Jack Kaskey Houston
MONSANTO has forecast financial 2015 earnings that trailed analysts’ expectations as tumbling grain prices leave farmers with less to spend.
Profit in the 12 months to August next year would be between $5.75 (R64.44) and $6 a share, the largest seed company said yesterday. The average of 25 estimates was for $6.03.
Monsanto said it expected earnings gains to mostly occur in the second half of the financial year because of a shift in the timing of orders. It planned to keep the pace of general corporate spending increases to the inflation rate.
Chairman and chief executive Hugh Grant told investors in August that the increase in 2015 earnings might be smaller than in recent years because falling agricultural futures could limit Monsanto’s ability to raise seed prices. Prices of maize and soya beans, its two biggest seed markets, have slumped as US farm production surged.
“The competition in corn seed will be fierce this year,” Chris Shaw, an analyst at Monness Crespi Hardt who recommends buying the shares, said in a note on Monday. “Monsanto will still be positive on 2015 seed pricing, but will likely have to re-evaluate this stance.”
Rain and mild weather have helped to boost US crop yields. Farmers will collect a record 366 million tons of maize this year, the US Department of Agriculture (USDA) estimates. Lower grain prices would cut US farmer profits by 14 percent, the USDA said in August.
The drop in income is affecting other companies. Tractor maker Agco cut its full-year earnings forecast on Tuesday, citing a slowdown in sales.
Deere, the largest manufacturer of farm machinery, reduced its forecast last month and said it was laying off workers amid weaker demand.
Monsanto said yesterday that its loss excluding some items in the fourth quarter to August, a weaker period dependent on sales in South America, was 27c a share, wider than the 24c average estimate.
Monsanto announced plans in June to repurchase $10 billion of stock over two years as part of a plan to double earnings a share in five years.
The US-based company raised $4.5bn for the buy-backs in its biggest-ever bond sale, prompting Standard & Poor’s to cut Monsanto’s credit rating three levels to BBB+ from A+. – Bloomberg