Monsanto Expects Growth From Flagship Herbicide This Year -- Update
05 January 2018 - 06:03AM
Dow Jones News
By Jacob Bunge
Monsanto Co. anticipates reaping bigger profits this year from
its flagship weed killer.
The maker of Roundup herbicide said that higher generic prices
for the product's main chemical, glyphosate, would boost Monsanto's
business over the coming year as the company works to close its
planned sale to Bayer AG.
Glyphosate is the world's most widely used herbicide, and
underlies much of Monsanto's franchise in crop seeds. Monsanto
sells corn, soybean and cotton seeds genetically engineered to
withstand glyphosate, which have come to dominate U.S. farm fields.
The St. Louis company also sells the spray itself.
The division that sells glyphosate represents about 11% of
Monsanto's profit. Executives on Thursday projected growth in the
business this year as Chinese chemical companies, among the largest
suppliers of generic glyphosate, implement new government-mandated
environmental controls.
"They've been talking about it for years, but they're actually
starting to do it now," said Hugh Grant, Monsanto's chief
executive, on a conference call discussing the company's quarterly
results.
Relocating Chinese glyphosate production to industrial sites and
adding new pollution containment systems has driven generic prices
for the chemical higher, allowing Monsanto to raise its own price
for Roundup, executives said.
The chemical came under attack in 2015 after the International
Agency for Research on Cancer, a World Health Organization agency,
classified glyphosate as likely having the potential to cause
cancer in humans. That finding, harshly criticized by Monsanto and
farm groups, prompted lawsuits and calls for regulators to
re-examine its use.
Monsanto has scored some recent victories in its defense of
glyphosate. The European Union in late November approved the use of
glyphosate for another five years after a two-year dispute among
member nations, some of which voted against extending the license.
Last month, the U.S. Environmental Protection Agency concluded that
glyphosate is unlikely to cause cancer in humans, corroborating
earlier findings.
The company is still fighting a California state requirement
that glyphosate manufacturers label the herbicide as a potential
carcinogen. Monsanto is also defending against lawsuits from
farmers and other plaintiffs, alleging they got cancer from Roundup
exposure and that the company hid that risk.
The European Union, which last year raised "serious doubts"
about Monsanto's planned $57 billion sale to German chemical
conglomerate Bayer, expects to rule on the merger by March 5.
Monsanto expects the deal to close "in the early part of 2018," Mr.
Grant said.
Monsanto didn't provide specific profit guidance for the year in
light of its pending deal with Bayer. The company said new U.S. tax
legislation could give it a tax rate in 2019 significantly lower
than the 30% expectation it has set for the current year.
Monsanto on Thursday reported a fiscal first-quarter profit of
$169 million, or 38 cents a share, up from $29 million, or 7 cents
per share, a year earlier. Revenue edged 0.3% higher to $2.66
billion. Analysts had forecast earnings of 42 cents on $2.77
billion in revenue.
Monsanto shares were 54 cents higher at $118 in midday
trading.
--Imani Moise contributed to this article.
Write to Jacob Bunge at jacob.bunge@wsj.com
(END) Dow Jones Newswires
January 04, 2018 13:48 ET (18:48 GMT)
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