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Monsanto investors warned of Solutia-related threat
Mon August 4, 2003 03:18 PM ET 

KANSAS CITY - (Reuters) A $2.3 billion hit could be looming over
Monsanto Co.  in the form of litigation liabilities, according to an
analyst's report released yesterday that drove the agricultural chemical
company's shares down almost 6 percent.

Monsanto's stock fell 5.8 percent early in the session to an intraday
low of $20.86, but recovered some of those losses by early afternoon to
trade at $21.80, down 1.6 percent, on the New York Stock Exchange.

The drop in the stock's price followed a report by Banc of America
Securities analyst Kevin McCarthy, who downgraded Monsanto to "neutral"
from "buy."

The downgrade followed warnings last week by Monsanto that its long-held
liabilities associated with Solutia Inc. were becoming more perilous as
a trial over chemical contamination in Alabama approaches.

The downgrade comes on the heels of Monsanto's better-than-expected
quarterly earnings results last Thursday.

"The risk has grown in recent weeks and that has prompted this action,"
McCarthy said.

Although the analyst said fundamentals at Monsanto appeared to be
improving in the short term, a long-term outlook and uncertainty related
to the Solutia situation necessitated the warning to investors.

McCarthy previously had pegged Solutia-related liabilities for Monsanto
at $1.65 billion, or $6.29 a share. The new estimate of $2.3 billion
equates to $8.88 a share.

Monsanto spokeswoman Lori Fisher said the company would not comment on
the report but acknowledged the risk around Solutia was "heightened."

"We're not in a position to quantify around a Solutia liability," she said.

Last week, Monsanto Chief Financial Officer Terry Crews said the Solutia
situation was "uncertain." He said the company was "preparing
contingency plans and alternatives for action," but declined to provide details.

Other analysts have expressed similar concerns.

"It is just giving everybody heartburn right down the line," said R.T.
Jones Capital Equities analyst Juli Niemann.

Solutia, spun off from Monsanto in 1997, represents what once was the
chemical business component of the old Monsanto, a conglomerate of
agricultural, chemical and pharmaceutical businesses.

Solutia is being sued in both state and federal courts because of
harmful chemical pollution in Alabama. It has already been found liable
for property damage; thousands of personal injury claims are headed to
court this fall.

Monsanto and the financially beleaguered Solutia had been hopeful a
settlement could be reached, but both companies said last week that was
not likely at this point.

Adverse court decisions would likely force Solutia into bankruptcy and
leave Monsanto on the hook for damages, analysts fear.

Story by Carey Gillam

Story Date: 5/8/2003