WASHINGTON – Monsanto reported lower-than-expected earnings as slumping corn prices push farmers toward other crops, crimping sales of the company’s bestselling biotech corn seeds.
The St. Louis agricultural business giant reported a second-quarter profit of $1.42 billion, or $2.92 per share, down from $1.67 billion, or $3.15 per share, in the prior year period. Sales slid to $5.2 billion from $5.8 billion.
Analysts surveyed by Zacks Investment Research predicted earnings of $2.96 per share on sales of $5.76 billion.
Monsanto’s biotech seeds have genetically engineered traits that help farmers increase their crop yield, despite their higher costs.
U.S. farmers are expected to plant fewer acres of corn for the third consecutive year in 2015, down 2 per cent from last year, according to survey figures from the U.S. Department of Agriculture. More farmers are favouring soybeans because they cost less to grow and prices farmers receive for soybeans haven’t fallen as quickly as corn. Soybeans also can withstand broader weather variations.
In a conference call, company executives said soybean demand is growing by more than 200 million bushels per year and Monsanto is poised to take advantage with expanding varieties. It expects to penetrate 30 million acres in South America in 2016.
The positive outlook for soybean growth in South America and the U.S. helped push the company’s stock higher, despite the profit miss. Shares of Monsanto Co., which have declined roughly 6 per cent since the beginning of the year, rose $2.15, or 1.9 per cent, to $114.69 in afternoon trading Wednesday.
Monsanto’s total seed and seed license revenue declined to $4.18 billion from $4.65 billion mainly due to lower sales of the company’s bestselling product, biotech corn seeds, which fell 15 per cent to $2.9 billion. Soybean sales partially offset the drop in corn rising to $883 million from $820 million.
Sales of the company’s signature herbicide, Roundup, and other agricultural chemicals fell slightly to $1 billion in the period.
Monsanto has recently weathered a wave of negative publicity centred on Roundup, with European officials questioning the weed killer’s safety when used in industrial farming.
Last month the International Agency for Research on Cancer labeled the Roundup’s key ingredient, glyphosate, a “probable carcinogen.” The company has pushed back against the conclusion and demanded a retraction from the group, a French research arm of the World Health Organization. The group has no regulatory powers and no commercial sanctions are expected against Roundup and other weed killers containing the ingredient.
The U.S. Environmental Protection Agency, which makes its own determinations, said it would consider the French agency’s evaluation.
Just days later the EPA announced that Monsanto would pay $600,000 in fines for failing to report the release of toxic chemicals at a phosphate plant in Idaho.
The company expects full-year earnings in the range of $5.75 to $6 per share. Those results will be negatively hit by 35 to 40 cents in foreign exchange headwinds as the dollar strengthens against overseas currencies.
Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on MON at http://www.zacks.com/ap/MON
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