Slumping Roundup Sales Hurt Monsanto

Reuters October 30
Kansas city, M0. By Carey Gillam


Agrochemical giant Monsanto Co. on Wednesday posted a wider quarterly loss because of slumping sales of its Roundup herbicide and economic woes in South America.

The St. Louis-based maker of agricultural inputs and biotech seeds posted a net loss of $165 million, or 63 cents a share, in the third quarter, compared with a loss of $45 million, or 17 cents a share, a year earlier.

Net sales dropped 27 percent to $679 million, led by a sales decline of 62 percent in economically troubled Latin America.

Monsanto (NYSE:MON - News) shares rose 5 cents to $17.05 on the New York Stock Exchange, after falling by 2.6 percent earlier Wednesday. The shares have traded between $13.25 and $36.35 in the last 12 months.

Wall Street analysts were expecting a loss of 57 cents a share, with estimates ranging from a loss of 54 cents to 60 cents a share, according to research firm Thomson First Call. The results included 7 cents per share for restructuring.

Buckingham Research Group analyst John Roberts, who maintained his "strong buy" rating on Monsanto shares, said the results were consistent with the company's warning to Wall Street on Oct. 11 to revise expectations sharply downward.

Monsanto said the third-quarter loss does not alter the outlook for 2002 earnings, which the company has said should come in between $1.15 and $1.23 a share. That outlook excludes a full $7.63 per share in restructuring charges, reserves and accounting changes, and includes a gain of 8 cents per share related to asset sales.

Monsanto, which has about $5 billion in annual revenue, has been struggling on two fronts.

Economic troubles in Latin America, particularly in Argentina, have hurt Monsanto's seed and chemical sales there. In particular, a drop in corn seed sales in Brazil hurt the company's third-quarter results, Monsanto said.

After seeing a rise in the number of customers unable to pay their bills, Monsanto earlier this year stopped extending credit to customers and began accepting only cash or grain as payment. Sales have declined as a result.

In the United States, the sale of Roundup herbicide to farmers has suffered as the result of increasing competition and because of the drought that cut into U.S. grain production this year and the need for weed-killing treatments.

"Competition is alive and well, as is Mother Nature," said Chief Operating Officer Hugh Grant.

Total sales of Roundup and Monsanto's other herbicides fell 43 percent in the third quarter from a year earlier, for an overall 27 percent drop in agricultural productivity product sales.

Monsanto said earlier this month that shipments of Roundup, which accounts for nearly half of Monsanto's total sales, are expected to be down about 4 million to 6 million gallons this year because of the drought.

Monsanto's patent on the chief ingredient in its top-selling Roundup herbicide expired two years ago, and competitors have been making inroads into the market.

In response, Monsanto has been trying to reduce its dependence on Roundup and increase seed and genomics revenue, but the company has been slow to gain approval outside the United States for its genetically modified crops, Monsanto's next generation of products.

Seed and genomics sales were down 29 percent to $174 million.

Monsanto became a fully independent company two months ago when Pharmacia Corp. (NYSE:PHA - News) spun off its 84 percent stake.