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Corvex Reduces Its Position in Monsanto

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Corvex lowers stake in Monsanto

Corvex Management lowered its stake in Monsanto (MON). The position accounted for 3.55% of the fund’s total portfolio in the fourth quarter. The fund lowered its position by 884,583 shares in 3Q14. Currently, it owns 2,423,901 shares.

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Monsanto’s 2Q15 results miss estimates

Monsanto’s net sales for fiscal 2Q15 fell 11% to $5.20 billion from $5.83 billion in the same period last year. The net income was $1.43 billion, or $2.92 per share—down 14% from $1.67 billion, or $3.15 per share, in the same quarter last year.

A quarterly filing said that the decline was driven by a fall in corn seed and traits and agricultural productivity. It said, “The decrease in corn seed and traits was driven by lower volumes in key regions, a timing shift in our Channel business in the United States and lower projected planted acres in the U.S. The decrease in agricultural productivity was driven by lower volumes resulting from a shift to branded products which impacts timing of shipments. The increase in soybean seed and traits was driven by increased sales of Intacta RR2 PRO, primarily in Brazil, and increased anticipated acres in the United States.”

Monsanto has 9.63% exposure to the Materials Select Sector SPDR Fund (XLB). The fund includes other companies in the agrochemical space like DuPont (DD) and Dow Chemical (DOW). The three companies account for around 29.7% of XLB. DuPont, Monsanto, and Dow Chemical also account for ~28% of the iShares U.S. Basic Materials ETF (IYM). Monsanto has 0.50% exposure to the iShares Russel 1000 Growth ETF (IWF).

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Monsanto sued by San Diego over chemical pollution

Earlier in March, the city of San Diego filed a lawsuit against Monsanto. It alleges chemical pollution in the San Diego Bay against the firm. The defendants for the case are Solutia, a company spun off from Monsanto, as well as Pharmacia, a firm that’s currently owned by Pfizer (PFE)—it was inherited from Monsanto.

The city of San Diego states that the above mentioned companies are largely responsible for the bay’s contamination during the period between the 1930s and the late-1970s.

Overview of Monsanto

Monsanto is a leading global provider of agricultural products. Its products help farmers improve productivity, reduce the costs of farming, and produce better foods for consumers and better feed for animals. The company operates in two business segments:

  • Seeds and genomics – Monsanto produces seed brands that include DEKALB, Asgrow, Deltapine, Seminis, and De Ruiter. The company also develops biotechnology traits that assist farmers in controlling insects and weeds and precision agriculture to help farmers make decisions. The company provides other seed companies with genetic material and biotechnology traits for their seed brands.
  • Agricultural productivity – Monsanto manufactures the Roundup and Harness herbicide brands as well as other herbicides.

The city also alleges that Monsanto continued to manufacture and sell the chemicals even though they knew that the chemicals pose a threat to the environment.

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