Reuters — U.S. seeds and agrochemicals company Monsanto, which agreed last month to be bought by Germany’s Bayer for US$66 billion, reported a surprise adjusted profit, helped by a drop in expenses and higher corn seed volumes.
Monsanto agreed in September to a sweetened $128-per-share offer from Bayer that, if approved by regulators, would create a company commanding more than a quarter of the world market for seeds and pesticides (all figures US$).
The St. Louis-based company had been expected to report a loss on an adjusted basis, reflecting a slump in commodity prices and a fall in farm incomes.
However, net sales in the company’s corn seeds and traits business jumped 34 per cent in the three months ended Aug. 31 as corn seed volumes rose in the U.S.
Monsanto’s expenses also dropped, by nearly 10 per cent, as cost-cutting measures paid off.
It expects fiscal year 2017 earnings per share of $3.83 to $4.35 on an as-reported basis, which included costs related to the Bayer transaction of 27 to 34 cents. On an ongoing basis, EPS was expected between $4.50 and $4.90 a share, assuming stable currencies, the company said.
Monsanto, whose shares traded on either side of the previous day’s close on Wednesday, did not offer any update on potential divestitures related to the Bayer deal but said it expects the deal to close by the end of 2017 as previously stated.
Some farm groups, seed companies and lawmakers have raised concerns about the deal, saying it could result in higher prices and reduced choices for farmers.
Bayer and Monsanto have said they are confident that the deal will pass regulatory muster. Bayer has said it is committed to divest up to $1.6 billion of its portfolio to win approval.
The net loss attributable to Monsanto narrowed to $191 million, or 44 cents per share, in the fourth quarter ended Aug. 31 from $495 million, or $1.06 per share, a year earlier.
Excluding items, however, the company earned seven cents per share. Analysts had expected a loss of 3 cents per share on that basis, according to Thomson Reuters I/B/E/S.
Net sales of the company, known for its genetically engineered corn and soybeans and its Roundup herbicide line, rose 8.8 per cent to $2.56 billion, beating the average estimate of $2.36 billion.
Up to Tuesday’s close of $102.15, Monsanto’s shares had fallen about 4.3 per cent since the Bayer deal was announced.
— Karl Plume reports on agriculture and ag commodity markets for Reuters from Chicago. Additional reporting for Reuters by Arathy S Nair in Bangalore.