Monsanto's Bountiful Harvest
Evelyn M. Rusli, 01.03.08, 5:25 PM ET
Monsanto has the world eating out of its hand.
The St. Louis-based company, which manufactures bio-engineered seeds and agricultural products, smashed Wall Street's expectations with its first-quarter profit report. On Thursday, Monsanto said profits surged 184.4%, to $256 million, or 46 cents a share, from $90 million, or 16 cents a share, for the year-ago period. Meanwhile, sales ticked up 36.4%, to $2.1 billion, from $1.5 billion. Analysts expected profits of 35 cents a share on sales of $1.87 billion.
The stunning results boosted investor confidence on Thursday, and Monstanto's shares rose $9.45, or $8.5% to $120.95. Over the last 12 months, the stock has more than doubled from $51 a share. Investors are betting big on agricultural players such as Monsanto, due to the rising popularity of bio-fuels and the growing demand for food worldwide.
With emerging market populations still booming and oil at all-time highs, these trends are expected to continue through 2008 and beyond.
Monsanto is certainly profiting. In the first quarter, it experienced robust sales outside the United States. "Our results in the first quarter represent a solid start to the fiscal year and highlight the strong performance of our Latin American business," Chief Executive Hugh Grant said Thursday.
In particular, the company managed to sell more herbicides in Brazil, Argentina and Europe and saw its seed technologies gain traction in Brazil and Argentina. Seed and genomics sales were up 22.9%, to $836 million, from $680 million, while agricultural sales, which includes herbicides, jumped up 46.7%, to $1.26 billion, from $859 million.
With the company hitting on all cylinders, Monsanto lifted its guidance on Thursday. For 2008, the company plans to earn a net $2.50 to $2.60 a share, far higher than the previous range of $2.20 to $2.40. But Wall Street analysts are already expecting profit at the top end of the new forecast, $2.59 a share. (See: "Monsanto Grows Investor Pleasing Profits." )
Monsanto is betting that agriculture's heydays are far from over. Despite new concerns that the corn boom might go bust in the U.S., Monsanto is ramping up production for corn products. In October, the company announced it is building a new processing plant and expanding another plant, in a bid to double corn seed production in Nebraska. (See: "Monsanto's Cashing In On Corn." ) It will spend $155 million to expand a current facility and create a new 145-acre processing plant in York County in Nebraska. The expansion and construction projects should be completed by the end of 2009.
In Thursday's profit report, the company said it was experienced "strong early-season order patterns in the United States for the company's corn business ... Monsanto now expects that its DEKALB corn seed brand in the U.S. could realize an increase of 2-to-3 percentage points, up from its previously announced range of 1-to-2 points."
The boom seems to be more impressive in America's neighbors to the south. In Brazil, the swift rise in corn prices "have resulted in an increase in the number of total corn acres planted within the country to approximately 35 million acres," Monsanto predicts that the region will see higher than expected levels in corn and soybean production.
In conjunction with its profit report, the company also announced progress in its research and development pipeline. Monsanto said it has advanced or initiated 10 biotech projects. "We are now seeing the deepest and most-compelling research pipeline to date," Chief Technology Officer Dr. Robb Fraley, said. "This unprecedented progress and the sheer momentum of the pipeline reinforces our commitment to deliver high-quality products to farmers."
Other agricultural companies were up on Thursday, including Syngenta which rose 8.5%, or $4.32, to $54.95.
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