Despite regulatory uncertainty surrounding a record merger agreement with German pharmaceuticals company Bayer AG, St. Louis-based seed firm Monsanto Co. has reported a profitable fiscal first quarter to start 2017.
Monsanto reported a first-quarter net income of $29 million. The profitable first quarter topped most Wall Street expectations and substantially improved upon figures from the same period a year prior when Monsanto posted a loss.
Top executives said during a conference call Jan. 5 that the robust first quarter was partially because of higher corn demand in its South American markets, which saw double-digit planted acre increases for corn accompanied by double-digit price increases.
Overall, net sales for corn seed and traits during Monsanto’s 2017 first quarter were $949 million compared to $747 million the previous year.
Monsanto and Bayer are in the process of seeking regulatory approval for a $66 billion merger. Both companies face challenging procedural hurdles in the United States, the European Union and additional jurisdictions, especially as regulators weigh the Monsanto-Bayer deal against the backdrop of other major agribusiness deals happening simultaneously.
“Since announcing the deal, we’ve been focusing on speaking with our grower customers, with policymakers and regulators about the benefits of the combination,” said Monsanto Executive Vice President and Chief Technology Officer Robert Fraley. “I’d say the responses have been pretty positive.”
Under the deal’s terms, Bayer will pay an all-cash consideration of $128 per Monsanto share and a reverse break-up fee of $2 billion if antitrust concerns persist. Monsanto shareholders voted 99 percent in favor of the deal on Dec. 13.
Monsanto reported that its planned combination with Bayer would create an annual research and development budget of about $2.7 billion.
The joint investment would accelerate the pace of agricultural innovation and provide more comprehensive, integrated solutions, according to the companies. The Midwest Center for Investigative Reporting in October reported that the industry concentration could affect innovation in negative ways, too, however.
Fox Business reported that the top executives from Bayer and Monsanto met with President-elect Donald Trump at his transition headquarters in New York on Wednesday.
Monsanto executives said they hope to complete the merger with Bayer by the end of 2017.
Critics believe the acute concentration of seed companies has generated an uncompetitive market that has hurt farmers by raising the price of seeds as commodity prices have dropped. Farmer profit is so weak that the U.S. Department of Agriculture announced in early October that it plans to pay more than $7 billion in taxpayer money to keep growers in business… (continue reading)
Monsanto highlights research and development efforts
Monsanto executives also highlighted the company’s recent research and development efforts, which Fraley described as “exciting.”
Among the highlights is Monsanto’s work with Danish biologicals firm Novozymes, a world leader in microbial technologies. Working collaboratively as part of the BioAg Alliance, Monsanto and Novozymes expect to release two new products in 2017. Acceleron B-300 SAT is a corn inoculant based on a fungus found in soil that increases nutrient uptake. Acceleron B-200 SAT stimulates the growth of beneficial microbes in the soil to improve soy plant health.
BioAg Alliance products are currently used on more than 80 million acres of farmland largely in North and South America, according to company statistics.
Other research and development highlights included updates on Monsanto’s use of next generation gene-editing technology and The Climate Corporation’s expanding digital ag platforms.
Monsanto projects its core product pipeline to eventually deliver up to $25 billion in peak net sales.
“This, I would say, was probably one of our most spectacular product pipeline year advances ever,” Fraley said.