October 8, 2010
Monsanto crafts new seed strategy
Monsanto Co. unveiled earlier a revamped seed marketing strategy that will provide more products to farmers at varied prices and deliver investors growth in earnings.
For growers, SmartStax was supposed to boost yield by protecting corn plants from weeds and bugs. For Monsanto, it represented a potential blockbuster product at a time when the company was trying to steer investor attention onto its successful seeds and traits business and away from its Roundup herbicide business, where profitability had been gutted by generic competition.
Monsanto''s shares were punished in late September after early harvest data from the southern Corn Belt indicated SmartStax yields were, on average, weaker than those from Monsanto''s less expensive seeds.
Grant said the company''s other corn seed products were outproducing the competition. But only 15% of SmartStax has been harvested so far, so it''s premature to generalise about its performance.
"Despite all the speculation, we cannot be as definitive on the pronouncement on SmartStax," he said.
Monsanto executives predicted better results when harvest data are available from the northern Corn Belt, where more varieties of SmartStax were available.
But they did acknowledge that the benefits of the new seed probably would not be fully realised because growers experienced less damage from rootworm, a common pest in cornfields. Warm summer nights in some growing regions also hurt yields from two particular SmartStax hybrids, Chief Technology Officer Robert Fraley said on the call.
Questions about SmartStax overshadowed news on the company''s fourth-quarter financial results.
For the quarter, Monsanto reported a net loss of US$143 million, or US$0.26 a share, compared with a loss of US$233 million, or US$0.43, in the same period last year. Sales rose 4% to US$1.95 billion.
Excluding restructuring costs, Monsanto''s loss equaled US$0.09 a share. On average, analysts polled by Bloomberg expected the company to lose US$0.06 a share.
The summer quarter is typically Monsanto''s weakest because farmers in the US have already purchased and planted their crops for the current growing season.
Monsanto reaffirmed that it expects earnings growth of 13% to 17% in fiscal 2011. The company forecast single-digit volume growth in sales of biotech seeds, driven in part by sales of SmartStax corn and Roundup Ready 2 Yield soy.