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Monsanto tops estimates, raises 2013 earnings outlook
2:13 PM MDT | April 3, 2013 | Rebecca Coons
Monsanto raised its 2013 earnings outlook as expanded corn acres in Brazil and increased sales of advanced corn seeds in the United States drove second-quarter results above analysts’ estimates.
The company reported net income of $1.48 billion for its fiscal second quarter, ended 28 February, up 22% from the year-ago quarter. Adjusted earnings of $2.73/share beat a $2.58/share consensus of analysts’ estimates reported by Thomson Reuters (New York). Net sales increased 15%, to $5.5 billion, driven in part by a 16% increase in global corn sales, Monsanto says. Net gross profit increased 13%, to $3.07 billion.
"By understanding [farmers’] needs and finding new ways to work with them to meet growing demand, we've achieved momentum in our business and strong results across our global portfolio,” says Hugh Grant, Monsanto’s chairman and CEO. “Our performance underscores our expectation for a third consecutive year of strong earnings growth and reinforces our opportunities for the future as well.”
Seeds and genomics gross profit increased 8%, to $2.7 billion, led by strong demand for corn seeds in Brazil and US farmers trading up to Monsanto’s higher-value seeds. Segment sales increased 11%, to $4.35 billion. Monsanto’s glyphosate business unit reported gross profit of $371 million, up 73% from the year-ago quarter, on sales up 36.7%, to $1.13 billion. Monsanto says higher prices for generic glyphosate created a positive price environment.
Monsanto raised its full-year outlook to $4.42–4.52/share. The midpoint is 2.7% higher than its previous guidance of $4.30–4.40/share and 20.8% higher than 2012 fiscal-year earnings of $3.70/share, but narrowly misses the $4.57/share street consensus. Corn will be a major growth driver, with record volumes expected in the 2013 season, Monsanto says. The company is also on track to reach the high end of its 36–38-million US acre target range for its Genuity reduced refuge corn.
"We have good momentum in the US, we’re on the front edge of some significant acceleration in Latin America, and we’re bringing a couple of new layers of growth into our business each year," Grant says. "And the strength in our global portfolio in fiscal  reinforces our confidence in the growth opportunity that continues beyond this year."
The guidance does not include the 20–25 cts/share that its Brazilian Roundup Ready 1 (RR1) soybean business historically contributes to earnings because of ongoing litigation concerning its royalty collection system in the country.
Grant also notes "strategic moves" the company made in the second quarter that "reduce uncertainty, provide clarity, and reinforce key elements of our ongoing growth, including an agreement with Brazilian customers to resolve the RR1 dispute and the recent $1.75-billion licensing deal with DuPont. "The Dupont agreement is a major breakthrough that allows us to put the marketplace noise behind us while we expand customer choice by making our innovations available to more farmers and more brands," Grant says. "Strategically, the deal validates our Roundup Ready 2 Yields and our new Extend technologies and it expands the total opportunity for both of these. And that’s backed by the financials, as we have a long-term customer that consolidates a key piece of the growth that we’ve anticipated."