Monsanto Reaps Rewards from Latin American Corn and Other Businesses in First Quarter of Fiscal 2013

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Researched by Industrial Info Resources (Sugar Land, Texas)--Agricultural technology and product leader Monsanto Company (NYSE:MON) (St. Louis, Missouri) reported solid gains in revenues and profits for the first quarter of the company's fiscal-year 2013. Monsanto's success in Latin American corn crops drove its corn seeds and traits business, which also saw solid growth in the U.S., while the Agricultural Productivity segment benefited from a strong market environment. Net income for the quarter was reported to be $339 million, compared with $126 million in first-quarter 2012.

Total sales stood at $2.94 billion, a 20.5% increase from the same period last year. Stronger opportunities for corn products in Latin America proved to be a boon for the corn seeds and traits business, particularly in Argentina, Brazil and Mexico. Monsanto shipped more corn and soy volume in the first quarter than last year, giving it a very solid start for 2013 in the U.S., and the pace of orders in the U.S. order book is ahead of both fiscal first-quarter 2012 and what was projected for this quarter. The company's products also thrived despite a difficult growing season that included the effects of a major drought.

Capital expenditures for the quarter were reported to be $133 million, compared with $138 million in the same period last year.

Industrial Info is tracking $149 million in active projects involving Monsanto, including the $35 million expansion of a corn seed plant in Remington, Indiana. The project involves constructing a new dryer house and installing associated equipment and machinery, as well as constructing a bulk storage facility. The expansion is expected to be completed in September 2013.

"The Latin American opportunity is tracking very well, setting up the full-year growth that we expect as an important element of our 2013 strategy," said Hugh Grant, the chairman and chief executive officer of Monsanto, in a conference call. "As we expected, the initial corn acres in Brazil's summer season were lower than last year's, but the market is set for one of the largest-ever second-season crops, keeping total acres on par with last year. And, even with some early rain delays in Argentina, the corn crop is on target with our planning projection. More importantly, both Argentina and Brazil are in full swing on the corn trait adoption cycle that is driving our immediate opportunity."

Both of Monsanto's major segments saw sales and earnings growth from the same quarter in 2012, although Seeds and Genomics was buoyed largely by its corn seeds and traits business:

• Monsanto's Seeds and Genomics segment reported $1.76 billion in net sales, an 14.41% increase from first-quarter 2012, while gross profits stood at $1.03 billion, an 11.9% increase:
• The corn seed and traits business reported net sales of $1.14 billion, a 27.26% increase from the same period last year. Gross profits were $686 million, a 29.19% increase.
• The soybean seed and traits business reported net sales of $231 million, a 4.55% decrease from first-quarter 2012. Gross profits were $118 million, a 31.79% decrease.
• The cotton seed and traits business reported net sales of $185 million, a 4.64% decrease from the same period last year. Gross profits were $127 million, a 5.93% decrease.
• The vegetable seed business reported net sales of $156 million, a decrease of less than 1% from first-quarter 2012. Gross profits were $83 million, a 2.47% increase.
• All other crop seeds and traits businesses reported net sales of $44 million, a 4.35% decrease from the same period last year. Gross profits were $11 million, compared with a net loss of $4 million in first-quarter 2012.
• Monsanto's Agricultural Productivity segment reported $1.18 billion in net sales, a 30.83% increase from the same period last year, while gross profits stood at $372 million, compared with $180 million in first-quarter 2012.

Monsanto executives are anticipating that 2013 will be a third straight year of earnings growth. The Latin American region is expected to be a powerhouse, with Brazilian corn farmers upgrading to the company's VT PRO2 product and Argentine farmers increasingly turning to the Genuity VT Triple PRO product. In the U.S., Monsanto executives are expecting to see another increase in acreage for Genuity Roundup Ready 2 Yield soybeans product and other Genuity corn products. The company plans to launch a major new technology every year through the end of the decade.

"This is a record year, with more phased advancements across crops and technology platforms than we've ever realized in our history," said Robb Fraley, the chief technology officer for Monsanto, about the company's research and development (R&D) pipeline in the conference call. "We've advanced 18 projects, plus three additional projects moving into our groundbreakers program. If you look at the progress this year, I believe that our R&D advantage is extending, and in important new ways. We've just introduced major new platforms in integrated farming systems and our bio-direct research area."

Fraley added that Monsanto executives believe that their R&D pipeline is the industry's first integrated yield pipeline. "In the next decade, we plan to refresh every major platform, creating incremental value and even better wheat control; greater insect control; and more opportunity to increase yield for our farmer customers."

For more information, visit Industrial Info's North American Chemical Processing Project Database.

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