Price of Monsanto stock shoots up
One day after falling to an annual low, shares of Monsanto Co. climbed the most in six months after the Creve Coeur-based agribusiness posted a smaller fourth-quarter loss than Wall Street expected while professing confidence about long-term plans.
Net sales rose by more than a third for the maker of Roundup herbicide and biotech-enhanced seeds for corn and soybeans, Monsanto said Wednesday. Executives said the long-term trend of greater grain demand will allow the company to reach ambitious milestones it has set for the next few years, including doubling its gross profit by 2012.
Across the agriculture industry, companies are dealing with historic volatility caused by uncertainty in the commodities and credit markets, said Hugh Grant, chairman and chief executive. But "in a world of increasing uncertainty, we at Monsanto believe substantial growth is still to come," he said in a conference call.
Monsanto said it expected to earn between $4.20 and $4.40 per share in 2009, an increase of approximately 15 percent to 20 percent from Monsanto’s results for continuing operations in the 2008 fiscal year. Several analysts said the projections were characteristically conservative.
Monsanto posted record net sales and doubled profits in the 2008 fiscal year, juiced by a big increase in sales of Roundup as well as gains in corn seeds and traits. The company’s smaller vegetable seed portfolio also chipped in.
Monsanto said it now expects its gross profit to grow to between $9.5 billion and $9.75 billion in 2012, or about two-and-a-quarter times its 2007 base. That estimate was raised from Monsanto’s prior projections, which called for gross profit to grow to a range between $8 online instant cash advance.6 billion and $9.1 billion.
But the key year may actually by 2010, when Monsanto plans to widely market its new Roundup Ready 2 Yield soybean seeds, said Frank Mitsch, managing director at BB&T Capital Markets. Grant called that product a "game-changer."
That introduction "bodes well for Monsanto’s results," Mitsch said. "We’re very bullish on the stock."
Monsanto tried to assuage fears that farmers’ credit was evaporating, which could cause them to cut back on purchases of herbicide and seed. Chief financial officer Terry Crews said U.S. farmers’ debt-to-asset ratio is "low" — about 10 to 12 percent. Farmers on solid financial footing should be able to get needed funds to carry on operations, he said.
Plus, "seed will be the last place that growers will seek to cut corners in this environment of rising input costs," Morningstar analyst Ben Johnson wrote in a research note.
Monsanto also predicted strong demand for glyphosate-based herbicide, including Roundup. The company’s stock fell rapidly last week when chatter about falling demand and higher production costs for Roundup spread across Wall Street.
The chemical is one of Monsanto’s most important products, and is expected to contribute $2.3 billion to $2.4 billion in gross profit in the 2009 fiscal year. Proceeds from "the house of Roundup" paid for several recent acquisitions, said Grant.
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