Monsanto Boosts 2007 Profit Forecast on Corn Seeds

June 15 (Bloomberg) -- Monsanto Co., the world's biggest seed producer, boosted its profit forecast for fiscal 2007 as rising demand for ethanol and animal feed led to a surge in U.S. corn planting. The shares rose to a record.
Profit in the year ending Aug. 31 will be $1.75 to $1.80 a share, excluding some items, compared with a previous forecast of $1.60 to $1.65, St. Louis-based Monsanto said today in a statement. Earnings were expected to be $1.69, the average estimate of 13 analysts surveyed by Bloomberg.
Monsanto said it increased sales of genetically modified corn seed and grabbed market share from competitors including DuPont Co. U.S. corn farmers, the world's largest growers of the crop, planted 15 percent more acres this year as the price of the grain jumped to a 10-year high. Demand also rose for Monsanto's Roundup herbicide, the company said.
``We're having extraordinary performance in an extraordinary year for agriculture,'' Chief Executive Officer Hugh Grant said in the statement.
For the third quarter ended May 31, profit was about $1 a share, including a 5-cent gain from the resolution of tax audits, Monsanto said in a preliminary earnings statement. Ten analysts surveyed by Bloomberg had estimated 77 cents on average.
Shares of Monsanto rose $2.32, or 3.7 percent, to $65.63 at 11:35 a.m. in New York Stock Exchange composite trading, after earlier rising as much as 7.2 percent to a record $67.86. Before today, the stock had gained 61 percent in the past year.
Market-Share Gain
Much of the increased forecast reflects Monsanto's growing market share for gene-modified corn, spokesman Glynn Young said.
The company may have exceeded its April market-share forecast as competing producers struggled to meet surging demand, said Soleil Securities analyst Mark Gulley, who recommends buying the shares. Monsanto had previously forecast a gain of 3 percentage points in market share.
``It's really a corn story,'' Gulley said in a phone interview. ``The ag market is just really good this year.''
Market-share gains boost profit more than a larger corn crop, said Jason Dahl, who manages $1.2 billion including Monsanto shares at the Victory Capital Focused Growth Fund. When farmers plant more corn, they may buy fewer soybean or cotton seeds, so Monsanto might only trade sales of one for the other, he said.
``We'd much prefer they gain a point of overall market share than have more acres planted,'' Dahl said in a phone interview. ``They got both.''
Excluded Items
The full-year forecast excludes the acquisition of cottonseed producer Delta & Pine Land Co., which will reduce earnings ``moderately'' because of seasonal losses traditional during the fourth quarter, Monsanto said.
Also excluded are pending divestitures of the Stoneville and NexGen cottonseed units, including the write-off of in- process research and development. The Department of Justice is requiring the divestitures as a condition of the Delta & Pine Land acquisition. Monsanto cannot detail the costs until the divestitures are approved, Young said.
The full-year tax rate may be as low as 29 percent, compared with a prior estimate of 30 percent, Monsanto said.
Banc of America Securities analyst Kevin McCarthy said he is reviewing his per-share earnings estimates of 79 cents for the third quarter and $1.65 for the year.
``Favorable fundamental factors accounted for the lion's share of the upside,'' McCarthy in a report. He rates the shares ``neutral.''