Executives of Monsanto told skittish investors on Wednesday that earnings per share would grow 13 to 17 percent in the next fiscal year and that the company was on its way to fixing problems in its seed business that have undermined the confidence of Wall Street.
The remarks, in line with some previous assurances by company executives, were made as Monsanto reported that net income for the year that ended Aug. 31 had dropped by nearly half from a year earlier.
“I believe we’ve taken steps to allow our company to return to growth,” Hugh Grant, the chief executive, told analysts and investors Wednesday on a conference call.
He said the seed business was going to offer “more products at more price points” to help regain the trust of farmers who have been put off by high seed prices and lower-than-expected yields for some products, particularly Monsanto’s new SmartStax corn.
Company shares, which have lost about 40 percent of their value this year, rose 5 percent in early trading Wednesday but then settled back down. At midday, shares were 2.6 percent higher.
Monsanto, the world’s biggest seed company and the leading developer of genetically engineered crops, said that net income for the year plunged to $1.1 billion from $2.1 billion a year earlier. In the fourth quarter, Monsanto lost $143 million, or 26 cents a share, compared with a loss of $233 million, or 43 cents, in the period a year ago.
This decline was largely because sales and profit from its Roundup weed killer business were eviscerated by low-priced generics from China.
Sales for the year fell 10 percent, to $10.5 billion from $11.7 billion. For the quarter, sales were $1.95 billion, up from $1.88 billion a year ago.
Earnings were $2.01 a share for the year compared with $3.80 a year ago. Excluding restructuring charges and discontinued operations, earnings were $2.41 a share, at the low end of the range the company had expected, though the forecast had been lowered earlier in the year. The company said it expected earnings to rise to $2.72 to $2.82 a share in fiscal year 2011.
For its fourth quarter, the company reported a loss, after adjustments, of 9 cents a share, 3 cents worse than the consensus analyst estimate. Monsanto typically loses money in the fourth quarter because farmers do not buy many seeds in the summer.
While the decrease in earnings came largely from the Roundup chemical business, the focus of both analysts and company executives was on seeds and genetically engineered traits, which constitute most of the company’s business now and are expected to be the source of growth.
The biggest concern is that early data from this year’s harvest have shown the company’s newest product, SmartStax corn, with eight inserted genes, was not providing higher yields than older varieties with three genes.
Monsanto executives said that since most corn had not been harvested yet, it was too early to judge. Some yield problems, it said, were the result of one particular corn variety that did not perform well in the high nighttime temperatures in parts of the Corn Belt this year.
Nevertheless, the company has already cut prices sharply for SmartStax for next year. “Going into 2011 we’ve taken a decidedly practical approach,” Mr. Grant said.
American farmers planted three million acres of SmartStax corn in 2010, below Monsanto’s goal of four million. Executives declined to provide a goal for 2011 for SmartStax alone. The goal is the midteen million acres for SmartStax and two other product families combined.
