Monsanto posted a smaller quarterly loss Oct. 8 as strong herbicide and seed sales helped offset seasonal slowness and research and development costs.
Shares of the agricultural technology company rose more than six per cent after company officials said they saw strong growth ahead and boosted their gross profit target for 2012 to between $9.5 billion and $9.75 billion, up from about $8 billion (all figures US$)
Despite the current troubles roiling U. S. and global economies, Monsanto officials said the company’s strong cash position, low debt and good market demand for its core products were insulating it from much of the market woes.
“Every company is dealing with historic volatility caused by uncertainty in the commodities and credit markets,” Monsanto chairman Hugh Grant said in a statement. “But if we focus on the things in our business that we control, and we do those things well, there’s significant growth ahead for our business.”
Company officials said optimism was boosted by the fact that they have been surveying the financial landscape ahead of a new U. S. planting season and found that current tight credit markets should not weaken the company’s ability to sell seeds and herbicides to farmers.
Rural banks remain viable lenders for U. S. farmers and Monsanto is positioned to extend credit to farmers as well, Monsanto chief financial officer Terry Crews said. The company is monitoring the credit situation in its key markets of Brazil and Argentina, he said.
Monsanto said its net loss narrowed to $172 million in the fourth quarter ended Aug. 31 from $210 million a year earlier.
Monsanto said the loss resulted from seasonal cycles for certain product sales as well as research and development expenses.Net sales rose 35 per cent to a record $2 billion for the quarter.
A key factor was strong pricing for Roundup and other herbicides, whose sales jumped 48 per cent to $936 million as branded pricing was pushed higher than the company’s set range of $16 to $18 a gallon. The Roundup business should generate $2.3 billion to $2.4 billion in gross profit in 2009, Monsanto said.
“The Roundup business is performing better than anybody had expected,” said Morningstar analyst Ben Johnson, who cited continued strong pricing in that segment as key. “Roundup has really been a cash machine for them, and I think it will continue to be a cash machine for them in the future.”