On the Call: Monsanto Co.
Thursday, June 30, 2011
ST. LOUIS (AP) — Monsanto Co. on Wednesday reported that its third-quarter net income rose 77 percent from the year before, thanks to higher sales of its genetically engineered seeds.
Monsanto is in a fierce competition with rivals like DuPont to win market share as farmers plant their fields this year. Monsanto is offering its top-of-the-line seeds, which each contain several genetically engineered traits.
But many farmers have balked at paying higher prices for these seeds, so Monsanto has had to cut its prices to win customers.
CEO Hugh Grant has said in the past that the price cuts are temporary. Monsanto will be able to raise its prices in years to come after farmers see the economic benefit of the seeds, which makes the high price worth it, according to Monsanto’s sales pitch.
During a conference call Wednesday, analysts wanted to know if Monsanto would be able to charge higher prices any time soon.
Grant was also asked about Monsanto’s disclosure that the U.S. Securities and Exchange Commission is investigating the company’s incentives for its popular Roundup herbicide.
QUESTION: So, do you think you’ve won back enough goodwill from growers that you can look at raising prices again?
GRANT: I don’t think about it like that. I don’t think about it as trading goodwill against runway and price ... We spent a lot of time getting back to basics of listening to growers. We have gained high marks based on our research on responding to that grower feedback.
...We’ve been talking about a three-year strategy in this and how we continue to drive on our side volume growth, on their side improved choice. And that choice will show up in a range of technology offerings at a segmented price depending on where they play in that product ladder.
So I don’t -- I think this is going to take a couple of years ... and I feel very good in the first year of this. You make changes in a strategy in one year but you execute over three or four, so this is the first chapter.
QUESTION: Could you just explain if you can why the investigation on (Roundup) is the SEC rather than the US Department of Justice or some other agency? And what would you see as potential downside risk there? Would the penalty be fines or reimbursement of customers, or what would you see as a remedy if there was misconduct?
GRANT: Thanks for the question. I think, out of respect for the SEC and their processes, there’s really not a great deal that I can say at the moment. It’s focused on (Roundup) and it’s focused on our customer incentives and it’s focused on the 2009-2010 time frame, and we are — it’s early days, but we are, we’re just starting document production and we are cooperating to our full ability. But beyond that, I don’t think there’s a great deal I can say at this stage.