Monsanto will restate portions of its earnings statements from the fourth quarter of fiscal year 2009 through the third quarter of fiscal year 2011.

The company said the restatements could reduce its reported net income in the fiscal year 2009 by 5 cents per share to 10 cents per share. The impact on earnings for fiscal year 2010 could be in the range of a loss of 2 cents a share to a gain of 3 cents a share.

Grant assured analysts during the conference call that the earnings revision would not affect Monsanto's previously announced goal of boosting its net income by the mid-teens.

Investors were more focused on that growth potential than on the earnings restatement, said Jeff Windau, an analyst with Edward Jones in St. Louis. He was encouraged Monsanto made the revisions before the SEC forced the company to do so.

"They've taken a step of proactively looking at it." Windau said.


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