Article

by Carey Gillam

KANSAS CITY, Missouri (Reuters) - Monsanto Co MON.N, the world’s largest seed company, posted a deeper quarterly loss than Wall Street had expected, and warned next year’s results may also be weak after customer complaints prompted a revamping of products and pricing levels.

The company’s shares, which had fallen nearly 10 percent last week after disappointing preliminary harvest results from a new seed corn, rose on Wednesday as executives predicted the new strategy would win back corn and soybean customers.

“We’ve focused on giving farmers the most profitable product options,” Monsanto Chairman Hugh Grant said on a call with analysts. “We’re trying hard to back that with our actions from our new products and new price points.”

Monsanto said it has lost two to three points of market share in soybeans this year, while its corn share has been flat as it struggles with the poor product performance reports and stiff competition from DuPont DD.N and other rivals.

Continued poor performance in the company’s herbicide business was also a factor.

Net sales in the fiscal fourth quarter did rise, surprising analysts by climbing nearly 4 percent to $1.95 billion. But narrower profit margins for some key products and a restructuring charge of $132 million ate into the gains.

For the quarter, St. Louis-based Monsanto posted a loss of $143 million, compared with a loss of $233 million a year earlier. The company reported a quarterly per-share loss of 9 cents on an ongoing basis and a net loss of 26 cents.

Wall Street analysts, on average, expected a loss of 6 cents a share on an ongoing basis for the fourth quarter, which ended August 31, according to Thomson Reuters I/B/E/S.

Monsanto said it expected 2011 earnings to range from $2.72 to $2.82 a share, below analysts’ expectations for $2.83 a share for 2011.

But the increase in sales, along with the fact that Monsanto’s 2011 guidance wasn’t lower, helped push shares higher Wednesday, according to Morgan Stanley analyst Vincent Andrews.

Monsanto forecast that it should still generate 13 to 17 percent earnings growth in 2011, soothing worried investors who have seen its shares plummet more than 40 percent this year.

Shares of Monsanto rose more than 5 percent in early Wednesday trade and were up 2.4 percent to $49.70 in early afternoon trading on the New York Stock Exchange.

Jefferies & Co analyst Laurence Alexander said the company’s shares were likely to remain range-bound over the next few quarters as investors view the “adverse competitive dynamics” affecting Monsanto this year and next.

Monsanto said Wednesday it was still too early to offer meaningful data on its news SmartStax corn product. But it said it was seeing yield gains for other corn offerings against competitors.

Likewise, Monsanto officials said farmers were embracing the company’s new glyphosate-tolerant “Roundup Ready 2 Yield” soybean seed after complaints about high prices and poor performance last year.

Grant said going into 2011 the company has taken “a decidedly practical approach” that should pay off over the long term, lowering prices or holding them flat, unbundling products and making them more affordable for farmers.

“In the longer term we’re bringing farmers the best products in this industry,” Grant said. “As we demonstrate that value farm by farm ... the growth for our company will follow.”

Seed sales are expected to continue to drive Monsanto’s growth. In the fourth quarter, seeds and genomics sales totaled $970 million, up 7 percent from a year earlier.

The company said it expected sales of Roundup and other glyphosate-based herbicides between 250 million and 300 million gallons at an average gross profit of $1 per gallon.

The company projected free cash flow in the range of $800 million to $900 million for 2011.

(Reporting by Carey Gillam; Editing by Derek Caney, Maureen Bavdek and Tim Dobbyn)