Monsanto posts deeper Q4 loss, unveils acquisition

Monsanto Co., the world’s largest seed company, reported a deeper quarterly loss on Wednesday as seed sales slipped, and announced the acquisition of a high-tech climate data firm it touted as a “transformational” growth engine.

Investors initially appeared unimpressed with the $930 million purchase of Climate Corp and instead eyed Monsanto’s 2014 profit forecast and a drop in gross profit in its key corn and soybean seed business in the latest quarter (all figures US$).

“Seed gross profit was down more than expected,” and the 2014 outlook is “too low,” BGC Financial analyst Mark Gulley said in a note to investors.

Monsanto, the leading developer of genetically engineered corn, soybeans and other crops, said it expects earnings in the new fiscal year, begun Sept. 1, of $5 to $5.20 per share. It said the Climate Corp purchase would dilute earnings by about 14 cents a share.

Analysts’ average profit estimate for 2014 is $5.30 per share, according to Thomson Reuters I/B/E/S.

Overall, Monsanto lost $249 million, or 47 cents a share, in the fourth quarter, compared with a loss of $229 million (42 cents a share) a year earlier. Analysts on average were expecting a loss of 43 cents a share.

Sales rose to $2.2 billion from $2.1 billion, but sales of its key seeds and genomics business dropped to $1.19 billion from $1.2 billion.

Monsanto officials said in a conference call with investors that the acquisition of San Francisco-based Climate Corp was a transformational event.

The deal, expected to close in the current quarter, will give the seed and chemical giant a technology platform with significant growth potential, the officials said.

“This is the entry ticket into a $20 billion market opportunity and it starts fast,” chairman Hugh Grant said on the call. “It’s an important addition. It will strengthen our growth rate over the coming decade.”

Monsanto and rival DuPont Pioneer have been racing to roll out such data-driven products to help farmers boost production.

The Climate Corp weather data products will be incorporated into Monsanto’s FieldScripts precision planting platform for farmers. FieldScripts is designed to help farmers make dozens of decisions related to planting, field management and harvesting.

Monsanto plans to launch FieldScripts across four states on hundreds of thousands of acres at a price of about $10 per acre in 2014.

Monsanto said it would likely take a year to incorporate Climate Corp weather data into its FieldScripts platform, and company officials said they would be determining over that period how much higher they can price the FieldScripts offering, based on how much additional yield the information can give farmers.

Grant said the technology could be sold to farmers planting an array of crops, whether or not Monsanto sells the seeds those farmers use. While corn farmers are Monsanto’s core customers, wheat and rice farmers could become customers through the FieldScripts product, he said.

The company also expects to license the technology offering to equipment manufacturers, retailers and others, Grant said.

The Climate Corp acquisition is expected to boost Monsanto’s earnings within two years, officials said.

Monsanto said its farm trials in 2012 showed a production boost of five to 10 bushels per acre when FieldScripts was used.

The company said its core business should see good growth in 2014, with margin expansion and an acceleration of sales in corn and soybean products that will include a five to 10 per cent price lift.

The company is rolling out new seed products in Latin America, and as part of its global expansion efforts will be adding corn breeding and production facilities in Eastern Europe, officials said.

— Carey Gillam is a Reuters correspondent covering agribusiness from St. Louis.

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