Monsanto Company Delivers Strong Third Quarter As Seed Business Maintains Momentum Through Culmination Of Key Selling Seasons

27/03/2012

Company Reaffirms Fiscal Year 2012 Earnings Guidance, Projecting Up to 25 Percent Ongoing Earnings Growth and Setting Stage as Layers of Opportunity Across Business Position Company Well for Strong Growth in Fiscal Year 2013

Monsanto Company (NYSE: MON) executives today said the continued momentum of its seeds and traits business through key seed selling seasons drove a strong third quarter, further highlighting a year of the company's proven delivery on important business drivers. Executives also reaffirmed Monsanto is on track to achieve its recently increased ongoing earnings growth target and is poised to see mid-teens earnings growth off that base given the strength of its core business.



Third Quarter


Nine Months

($ in millions)

2012


2011


2012


2011

Net Sales By Segment













Corn seed and traits

$

1,515


$

1,123


$

5,226


$

4,134


Soybean seed and traits


698



605



1,629



1,446


Cotton seed and traits


490



487



750



666


Vegetable seeds


195



216



567



628


All other crops seeds and traits


230



216



414



357

TOTAL Seeds and Genomics

$

3,128


$

2,647


$

8,586


$

7,231















Agricultural productivity

$

1,091


$

961


$

2,820


$

2,344

TOTAL Agricultural Productivity

$

1,091


$

961


$

2,820


$

2,344














TOTAL Net Sales

$

4,219


$

3,608


$

11,406


$

9,575














Gross Profit

$

2,363


$

1,973


$

6,164


$

5,107














Operating Expenses

$

1,013


$

952


$

2,760


$

2,535














Interest Expense – Net

$

18


$

18


$

80


$

66

Other Expense – Net

$

3


$

15


$

46


$

38














Net Income Attributable to Monsanto Company

$

937


$

692


$

2,274


$

1,719














Diluted Earnings per Share (See note 1.)

$

1.74


$

1.28


$

4.21


$

3.17

Items Affecting Comparability – EPS Impact













Restructuring charges








0.01


Income on discontinued operations






(0.01)



(0.01)


Nitro claims settlement






0.05




Resolution of a legacy tax matter


(0.11)





(0.11)



Diluted Earnings per Share from Ongoing Business (For the definition of ongoing EPS, see note 1.)

$

1.63


$

1.28


$

4.14


$

3.17














Effective Tax Rate


27%



28%



30%



29%

 




Third Quarter

Nine Months

Comparison as a Percent of Net Sales:

2012


2011

2012


2011


Gross profit

56

%


55

%

54

%


53

%


Selling, general and administrative expenses (SG&A)

15

%


16

%

15

%


16

%


Research and development expenses (R&D)

9

%


10

%

9

%


10

%


Income from continuing operations before income taxes

32

%


27

%

29

%


26

%


Net income attributable to Monsanto Company

22

%


19

%

20

%


18

%

 

"With our most significant selling seasons wrapped up, the third quarter gives us a near complete view of our business for the fiscal year and I feel very good about where we stand," said Hugh Grant, Monsanto's chairman, president and chief executive officer. "We've achieved excellent business results this year, but more importantly we've continued to receive positive response to our products from farmers.  As I look to 2013 and beyond, I am confident as our momentum is now validated with sustained business results and I believe the opportunity ahead for our customers, our business and our owners is significant."

Results of Operations

Net sales increased $611 million or 17 percent in the three-month comparison driven by unit volume growth in the company's seeds and traits business, complemented by better-than-expected sales across Monsanto's chemistry portfolio. Third quarter gross profit rose 20 percent to $2.3 billion compared to the prior year third quarter. For the first nine months, gross profit is up 21 percent.

Operating expenses were up $61 million in the third quarter compared to the same period in the prior year. In the three-month comparison, SG&A expenses increased to $638 million.  R&D expenses also increased to $375 million for the quarter, reflecting incremental investment as the company continues to advance and expand its pipeline.

The company's third quarter earnings per share (EPS) was $1.63 on an ongoing basis, $1.74 on an as-reported basis. EPS for the first nine months of fiscal year 2012 was $4.14 on an ongoing basis, $4.21 on an as-reported basis. (For a reconciliation of ongoing EPS, see note 1.)

Cash Flow

The third quarter saw a continuation of the strong first half of the fiscal year for cash flow. For the first nine months of fiscal year 2012, cash flow from operations was a source of $853 million compared with a source of $944 million in the first nine months last year. Net cash required by investing activities for the first nine months of fiscal year 2012 was $542 million, compared to $707 million for the same period of fiscal year 2011. 

Net cash required by financing activities for the first nine months of 2012 was $1 billion, compared to net cash required of $766 million for the same period of fiscal year 2011. 

Free cash flow was a source of $311 million for the first nine months of fiscal year 2012, compared to a source of $237 million for the first nine months of fiscal year 2011. (For a reconciliation of free cash flow, see note 1.)

