Monsanto reports "encouraging" results, Bayer merger on track
05 Oct 2017 --- Monsanto Company, which is in the process of merging with fellow multinational Bayer, reports that it concluded the fiscal year 2017 with encouraging results including as-reported earnings per share (EPS) of US$5.09, up from last year’s as-reported full-year EPS of US$2.99. The company adds that EPS is expected to grow in the first quarter of fiscal 2018.
In results that Monsanto says reflect the value its innovation brings, the company “delivered exceptionally” on its operational plan. It also continued to progress on the closing of the merger with Bayer as it looks forward to combining companies’ pipelines.
Pending Bayer transaction-related costs were given as US$0.05 million for the fourth fiscal quarter of 2017 and US$0.32 million for the fiscal year 2017.
“Our record sales and gross profit in the seeds and genomics segment this year, fueled by the outstanding penetration of our latest soybean and cotton technologies and continued adoption of our newest corn hybrids around the world, reflects the need for new solutions in what continues to be a challenging ag economy,” says Hugh Grant, Chairman and CEO for Monsanto.
“Our proven ability to innovate and our unique platform advantages position us well to meet the production challenges of today, as well as the demands of tomorrow,” Grant adds.
Results of operations
Monsanto reported net sales of US$2.7 billion for the fourth quarter of the fiscal year 2017. Net sales for the full fiscal year were US$14.6 billion. Full-year net sales were up more than US$1 billion year-over-year, due primarily to record technology adoption for the newest soybean technologies across the Americas and global corn pricing, according to Monsanto.
Seeds and genomics segment net sales were US$1.7 billion for the quarter. For the full year, net sales for the seeds and genomics segment were US$10.9 billion. Agricultural productivity segment net sales were US$939 million for the quarter, while net sales for the agricultural productivity segment for the fiscal year were US$3.7 billion.
The company’s total operating expenses were up slightly year-over-year on an as-reported basis, at US$4.7 billion. Selling, general and administrative expenses increased to US$3 billion for the year, primarily from increased incentives and commissions, with the return to growth of the business. R&D expenses increased due to incentives and increased investment in digital tools for agriculture. Finally, restructuring charges were a net reversal of US$36 million in the fiscal year 2017 compared to a US$297 million spend in the fiscal year 2016.
The company reported a net income attributable to Monsanto of US$20 million in the fourth quarter of the fiscal year 2017, compared with a reported net loss attributable to Monsanto of US$191 million in the same period last year. Net income attributable to Monsanto for the fiscal year 2017 was approximately US$2.3 billion compared to net income of US$1.3 billion attributable to Monsanto in the fiscal year 2016.
The company’s fiscal year 2017 EPS on an as-reported basis was US$5.09, reflecting both the company’s focus on delivering its operational plan and its strategic portfolio management. On an ongoing basis, this translated to US$5.50. For the full year, strategic licensing deals and non-core asset sales contributed about US$380 million of pre-tax benefit, similar to the fiscal year 2016.
For the fourth quarter, the company reported US$0.05 EPS on an as-reported basis which translated to US$0.20 EPS on an ongoing basis, versus a US$0.44 loss per share on an as-reported basis and US$0.07 EPS on an ongoing basis in the same period last year. The ongoing EPS results for the quarter were better than initially projected, mostly due to tax benefits and the fact that the company had the opportunity to grant the right to some key corn licenses in Brazil. The latter resulted in a pre-tax benefit of more than US$200 million in the fourth quarter of 2017.
Outlook
Given the pending combination with Bayer, the company will not provide financial guidance for the fiscal year 2018 but instead will highlight key guideposts to consider. This includes growth drivers in the Seeds and Genomics segment such as adoption and pricing of INTACTA RR2 PROTM soybeans in South America; continued adoption of Roundup Ready 2 Xtend soybeans, and price and share gains from the launch of new corn hybrids around the world.
In addition, the company expects to reach 50 million paid acres globally for the Climate FieldView platform, and growth from the multi-crop US launch of NemaStrike Technology. The company also anticipates lower planted corn acres in Brazil and challenging commodity pricing for corn around the globe.
In ag productivity, the pricing for glyphosate is expected to improve, at least through the first quarter of the fiscal year, and volumes of XtendiMax Herbicide with VaporGrip Technology are expected to expand. The company expects that its tax rate will normalize and that contributions from strategic portfolio management will likely fall below the roughly US$350 million average annual pre-tax contributions from the last three years.
Finally, in the fiscal year 2018, the company also anticipates completing its restructuring and cost savings initiative that began in the fiscal year 2015, with the expectation that S, G&A and R&D expenses in the fiscal year 2018 will be relatively flat year-over-year compared to 2017. Upon completion of the initiative, the company expects to realize nearly US$500 million in annual savings as compared to its fiscal year 2015 baseline.
