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7-Business: Monsanto tries to reduce dependency on Roundup sales

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TITLE:  Monsanto Posts Profit on Seed Sales
SOURCE: Reuters/The New York Times, USA,
DATE:   Feb 5, 2003

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Monsanto Posts Profit on Seed Sales

KANSAS CITY, Mo. (Reuters) - Monsanto Co. said on Wednesday farmer demand
for specialty seed products helped the agrochemical company post a
quarterly profit, partly offsetting a persistent slump in its trademark
Roundup herbicide business.

The St. Louis-based company, which has been rocked by market difficulties
and upheaval in its top management, guided Wall Street profit estimates
lower for 2003. The company, which had withdrawn its 2003 guidance in
October, on Wednesday gave a wide-ranging outlook for the year because of
a host of uncertainties, such as the difficult economic conditions in
Latin America and slower-than-expected acceptance of new biotech products.

"You have this huge, enormous positive in ag biotech," which includes the
specialty seeds, said Deutsche Bank analyst John Moten. "But in the short
term, there are some issues."

Monsanto said it now expects 2003 earnings in the range of $1.20 per
share to $1.40 per share. Analysts' average estimate for 2003, as
surveyed by research firm Thomson First Call, was $1.43 per share.

Shares of the company were trading at $17.33, down 32 cents, in early
afternoon on the New York Stock Exchange. The stock has lost roughly half
its value over the last year.

Monsanto said it is making progress on its goal to shift the company's
focus to sales of seeds with genetically modified traits making crops
resistant to certain herbicides and insects, from its dependence on its
Roundup line of herbicide products.

"The seeds and traits business is critical for our business now and in
the future," Monsanto Chief Operating Officer Hugh Grant said on a
conference call with media and analysts.

That business, best known for its herbicide-resistant soybean and corn
varieties, saw fourth quarter sales of $612 million, up 16 percent from a
year earlier. With new products expected in 2003, including a new biotech
corn that fights rootworm pests, the outlook is generally favorable,
company officials said.

Roundup, Monsanto's top-selling product, is under intense pricing
pressure from competitors, contributing to a 14 percent drop in Roundup
product sales in the fourth quarter. Revenue growth from seeds and traits
should help offset projected declines in gross profit for the herbicide
in 2003, the company said.

As well, Monsanto said its steps to cut the risk of doing business in
Latin America, struggling with an economic downturn, should continue to
help results in 2003. Monsanto said in mid-2002 it stopped extending
credit to customers, after a number of customers were unable to pay their

"We're well positioned for a return to more normal operations in that
region," Monsanto Chairman and Interim Chief Executive Frank AtLee said
in a statement.


For the fourth quarter, Monsanto reported net income of $61 million, or
23 cents per share, compared with a loss of $104 million, or 40 cents per
share, in the fourth quarter of 2001.

The fourth quarter of 2002 included restructuring charges of $20 million,
or 8 cents a share. In the fourth quarter of 2001, charges for
restructuring and litigation matters were 49 cents a share, plus 8 cents
a share for goodwill amortization.

Net sales were $1.2 billion for the quarter, up 1 percent from a year
earlier, the company said.

To manage costs in the fourth quarter, Monsanto cut research-and-
development expenses by 6 percent, and selling, general and
administrative expenses by 13 percent.

Monsanto saw a tumultuous close to 2002, capped by the unexpected
resignation of President and Chief Executive Hendrik Verfaillie in
December. The company is still searching for a new leader, leaving the
business and investment communities with numerous questions about the
company's future.

Verfaillie's departure came after Monsanto in October revised its 2002
outlook downward and suspended its guidance for 2003 amid persistent
troubles in Argentina, drought in the U.S. farm belt and declining sales
of Roundup.

Officials said Wednesday that they were considering COO Grant as one of
the candidates for the job, though previous statements had indicated they
were looking only outside the company for Verfaillie's replacement.

Buckingham Research analyst John Roberts said the company has a lot of
work to do to win back the confidence of the investment community.

"There are still a lot of open issues, management being at the top of the
list," he said.