Monsanto Co., the world’s largest seed company, rose after reporting that plantings of its newest genetically modified soybeans jumped fivefold in 2015 and will double next year.
Planting of Intacta soybeans, developed to control insects in Latin America, will expand to 30 million acres (12 million hectares) in 2016. Roundup Ready 2 Xtend soybeans, engineered to withstand the application of two kinds of weedkiller, will debut on more than 3 million acres in the U.S. next year, St. Louis- based Monsanto said Wednesday in a statement.
The shares rose as much as 4.1 percent in New York, the most intraday in nine months. The positive news on soybeans outweighed concerns about the impact of a stronger dollar on foreign sales and a smaller corn crop this year. Monsanto cited both of those factors in guiding its full-year earnings outlook to the lower end of a previously announced range.
“Folks will shrug off the guidance because they thought it was likely Monsanto would point to the lower end given the currency effect,” Matt Arnold, a St. Louis-based analyst at Edward Jones & Co. who recommends holding Monsanto shares, said by phone Wednesday. “Their earnings power improves with innovation, which allows them to take margins and market share higher.”
Soybean-seed margins expanded as sales gained 7.7 percent in Monsanto’s fiscal second quarter, which ended Feb. 28, amid gains in Intacta and second-generation Roundup Ready beans. In contrast, revenues from corn seed -- the company’s biggest business -- tumbled 15 percent.
Some of that decline was because Channel brand corn seed is now sold directly to farmers, rather than through distributors, shifting $275 million of gross profit into the third quarter, Monsanto said.
The market for corn is also softer. Prices have slumped from their 2012 peak amid favorable growing conditions and bin- busting inventories. The U.S. Department of Agriculture forecast on Tuesday that 2015 corn plantings will drop 1.5 percent, a third consecutive annual decline.
Still, Monsanto said Wednesday it expects to increase or maintain its share of the corn-seed market in every major region. Full-year corn seed prices excluding currency effects also should climb, the company said.
Monsanto rose 3.9 percent to $116.96 at the close in New York.
The company now projects earnings before one-time items in the 12 months through August will be at the low end of $5.75 to $6 a share, with foreign exchange having a negative impact of as much as 40 cents. To offset the headwinds of a stronger dollar and a smaller corn crop, Monsanto will cut operating spending by as much as 5 percent.
For the second quarter, profit excluding one-time items fell to $2.90 a share from $3.15 a year earlier. That missed the $2.93 average of 18 estimates compiled by Bloomberg. Revenue dropped 11 percent to $5.2 billion, trailing the $5.59 billion average estimate.
Gross profit in the unit that sells seeds and genetic licenses fell 11 percent, as lower corn seed sales more than offset soybean gains. Profit in the business that sells Roundup herbicide dropped 20 percent on lower prices.
The company is fighting back against a March assessment by the World Health Organization’s International Agency for Research on Cancer that glyphosate, the active ingredient in Roundup, probably causes cancer.
Chief Executive Officer Hugh Grant said he hasn’t seen any business impact from the WHO classification.
“It’s unfortunate that junk science and this kind of mischief can create so much confusion for consumers,” Grant said on a call with investors on Wednesday.
Monsanto has said the finding is at odds with regulators in the U.S., the European Union and elsewhere around the world, and has accused the WHO agency of “cherry picking” data.
The WHO agency said it relied on systematic searches of published literature and found statistically significant data to support its conclusion.
The Environmental Working Group and other U.S. proponents for mandatory labeling of genetically modified foods have found support for their campaign in the WHO’s finding.
--With assistance from Megan Durisin in Chicago.
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