Monsanto deal eases clouds over Plant Health Care

An outsourcing deal by Monsanto over seed treatments has eased the clouds over Plant Health Care, whose flagship plant protection spray looks like getting to a larger market, faster.

Plant Health Care's flagging shares bounced 4% after the alternative agrichemicals group revealed that the hefty inventory of its Harpin product built up at Monsanto last year, thanks to slower-than-expected sales of a cutting edge soybean seed, looked like being cleared.

US seed treatments group Direct Enterprises, which handles seed treatment under Monsanto brands, has bought half the surplus stock, and pledged to take the other half by the end of the year.

Furthermore, Monsanto is, through its Direct Enterprises deal, offering Harpin throughout its soybean range and on cotton seed too.

"This has greatly increased the possible market size to 35m-40m acres," John Brady, the Plant Health chief executive, said.

'Ends the uncertainty'

The prospect of the clearance of the Monsanto inventory build-up, which prompted a fall of more than one-third in Plant Health shares when it was revealed last June, was well-received by investors.

"This finally ends the uncertainty about Plant Health Care's route-to-market that has clouded the stock since Monsanto embarked on a major review of its seed-coating strategy in June," Evolution analyst Philip Sparks said, if warning that the Direct Enterprise deal may take time to reap results.

"Direct Enterprises now has only a few weeks to sell its first tranche of Harpin to seed-coaters, so 2012 will be the first year in which it gets a proper stab at the market."

He added: "We now believe that Plant Health Care will deliver some Harpin for the 2013 planting season in 2012, lending support to that year's result."

Plant Health shares, which last week stood among their lowest levels for five years, closed up 2.4p at 62.0p in London.

'In line'

The group's announcement on Harpin inventories came as Plant Health unveiled a widening to $7.9m, from $1.8m, in its annual after-tax loss in 2010.

Revenues more than halved to $7.1m, reflecting the Monsanto hiccups.

"Plant Health's results were in-line," Mr Sparks said.