‘Game-Changing’ Latin America Drives Sharp Rise in Monsanto Profit
10 January 2012 The market for seeds in Latin America emerged even stronger than expected in the first quarter and drove a $126 million profit for Monsanto, as sales climbed 33%, leading it to raise its earnings outlook to the upper half of its previous range. Its non-US market is expected to contribute 60% of profits in 2012.
The region’s standout for the burgeoning corn business was, not surprisingly, Brazil.
On a conference call with investors, CEO Hugh Grant said rapid adoption of traits has brought penetration to more than 75%, and at the same time – just four years since the country approved planting of its GM corn – farmers are now upgrading to higher-value traits.
“We can confidently see the game-changing effect that the Latin American opportunity can have in driving growth over the midterm horizon,” Grant said.
Monsanto sees Brazil ramping up its acreage from first- to second-generation single mode of action crops this year, “with even further upgrade opportunity as we move our offering from our Double PRO over time. With each of these upgrades, there’s significant new value for the farmer, and the value of the acre increases for us.”
Argentina is also in upgrade mode, as farmers there convert from established double-stacked traits to Genuity VT Triple PRO corn, which is in its first year of widespread availability.
In addition, Monsanto reported a robust US order book that is tracking well against full-year targets, and announced a record 14 phase advancements across its research and development platform – eight of them in biotech specifically.
The perception of a tighter corn supply likely drove some early orders in the industry, Grant said, but key cancellation deadlines for corn are likely over.
Corn seed and traits net sales increased 46% over last year’s quarter to $895 million, boosted by higher volume and significant trade expansion in Brazil and Argentina, and the company expects momentum in the corn business to continue.
Cotton seed and traits also strengthened in the quarter, as net sales soared 73% to $194 million based on a timing effect in Australia, while the soybean business rose 7% to $242 million.
One area of weakness was its vegetable seed business, which suffered a $26 million drop in sales to $157 million, as the European economic crisis has stifled spending on higher-priced produce.
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