Sunday, November 11, 2007

Monsanto Expects to Double Gross Profit

Thursday November 8, 5:45 pm ET
By Christopher Leonard, AP Business Writer

Monsanto Expects to Double Gross Profits Over 5 Years
ST. LOUIS (AP) -- Monsanto Co. upgraded its 2008 outlook Thursday and said it expects to double its profitability over the next five years as the company rolls out new strains of biotech crops.

The world's largest seed company released its guidance during an investor seminar, predicting that annual gross profit will rise from $4.29 billion in 2007 to more than $8 billion in 2012, said spokesman Lee Quarles.

Gross profit is a broad measure of profitability that doesn't include certain costs like research and development, and taxes. Including those costs yields the commonly used profit measure of net income.

News of the guidance sent Monsanto's stock to an all-time high of $99.98. The stock closed up $3.73, or 3.9 percent, at $98.29 a share Thursday.

Biotechnology and genetically engineered seeds will be the main driver behind Monsanto's profit growth as the company moves away from its roots as an agricultural chemical company. Quarles said the seed and genetics business will account for $6.5 to $7 billion of the firm's gross profits in 2012, while its Roundup herbicide will account for $1.2 billion in profits.

Chief Financial Officer Terry Crews also upgraded the firm's outlook for fiscal year 2008, saying net income will come in at the upper end of its previously announced range of $2.20 to $2.40 per share.

Crews also said profit in the first quarter of 2008 will be 35 cents a share, more than double the same period in 2007 when earnings were 16 cents.

"Backed by the growing demand for our seed and trait products, our business is poised for significant organic growth between now and the end of 2012," Chief Executive Hugh Grant said in a statement.

"We believe we can effectively double the gross profit potential of our business just with the businesses we have in hand today while continuing to return value to our shareowners," he said.

Monsanto plans to boost sales growth in part by expanding corn seed sales in the United States. Monsanto has been competing with old-line seed companies like Pioneer Hi-Bred to gain a bigger slice of the profitable market.

The company said it expects its U.S. DeKalb seed brand could grow by as much as 10 percentage points by 2012.

Chief Technology Officer Robb Fraley said Monsanto's research and development pipeline could generate new products that increase sales by $5 billion a year by 2020.

Monsanto Co.:

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