Mon­santo posts higher Q3 profit, pur­sues Syn­genta tie-up


Mon­santo Co. re­ported bet­terthan-ex­pected earn­ings re­sults for the third quar­ter on Wed­nes­day as ex­ec­u­tives of the huge agri­cul­tural busi­ness con­tin­ued to make a case for a US$45 bil­lion takeover of Swiss com­peti­tor, Syn­genta AG.

St. Louis-based Mon­santo re­ported earn­ings of US$2.39 per share on stronger rev­enue from crop chem­i­cals, com­pared with re­sults of US$1.62 per share in the prior-year pe­riod.

The av­er­age es­ti­mate of eight an­a­lysts sur­veyed by Zacks In­vest­ment Re­search was US$2.05 per share.

But Ed­ward Jones an­a­lyst Matt Arnold said the earn­ings gain was driven by a one-time li­cens­ing pay­ment from Scotts Mir­a­cle Gro, which sells Mon­santo’s sig­na­ture weed killer Roundup to con­sumers.

“The com­pany’s un­der­ly­ing op­er­at­ing per­for­mance was more mixed,” Arnold said. He noted that Mon­santo main­tained its ful­lyear earn­ings guid­ance at the lower-end of its range of US$5.75US$6.00.

Its shares dropped US$6.46, or 5.7 per­cent, to fin­ish at US$106.32 in trad­ing Wed­nes­day.

Mon­santo re­it­er­ated its goal to more than dou­ble its 2014 earn­ings per share by 2019, em­pha­siz­ing the po­ten­tial ben­e­fits of a com­bi­na­tion with Swiss chem­i­cal maker Syn­genta, which has three times re­jected its un­so­licited of­fers.

“Our pro­posal to com­bine with Syn­genta is an ex­cit­ing log­i­cal next step for our busi­ness, of­fer­ing the op­por­tu­nity to ac­cel­er­ate in­no­va­tion and sup­port a more di­verse group of farm­ers around the world,” CEO Hugh Grant said in a state­ment.

Syn­genta pro­vided a more de­tailed ex­pla­na­tion this week of its con­cerns with Mon­santo’s takeover of­fer. In a video posted to its web­site, Chair­man Michel Demare said the of­fer un­der­val­ues the pes­ti­cide maker’s busi­ness, which “they are try­ing to buy on the cheap.” He also re­it­er­ated con­cerns that Mon­santo is un­der­es­ti­mat­ing the an­titrust chal­lenges.

Mon­santo tried to sweeten the of­fer for share­hold­ers ear­lier this month, adding a US$ 2 bil­lion guar­an­tee should the pro­posal fall apart. Syn­genta said the pro­posal re­mains “in­ad­e­quate.”

Basel- based Syn­genta is the world’s largest crop chem­i­cal pro­ducer and its ac­qui­si­tion would help Mon­santo di­ver­sify its of­fer­ings be­yond Roundup. Sales of that chem­i­cal have been hurt in re­cent months by con­cerns about its safety when used in large-scale in­dus­trial farm­ing.

In March the In­ter­na­tional Agency for Re­search on Can­cer la­beled the Roundup’s key in­gre­di­ent, glyphosate, a “prob­a­ble car­cino­gen.” The com­pany has de­manded a re­trac­tion from the group, a French re­search arm of the World Health Or­ga­ni­za­tion. The group has no reg­u­la­tory pow­ers and no com­mer­cial sanc­tions are ex­pected as a re­sult of the rul­ing.

The U.S. En­vi­ron­men­tal Pro­tec­tion Agency, which makes its own de­ter­mi­na­tions, said it would con­sider the French agency’s eval­u­a­tion.

For the pe­riod ended May 31, Mon­santo said rev­enue rose 8 per­cent to US$4.58 bil­lion, but missed Street fore­casts. Four an­a­lysts sur­veyed by Zacks ex­pected US$4.65 bil­lion.

Sales were hurt by de­creased de­mand for the com­pany’s best­selling prod­uct, biotech corn seeds, as farm­ers turned to soy­beans and other crops. More farm­ers are fa­vor­ing soy­beans be­cause they cost less to grow and can with­stand broader weather vari­a­tions.

Mon­santo’s biotech seeds have ge­net­i­cally en­gi­neered traits that help farm­ers in­crease their crop yield, de­spite their higher costs.

Weak­ness in seed sales was off­set by growth in the com­pany’s chem­i­cal busi­ness, in­clud­ing a US$ 274 mil­lion pay­ment from Scotts Mir­a­cle Gro.

Mon­santo shares have

de- creased roughly 6 per­cent since the be­gin­ning of the year, while the Stan­dard & Poor’s 500 in­dex has in­creased 3 per­cent. The stock has dropped 7 per­cent in the last 12 months.


This June 28, 2011 file photo shows bot­tles of Roundup her­bi­cide, a prod­uct of Mon­santo, on a store shelf in St. Louis, Mis­souri.

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