Monsanto's 3rd-quarter profit drops on charges

Monsanto Co. said Wednesday third-quarter net income fell 81 percent due to write-offs for two large acquisitions and predicted next quarter’s results would fall short of Wall Street’s forecast, sending the agricultural technology company’s shares down 9 percent.

St. Louis-based Monsanto said net earnings for the period ending in May fell to $47 million, or 17 cents a share, compared with $252 million, or 93 cents per share, a year earlier.

The company said it expected a loss of 55 cents per share in the fourth quarter due to seasonal business issues and declining revenues from its herbicide business. Analysts were expecting a loss of around 32 cents a share.

But executives at Monsanto, which makes herbicides and specialty seeds, said sales of seeds and crop biotechnology surpassed expectations. They painted a bright outlook for the company, which is increasingly focusing on sales of biotech characteristics - or traits - for crops.

“What we delivered today reflects tomorrow’s promise,” said Chief Financial Officer Terry Crews in a conference call. “Our seeds and traits business outpaced our expectations.”

Third-quarter net sales for the seeds and genomics unit improved more than 50 percent to $1.1 billion, Monsanto said.

Net company sales surged 22 percent in the quarter to more than $2 billion.

Despite the poorer-than-expected forecast for the fourth quarter, Monsanto sales “appear healthy, with a good mix,” said Banc of America Securities equity research analyst Kevin McCarthy.

Roundup Ready soybeans, engineered to withstand weed-killing treatments, remained the company’s most popular biotech product, though growth was also seen in herbicide-resistant corn and other genetically modified cotton and canola seeds.

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Monsanto said its biotech beans were planted on nearly 120 million acres this year, and biotech corn was planted on nearly 53 million acres.

But the company’s net income was trimmed by 91 cents a share in the quarter because of the recent purchases of Seminis Inc., the world’s largest commercial fruit and vegetable company, and the Emergent Genetics Inc. cotton seed company.

Write-offs associated with research and development at those companies totaled $248 million. As well, the acquisitions helped push operating expenses to $776 million from $458 million in the quarter, compared to a year ago, while income from operations fell 38 percent to $231 million.

Monsanto announced its $1 billion purchase of Seminis from Fox Paine & Co. LLC. in January, and some analysts have pegged the deal as perhaps more pricey than warranted, but Monsanto maintains that the seed and vegetable company will be a key long-term growth vehicle.

The downturn expected in the fourth quarter is partly seasonal in nature with seed sales slowing as key farm crops, like corn and soybeans, are harvested. Declining revenues from Roundup and other herbicides are also among the factors, according to Monsanto.

Monsanto reiterated its forecast of a growth rate of 17 percent in 2006 over 2005 earnings, which are pegged at $2.00 to $2.05. It predicted a 20 percent to 25 percent growth rate for fiscal 2007.