Earlier this month, the company announced that its board had authorized a new share repurchase program, effective July 1, 2012, for up to $1 billion of the company's common stock over a three-year period. Monsanto's existing $1 billion share repurchase program is nearly complete.

Outlook

The company confirmed 2012 earnings per share guidance in the range of $3.65 to $3.70 on an ongoing basis, with mid-teens ongoing earnings growth for fiscal year 2013 projected from the base of $3.65 to $3.70. The company expects 2012 earnings per share on an as-reported basis to be $3.73 to $3.78. (For a reconciliation of ongoing EPS, see note 1.) The company also reaffirmed its previously announced full-year free cash flow guidance for fiscal year 2012 in the range of $1.7 billion to $1.8 billion. The company expects net cash provided by operating activities to be $2.7 billion to $2.9 billion, and net cash required by investing activities to be $1 billion to $1.1 billion for fiscal year 2012. (For a reconciliation of free cash flow, see note 1.)

Seeds and Genomics Segment Detail

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($ in millions)


Net Sales


Gross Profit



Third Quarter



Nine Months


Third Quarter



Nine Months

Seeds and Genomics


2012


2011



2012


2011


2012


2011



2012


2011

Corn Seed and Traits

$

1,515

$

1,123


$

5,226

$

4,134

$

927

$

679


$

3,305

$

2,524

Soybean Seed and Traits


698


605



1,629


1,446


463


386



1,079


953

Cotton Seed and Traits


490


487



750


666


385


386



567


502

Vegetable Seeds


195


216



567


628


94


123



260


361

All Other Crops Seeds

and Traits


230


216



414


357


152


132



217


176

TOTAL Seeds and Genomics

$

3,128

$

2,647


$

8,586

$

7,231

$

2,021

$

1,706


$

5,428

$

4,516

 


($ in millions)

Earnings Before Interest & Taxes (EBIT)




Third Quarter


Nine Months



Seeds and Genomics

2012

2011


2012

2011



EBIT (For a reconciliation of EBIT, see note 1.)

$

1,111

$

880


$

2,957

$

2,263



Unusual Items Affecting EBIT: Restructuring

$

$

(1)


$

$

(15)


 

The Seeds and Genomics segment consists of the company's global seeds and related traits business.

Sales for Monsanto's Seeds and Genomics segment in the third quarter of fiscal 2012 increased 18 percent or $481 million over the prior year period supported by strong sales across its U.S. corn and soybean portfolios. For the first nine months, gross profit in the segment is up approximately 20 percent over the same period last year.

In the U.S. market, continued sales momentum carried from the early spring throughout the planting season and an increase in planted acres of corn across the country helped deliver a record seed sales volume season for the company. In 2012, the company achieved continued strong adoption of its latest innovations, with its Genuity® Roundup Ready 2 Yield® soybeans projected to be on close to 30 million acres and its Genuity® reduced refuge corn family projected to be on more than 25 million acres this year in the United States.

The successful U.S. season was complemented by strong performances in key international markets, including Europe and Latin America. In Latin America, strong continued performance in Brazil was driven by an increase in total acres, mix improvement and higher-than-anticipated overall sales.  In the Northern hemisphere, core business growth and expanded acres helped drive better-than-expected performance in Eastern Europe.

Agricultural Productivity Segment Detail

($ in millions)

Net Sales

Gross Profit



Third Quarter


Nine Months


Third Quarter


Nine Months



2012


2011


2012


2011


2012


2011


2012


2011

Agricultural Productivity

$

1,091

$

961

$

2,820

$

2,344

$

342

$

267

$

736

$

591

TOTAL Agricultural Productivity

$

1,091

$

961

$

2,820

$

2,344

$

342

$

267

$

736

$

591

 


($ in millions)

Earnings Before Interest & Taxes (EBIT)






Third Quarter



Nine Months



Agricultural Productivity


2012



2011



2012



2011



EBIT (For a reconciliation of EBIT, see note 1.)

$

190


$

95


$

354


$

222



Unusual Items Affecting EBIT:















Restructuring

$


$


$


$

4




EBIT from Discontinued Operations

$

(3)


$


$

8


$

4




Nitro Claims Settlement

$


$


$

(44)


$


 

The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products.

Sales in the third quarter for Monsanto's Agricultural Productivity segment increased $130 million over the same period last year due to higher-than-expected sales across the company's chemistry portfolio, including its Roundup®, lawn-and-garden and selective herbicides businesses.

Webcast Information

In conjunction with this announcement, Monsanto will hold a conference call at 8:30 a.m. central time (9:30 a.m. eastern time) today. The call will focus on these results and future expectations and may include a discussion of Monsanto's strategic initiatives, product performance and other matters related to the company's business.

Presentation slides and a simultaneous audio webcast of the conference call may be accessed by visiting the company's web site at www.monsanto.com and clicking on "Investor Information." Visitors may need to download Windows Media Player™ prior to listening to the webcast. Following the live broadcast, a replay of the webcast will be available on the Monsanto Web site for three weeks.