Monsanto Posts Smaller-Than-Expected Loss on Soybean Gains

Monsanto, the world’s largest seed company, reported a smaller-than-expected loss for its fiscal first quarter as more farmers in Latin American bought its newest genetically modified soybean seeds.

The loss of 11 cents a share in the three months ended Nov. 30 excludes restructuring costs and compares with a profit of 47 cents a year earlier, St. Louis-based Monsanto said in a statement Wednesday. The average of 11 analysts’ estimates compiled by Bloomberg survey was for a loss of 23 cents.

The quarter is a seasonally weak one for Monsanto as North American and European customers generally aren’t buying the company’s seeds and chemicals during the period. Compared with a year earlier, revenue was down in every product category except soybean seeds, which gained 11 percent on higher sales of Intacta seeds, the first modified crop developed for South America. Monsanto said it’s on track to reach a target of 30 million acres (12 million hectares) sown with the seeds in fiscal 2016.

Intacta soybeans were developed to ward off insects and tolerate the application of weedkiller. Monsanto says they’re one three main drivers that will boost earnings over the next three years. Brazil is the largest soybean exporter and had a record harvest in the most recent crop year. In Argentina, the third-largest grower, farmers are sowing more after newly elected President Mauricio Macri removed export tariffs last month.

Strong Dollar

“If there is a bright spot, it was in soybeans,” Chris Shaw, a New York-based analyst at Monness Crespi Hardt & Co., said Wednesday by phone. “Intacta expanding from 15 million acres to 30 million this year is going to be a benefit.”

Despite the good news on Intacta, Monsanto now sees full-year earnings, excluding restructuring costs and other items, in the lower half of its previously forecast range of $5.10 to $5.60 a share because of the recent devaluation of the Argentine peso. The shares fell 1.8 percent to $95.53 at 9:31 a.m. in New York.

With federal officials forecasting the lowest U.S. farmer incomes in more than a decade, the crop-chemicals industry is focusing on consolidation, with Dow Chemical Co., DuPont Co. and Swiss-based Syngenta AG all striking or considering deals within the last month. Monsanto is facing the first drop in its annual earnings in six years as prices decline for its Roundup herbicide, the strong dollar hurts foreign sales, and lower crop prices curb farmers’ purchases of the newest genetically modified seeds.

Job Cuts

Monsanto’s sales of seeds and genetic licenses fell 14 percent in the first quarter. Revenue in the agricultural productivity unit, which primarily makes Roundup, tumbled 34 percent. On a net basis, the loss for the period was 56 cents a share. Sales fell to $2.22 billion from $2.87 billion, trailing the $2.39 billion average estimate.

Monsanto also said Wednesday it raised the number of jobs it expects to cut as part of a restructuring plan to 3,600, or 16 percent of the global workforce, from 2,600 announced in October. Monsanto Chief Executive Officer Hugh Grant aims to cut $500 million of expenses as he tries to meet his goal of doubling earnings by 2019.

In August, the company abandoned a $46.6 billion proposal to buy Syngenta, the world’s largest pesticide producer, which rejected the offer. Syngenta is in talks about being acquired by China National Chemical Corp., people with knowledge of the matter said last month.

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