Ambitious The world’s largest seed company is positioned to launch a new technology every year through the end of this decade
Monsanto Co., the world’s largest seed company, said Jan. 8 that expansion efforts in Latin America are paying off, adding to the company’s strength in the U.S. market and helping it capture surprisingly strong profits.
Monsanto has been pushing for deeper penetration of its corn seed products in Latin America and said it was seeing good progress on upgrading offerings in Brazil and Argentina. In particular, sales of corn engineered both to tolerate weed-killing treatments and to protect the plant from pests are expanding rapidly in both countries, the company said.
“The Latin American opportunity is tracking very well,” said Monsanto chairman Hugh Grant.
The growth in Latin America, along with early U.S. spring seed sales and strong herbicide sales, helped Monsanto raise its earnings outlook for fiscal 2013 and delivered surprisingly strong first-quarter results.
Shares rose nearly three per cent after the developer of genetically engineered corn, soybeans and other crops said it was aiming for $4.30 to $4.40 per share on an ongoing basis in fiscal 2013, up from its previous guidance of $4.18 to $4.32 per share. If achieved, it would mark the third straight year of ongoing earnings growth.
The guidance fell shy of analysts’ estimates, but still was applauded. On average, analysts were looking for $4.43 a share for fiscal 2013 guidance, according to Thomson Reuters I/B/E/S.
The guidance excludes what could be 20 cents to 25 cents of earnings contribution from soybean sales in Brazil, as the company is involved in a dispute there over collection of royalties on its patented “Roundup Ready” herbicide-resistant soybeans.
Monsanto has been meeting with grower groups in Brazil to try to forge an agreement even as its legal dispute with the government over royalty collection continues. The company wants to resolve the issue before it launches a new “Intacta” soybean.
Intacta beans are genetically altered not only to tolerate Roundup herbicide, but to also protect plants from harmful worms and to offer increased yields.
Brazil, the world’s No. 2 soybean producer, is one of Monsanto’s fastest-growing and most important markets after the United States and demand for soybeans in Brazil has increased sharply.
Monsanto said corn seed and genetic trait sales in Latin America and in the United States were key to a total jump in sales of 21 per cent, to $2.9 billion for the quarter, a surge that even surprised Monsanto, Grant said.
The company expects U.S. acreage planted with both its leading corn and soybean products to expand this year, officials said, as the pace of U.S. seed orders exceeds last year’s.
Monsanto said it expects U.S. farmers to plant 36 million to 38 million acres with its key corn seed products, up from 27 million acres in 2012. Company officials reiterated expectations for a total of about 96 million acres planted by U.S. farmers with corn.
Monsanto said it expects U.S. farmers to plant about 39 million to 41 million acres with its Genuity Roundup Ready 2 Yield soybeans, up from 32 million acres in 2012. The company has said it sees total soybean planting in the United States this spring at about 76 million acres or more.
“The bottom line is our order book is strong,” Grant told analysts in a conference call.
Total sales of corn seeds and genetic traits rose 27 per cent to $1.1 billion in the first quarter compared with a year earlier.
Soybean sales, conversely, fell to $231 million, down 4.5 per cent. Sales for cotton, vegetable seeds and all other crop seeds and genetic traits were lower for the quarter.
Monsanto’s sales of herbicide and other crop, lawn and garden chemicals were up nearly 31 per cent to $1.2 billion, largely due to strong pricing and other favourable market dynamics, the company said.
Pipeline of new products
Monsanto also said that it has a record number of projects in its research and development pipeline and is positioned to launch a major new technology every year through the end of this decade.
Commercial sales of the company’s new “DroughtGard” corn begin this year.
The company is moving forward on new dicamba-tolerant soybeans, as well as beans with resistance to root rot disease, and it is enhancing insect control for corn and pushing forward on a wheat with improved yield capability, officials said.
The dicamba-tolerant soybeans are seen as a critical move for Monsanto, as its core Roundup Ready crops lose their appeal due to growing weed resistance to Roundup herbicide.
The company is also deploying a “steady wave” of new vegetable products ranging from disease-resistant cucumbers to broccoli that is easier to harvest and has improved appearance on store shelves. The company hopes to launch the broccoli this year in the United Kingdom.