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Monsanto 3Q net income sags on weak Roundup sales


By CHRISTOPHER LEONARD
Associated Press

KANSAS CITY, Mo. (AP) -- Monsanto Co., the world's biggest seed maker, said Wednesday its fiscal third-quarter net income dropped 45 percent as customers continue to shun its Roundup weedkiller in favor of cheaper generic versions.

As Roundup sales have flagged, Monsanto last year said it was accelerating its long-term strategy to shift the majority of its business from chemicals and herbicides to genetically altered seeds. But the transition has been rougher than expected as declines in Roundup have been surprisingly steep amid growing generic competition from China, and farmers have been slow to buy up the company's pricier GMO seed varieties.

The St. Louis company said its net income dropped to $384 million, or 70 cents a share, in the quarter ended May 31, from $694 million, or $1.25 a share, a year ago. The latest quarter included $86 million in restructuring costs linked to downsizing the Roundup unit. Revenue fell to $2.96 billion from $3.16 billion a year ago, with sales in Monsanto's agricultural productivity unit -- which includes Roundup -- declining 34 percent to $600 million.

The company's quarterly results again missed the average estimates of analysts polled by Thomson Reuters. They had been looking for a profit of 79 cents per share on revenue of $3.17 billion. Monsanto shares slipped more than 2 percent to $46.27 in morning trading. Earlier in the session the stock fell as low as $45.29, its lowest point since November 2006.

The company's quarterly results again missed the average estimates of analysts polled by Thomson Reuters. They had been looking for a profit of 79 cents per share on revenue of $3.17 billion. Monsanto shares slipped more than 2 percent to $46.27 in morning trading. Earlier in the session the stock fell as low as $45.29, its lowest point since November 2006.

At $2.36 billion in sales, seeds and genomics represented the bulk of the company's revenue. Monsanto said that 5 percent growth rate year-over-year is consistent with its expectations. But CEO Hugh Grant noted that the company is implementing a new strategy to offer cheaper genetically engineered seeds along with its premium varieties that have multiple engineered traits.

Grant said the cheaper seeds are an answer to farmers' concern that Monsanto's new products, like its SmartStax corn seeds, are too expensive. That has opened the door to competitors who offered cheaper seeds carrying fewer traits. Soft demand kept the quarter's corn seed sales flat at $1 billion, and boosted soybean sales just 2 percent to $549 million.

"They need more products at more price points," Grant said of farmers. "The beauty of that (request) is that it's all within our control. We don't have to go out and invent something."

Monsanto Chief Financial Officer Carl Casale said that now that the changes to its business model have been put in place the company doesn't expect to see more volatility from its declining herbicide business.

"Monsanto now becomes a pure-play seeds and traits company," Casale said on a conference call with analysts Wednesday. "That means it's seed and traits growth that matters."

In May Monsanto lowered its full-year earnings outlook by 50 to 70 cents per share due to price cuts on Roundup. On Wednesday, the company backed the revised guidance, continuing to expect 2010 earnings per share between $2.15 and $2.41.



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