Roundup sales boost Monsanto Q2 earnings

David Bailey / Reuters 25jul01

Global sales of Roundup herbicide rose 4 percent in the second quarter, led by gains in the United States and Argentina.

CHICAGO  --  Agriculture and biotechnology company Monsanto Co. said on Wednesday that earnings rose 4.7 percent in the second quarter before special items on strong sales of Roundup herbicide.

The news bolstered shares of St. Louis-based Monsanto, which ended $2.22 higher, or up 6.93 percent, at $34.26 Wednesday on the New York Stock Exchange. The shares have risen 26.6 percent and outperformed the Standard & Poor's 500 index by nearly 31 percent since the start of the year.

Monsanto, which is 85 percent owned by Pharmacia Corp., also said it expects to report a third-quarter loss about equal to last year's loss of 13 cents a share, excluding nonrecurring items. Analysts, on average, expected a loss of 4 cents a share in the third quarter, according to market research firm Thomson Financial/First Call.

Monsanto's third-quarter results tend to fall due to seasonal declines in sales of Roundup, seed and other agricultural products.

Foreign currency weakness is expected to hold sales growth in fiscal 2001 to about 2 percent to 4 percent. However, Monsanto still expects earnings per share, excluding nonrecurring items, to rise 9 percent to 13 percent in 2001.

In the second quarter, Monsanto reported operating income of $421 million, or $1.60 a diluted share, excluding nonrecurring after-tax charges of $32 million, compared with $402 million, or $1.56, a year ago.

The analysts' consensus second-quarter estimate was $1.54 a share, according to First Call.

STILL SOME TWEAKING TO DO

Global sales of Roundup herbicide rose 4 percent in the second quarter, led by gains in the United States and Argentina. Corn seed returns in Latin America cut about $70 million from sales in the seeds and genomics business, where sales fell 20 percent to $437 million.

Second-quarter sales were flat from a year ago at about $2.01 billion, but would have been 2 percent higher without the impact of weak foreign exchange, the company said.

"I think we still have some tweaking to do, but we believe we are well-positioned, and uniquely positioned, in this industry to succeed and to grow," Monsanto Chief Operating Officer Hugh Grant said in a conference call.

Monsanto has held market share for Roundup herbicide despite expiration of a patent last year, according to Chief Financial Officer Terry Crews.

The Latin American presence is critical to Monsanto's growth overall, Grant said, adding that the company hopes for approval to roll out Roundup Ready soybeans in Brazil this fall. The roll-out would not have a significant impact on earnings this fiscal year, but could have an impact next year.

"They were smack on forecasts, which is much better than most companies, and they hadn't preannounced so they weren't meeting recently revised expectations," Merrill Lynch analyst John Roberts said.

The bottom line is that Monsanto is not significantly impacted by the weakening economy and the company is gaining share within agricultural markets, Roberts said.

So far, Monsanto has recorded about $330 million of what was expected to be $425 million to $475 million in pretax restructuring and other special items charges for the two-year period ending Dec. 31.