Article

by Carey Gillam

KANSAS CITY, Missouri (Reuters) - Monsanto Co (MON.N) reported a higher-than-expected quarterly profit on strong sales of corn seed for spring planting and improved margins, but its shares fell more than 4 percent as the global agribusiness failed to raise its outlook for the full year.

Officials at the world's largest seed company said the results were strong and showed Monsanto was on track with a strategic plan focused on steady growth in key crops.

"We feel good about where we stand," said Chairman Hugh Grant. "I believe we are getting done what we needed to achieve in 2011."

The fiscal second quarter, which ended on February 28, is key for Monsanto, which typically derives more than half its annual earnings from farmer purchases for spring planting. This year, U.S. farmers are widely expected to plant near-record amounts of key crops amid dwindling global supplies and strong demand.

Monsanto said second-quarter net income rose 15 percent to $1 billion, or $1.88 a share, from $887 million, or $1.60 a share, a year earlier.

Excluding discontinued operations, earnings came to $1.87 a share. Analysts on average were expecting $1.84, according to Thomson Reuters I/B/E/S.

Revenue increased to $4.13 billion from $3.89 billion.

Seed and genomic sales jumped 5 percent to $173 million. Gross margin from U.S. branded corn seed increased, and corn sales growth in Latin America was steady.

Profit margins also expanded for U.S. soybean seeds, and cotton had steady growth as well.

Gross profit for the company's global vegetable seed business declined because the timing of various product sales. The company said patterns should normalize over the rest of the year.

Monsanto had reduced pricing this season to try to secure farmer customers for new products. Grant said on Wednesday that the company would raise prices for the 2012 season, but the moves would be moderate.

Sales increased 10 percent at the agricultural productivity unit, which includes Roundup and other glyphosate-based herbicides.

Monsanto shares were down 4.5 percent at $70.04 on the New York Stock Exchange after the company said it still expected full-year ongoing earnings of $2.72 to $2.82 per share and net income of $2.66 to $2.79. Analysts have forecast $2.85.

The company increased its free cash flow outlook for 2011 to a range of $900 million to $1.1 billion. It previous had forecast $800 million to $900 million.

(Editing by Dave Zimmerman and Lisa Von Ahn)