Monument Circle Acquisition Corp (MON)

[Democritus_of_Abdera]

Foreshadows of a disappointing Q3...

In the Morgan Stanly conference of Feb 25, Carl Casale (MON CFO) made several comments that suggest that Q3 earnings will be disappointing (albeit his speaking style is a ramble that often relies on vague generalizations).... On the other hand, Carl suggests that Q4 will be better than expected (i.e. revenues will be shifted from Q3 to Q4).

The reasons Carl gives for “difficult comps that are going to see some oddities” include:

1) revenue recognition for corn sales to third parties will be moved into Q4 2010.

2) Roundup Ready soybeans were processed late due to the wet October in 2009. Revenues will be booked when the new seed is shipped. That will probably be in Q4 2010.

3) Because of the wet autumn, farmers have not yet committed to corn because they have not needed to commit to putting fertilizer in the ground yet... they might shift to soybeans. Every 1M acres of shift to soybeans costs MON about $0.02 per share. Currently, the commodity prices favor corn... but it is close.

4) Smartstax seed was not fully adopted because of the lack of hybrid diversity with the trait. And, not all of the Roundup Ready 2 soybean seed is likely to be sold. The Smartstax seed can be carried over to next year, but the soybean seed will need to be sold to commerce. The net effect is a few pennies (less than a nickel) reduction in earning per share.

We should talk a little bit about how do we see acreage this year on Roundup Ready 2 Yield. You know a few weeks ago we said that – and I’ll talk about SmartStax as well. We saw about eight million acres of Roundup Ready 2 Yield and about four million acres of SmartStax. As I stated here today, I think both of those numbers would be the top end of the range and if I were kind of calibrating meaningfully what is that range, I take both of those numbers and I take 20% off of those numbers and that’s the range that I think we’re probably going to land in.

5) Roundup sales will be reduced by $100-150M price concessions or trade incentives needed to reestablish the brand (but I don’t classify this as a disappointment since it has been long anticipated).