Monsanto earnings beat estimates as US seed sales climb

[CHICAGO] Monsanto Co, the world's largest seed company, reported record fiscal second-quarter earnings amid signs that US farmers are preparing to sow record acreage with soybeans this year.

Profit excluding one-time items was US$3.19 a share in the three months through February, St Louis-based Monsanto said in a statement Wednesday, beating the highest of 16 analysts' estimates compiled by Bloomberg.

Sales rose to US$5.07 billion from US$4.53 billion a year earlier, also exceeding all estimates. The shares climbed as much as 2.8 percent in pre-market trading.

The company, which is the subject of a pending US$66 billion takeover bid from Bayer AG, also said full-year profit is now expected to be at the high end of a previously forecast range of US$4.50 to US$4.90 a share, excluding one-time items. Monsanto reiterated that it expects completion of the merger with Bayer by end of the year.

The second quarter is typically Monsanto's best period for revenues, reflecting buying from Northern Hemisphere farmers as they plant their next crops, plus end-of-season demand from South America. The US is expecting record soybean plantings this year, the government said last week in an annual report.

Total corn, soybean and cotton acreage in the US is projected to be 2.2 per cent higher in 2017, which is positive for Monsanto, Don Carson, an analyst at Susquehanna Financial Group, said in a note before the earnings.

The company is also seeing higher sales in North America of Roundup Ready Xtend, its latest genetically modified soybean seed, while benefiting from expanding corn and soy acreage in South America.

"Soybeans will have better profitability this spring, and we're seeing that through the rapid adoption of the new soybeans," said Chris Perrella, a Bloomberg Intelligence analyst.

"Continued strong performance in Latin America plus strong demand for new products" is helping to drive the upside.

Other favourable factors Monsanto noted Wednesday: Growth exceeding 25 per cent for its global soybean gross profits.

Raising its estimate for US acreage for its new Roundup Ready 2 Xtend soybeans to 18 million acres (7.3 million hectares) from 15 million previously.

Increasing demand for cotton seed, which it says will help gross profit from the cotton segment rise more than 35 per cent.

For Monsanto's corn business, strong grower demand in Europe and the US, as well cost savings in the US.

Greater-than-anticipated corn acreage growth in Argentina of more than 40 per cent.

Monsanto rose 1.5 per cent to US$115.98 at 8.47am in New York.

Bayer's takeover has a more favourable outlook amid allayed regulatory concerns after competitors Dow Chemical Co and DuPont Co won conditional European Commission approval for their merger on March 27.

The global seeds and pesticides industry is in the middle of a wave of consolidation that could leave it dominated by just three huge companies.

Besides Bayer-Monsanto and Dow-DuPont, China National Chemical Corp is in the final stages of a takeover of Swiss seed maker Syngenta AG.

BLOOMBERG