Monsanto Co. (MON) on Wednesday posted a narrower quarterly net loss as the agricultural chemicals and crop company took a reserve of $284 million for legal problems, but saw a jump in seed sales.

Monsanto, whose shares fell 3 percent, acknowledged it was still struggling with stiff competition and declining sales in the herbicide market, as well as the potential liabilities tied to its former nonagricultural chemical concerns.

But the value of Monsanto's seeds and genetically modified traits businesses is growing globally and for the quarter, sales in the seed and biotech businesses jumped 20 percent, the company said.

The company's net loss for the first quarter ended Nov. 30 narrowed to $40 million, or 15 cents per share, compared with $97 million, or 37 cents, a year earlier.

Company officials said net sales increased 7 percent to $1.09 billion in the first quarter, largely because of strong sales of branded corn seed (search) in Europe and Brazil and stronger sales of genetically modified corn and soybean seeds in the United States and biotech cotton (search) in Australia. Analysts on average had expected $1.064 billion.

Monsanto said it expected fiscal-year 2005 net earnings of $1.56 to $1.71 per share, or $1.85 to $2.00 on an operating basis, in line with the forecast it gave late last month.

"The signs so far indicate we are advancing as we'd hoped," Monsanto Chief Financial Officer Terry Crews said in a conference call. "The first quarter is a great start in the right direction."

Results in the latest quarter included a $284 million reserve for liabilities tied to Monsanto's former affiliate, Solutia Inc. (search) , a chemical concern now mired in bankruptcy. Last month, the company said the reserve would be in the range of $285 million.

The first-quarter results also include a tax benefit of $106 million from losses incurred in a European wheat and barley business that the company has been winding down.

Excluding the reserve and the tax benefit, operating income rose to 13 cents a share, in line with analysts' expectations, according to Reuters Estimates. That compares with 4 cents a share for the first quarter of 2003.