Shares in Monsanto tumbled 8% after the seeds and sprays giant cut its profits hopes for the second time in two months, citing hits from currency moves, “compressed” farmer margins and rivalry in herbicides.
The US-based group – which in January cut its forecast for reported annual earnings to $4.12-4.79 per share, from $4.44-5.01 per share –lowered its estimate further, to $3.42-4.29 a share.
The downgrade, for results for the year to August, took the guidance well below the $4.67-a-share result that Wall Street has expected.
The immediate market reaction was to send Monsanto shares lower in New York to $85.07, wiping more than $3bn from the group’s stockmarket value, although the stock had recovered some ground by midday deals to stand at $86.41, a drop of 6.6% on the day.
Monsanto blamed the downgrade on further pressure from: currency weakness, with the weaker Argentina peso in particular hurting profits in dollar terms; falls in prices of glyphosate herbicides, a market in which it competes through Roundup; and “compressed grower margins”, making farmers less willing to spend.
“The company has seen additional headwinds from competitive dynamics and the delay” in Environmental Protection Agency approval of the dicamba herbicide.
“Today, the macro-environment is proving to be even more challenging,” said Pierre Courduroux, the Monsanto finance director.
The group forecast “relatively flat” profits in its key seeds and genomics business, compared with a previous estimate of growth of 5-7%.
The profits warning reflects the latest in a series for the sector, which has been badly hit by the squeeze on farm spending prompted by lower crop prices.
However, Mr Courduroux forecast better times ahead for Monsanto, thanks to its pipeline of cutting edge products, and the support to margins from a cost cutting programme.
“Moving beyond fiscal year 2016, Monsanto’s outlook is expected to improve,” he told the Bank of America Merrill Lynch Global Agriculture & Chemicals Conference.
“It’s easy to focus on the current downturn in the agricultural cycle, but as the leader in the industry, we are in a unique position to take advantage of the inevitable rebound.”
(Source – http://www.blackseagrain.net/novosti/monsanto-cuts-profits-hopes-again-sending-shares-lower)