by Carey Gillam
Monsanto reported a higher-than-expected quarterly profit on June 30, thanks to strong sales of herbicide and genetically modified seeds.
The St. Louis company, whose shares rose to the highest level in three years, attributed the gains to an earlier-than-normal rush by producers to apply herbicides on North American farm fields, and steady growth in biotech soybeans, corn and other crops.
The company posted a 45 percent rise in net income to $252 million US, or 93 cents a share, for the fiscal third quarter ended May 31, compared with $174 million, or 66 cents, in the year-earlier quarter.
Biotech crops are a hotly debated issue and opposition is stiff in many areas around the world.
But U.S. farmers have embraced genetically modified soybeans and new Monsanto corn seed and other products are making inroads both inside the United States and abroad, according to the company.
Monsanto chair Hugh Grant said the company is pushing forward with new biotech products, including a corn genetically modified to protect against insects that has recently received approval in Japan and will be launched in the U.S. next year.
Grant reiterated that the increasing focus on biotech-seed businesses should result in compounded annual growth of 10 percent in 2005 and 2006.
“That is really the main driver for our future growth,” he said.
To capitalize on the popularity of its biotech crops, Monsanto will raise prices next year for certain Roundup Ready soybeans and corn.
Company officials did not mention their May decision to suspend plans to introduce what would have been the world’s first biotech wheat, in the face of market opposition. They said biotech acreage was increasing despite assertions by critics that opposition to GM crops is growing.
Monsanto estimated U.S. growers planted 65 million acres of Roundup Ready soybeans this year, up two million acres, and pegged Roundup Ready corn at 16 million acres, up four million.
Monsanto officials said the popularity of biotech corn in North America helped push quarterly revenue up 11 percent in the company’s seeds and genomics unit, while conventional corn seed did well in Europe. Biotech soybeans, cotton and canola were also key growth factors.
Analysts expressed some surprise over bad-debt reserve increases in Argentina, and questioned expectations for future sales declines in herbicides as well as ongoing litigation expenses.
Monsanto officials said the herbicide business continues to level off due to increased competition, and that a third-quarter gain of 27 percent in herbicide sales was due in part to earlier-than-normal applications by U.S. farmers.
The company said quarterly results also benefited from a reduced tax rate to 24 percent from 33 percent following resolution of several issues with the Internal Revenue Service.
Monsanto shares on the New York Stock Exchange hit $38.10, their highest level since July 2001.