Monsanto:
'Confident' Business Practices 'Above Board'

DESIREE J HANFORD / Dow Jones Nerwswires 7jan04

ST. LOUIS—Monsanto Co. (MON) has taken "great care" in its conversations with those companies that license its technologies, and Chief Executive Hugh Grant said the company is "confident that our business practices are appropriate and above board."

Speaking during a conference call Wednesday to discuss fiscal first-quarter results, Grant, also the chairman and president, said the seed business is "highly competitive." Currently, farmers can pay, at retail, between $14 and $29 a bag for soybeans seeds with Roundup Ready traits, he said.

The price that farmers pay for Monsanto's technologies in the marketplace, once those technologies are licensed, are determined solely by the companies having the licenses, Grant said.

Grant's comments were in response to an article in Tuesday's New York Times that said Monsanto and Pioneer Hi-Bred International Inc. (X.PNB) had talks between 1995 and 1999 and agreed to charge higher prices for genetically modified seeds. The talks involved licenses that let Pioneer sell genetically modified seeds developed by Monsanto. The two companies said their executives met to discuss the seeds but denied engaging in illegal price fixing, the newspaper said.

Monsanto estimates that Solutia Inc.'s (SOI) Chapter 11 bankruptcy proceedings could take up to two years to complete, Chief Financial Officer Terry Crews said during the conference call. Monsanto can't estimate any potential cost it may incur from those proceedings because of the uncertainty of the bankruptcy process, he said.

Also, Monsanto hasn't taken any reserves in relation to Solutia's filing, Crews said.

Monsanto remains "steadfast" that it won't take on any financial obligations that aren't its responsibility as Solutia reorganizes, Crews said.

Monsanto was named Monday to the nine-member creditors' committee for Solutia's bankruptcy. Solutia, a chemical company, filed for Chapter 11 bankruptcy protection on Dec. 17 in New York. In September 1997, Solutia was spun off of the Monsanto that eventually merged with the company that became Pharmacia Corp., which was later purchased by Pfizer Inc. (PFE).

Weighed down by a write-off of goodwill and restructuring charges, Monsanto reported fiscal first-quarter net earnings that tumbled from the year-ago period. The company lost $97 million, or 37 cents a share, for the quarter that ended Nov. 30. That compares with a loss of $18 million, or 7 cents a share, in the year-ago period.

Monsanto's recent first-quarter results include $69 million, or 26 cents a share, for write-off of goodwill associated with the global wheat business. Also included were charges of $42 million, or 15 cents a share, for restructuring and discontinued businesses.

Absent those charges, Monsanto earned 4 cents a share for the latest quarter.

Analysts polled by Thomson First Call expected Monsanto to earn a penny a share in the first quarter.

The company's sales rose 22% to $1.03 billion from $846 million in the year-ago period behind increased sales of Roundup herbicide in Brazil and a shift in the timing of Roundup sales in the U.S.

Sales in Monsanto's seeds and traits business rose 5% to $385 million from $365 million in the year-ago period. Revenue from the agricultural business, which is mainly Roundup, increased 34% to $643 million from $481 million.

Monsanto announced in July that it was changing its fiscal year end period to Aug. 31 from Dec. 31 to better align its business cycle with that of its customers. The company's current fiscal year began Sept. 1 and will end Aug. 31.

Monsanto's results prove that it's delivering on the goals it set a few months ago, Chief Executive Grant said during the conference call. Although Monsanto's business in Argentina isn't yet where the company wants it, results from Brazil have improved, Grant said.

A drought in Argentina led to few acres of Monsanto's seeds being planted there, Grant said. However, he said that the actions Monsanto took in Latin America a year ago to change its operations there are paying off.

Grant reiterated that Monsanto's Roundup herbicide will see further price and market share erosion in the U.S. this year, but that Monsanto will offset the continued declines by cost reduction efforts. Most of Monsanto's restructuring programs will be in place by the end of the current fiscal year, Grant said.

The early signs for Monsanto's seed business for the current year are good, Grant said. For example, Grant reiterated that orders for Monsanto's branded corn seed were up in the first quarter compared with the year-ago period. Also, orders for Roundup Ready corn and soybeans seeds and branded seeds are running ahead of last year. Monsanto is also seeing an increase in the order pace for branded seeds that have several traits.