Monsanto Reports Third Quarter Financial Results

Gross profit declined 24 percent in the quarter to $1.4 billion, also driven by the price decreases for Roundup and other glyphosate-based herbicides. For the first nine months, gross profit is down 28 percent or $1.7 billion.

1 Jul 2010 --- Monsanto Company announced its third-quarter financial results and highlighted some of the actions in progress to generate expected annual earnings growth percentages in the mid-teens.  With its earnings results for the quarter and year-to-date in line with adjustments the company announced last month, company executives said the business is strong and well-positioned for future growth.

"We've made some real changes to our portfolio and business approach, and the positive feedback I'm hearing from our customers tells me we are on the right track," said Hugh Grant, chairman, president and chief executive officer for Monsanto.  "We have demonstrated agility in the face of adversity, enhancing our portfolio and equipping our sales team with an unprecedented amount of product choices and price points to offer our customers.  We've repositioned our Roundup business to recognize its appropriate role in supporting our Seeds and Genomics segment.  And we've demonstrated an ability to leverage our operational savings and sustain a strategic investment in research and development.  This year has brought its challenges, yet we are quickly evolving into a newer, leaner, stronger Monsanto, well-positioned to meet our objective for mid-teens earnings growth driven by our seeds and traits business."

Results of Operations

Price decreases for Roundup and other glyphosate-based herbicides affected the company's results as expected, despite the volume growth achieved for these products.  Net sales decreased $199 million, or 6 percent, in the three-month comparison and $1.3 billion, or 13 percent, year to date.  Net income in the third quarter was $384 million.

Gross profit declined 24 percent in the quarter to $1.4 billion, also driven by the price decreases for Roundup and other glyphosate-based herbicides.  For the first nine months, gross profit is down 28 percent or $1.7 billion.

Operating expenses were flat overall, with a slight decrease for selling, general and administrative (SG&A) expenses for the three month comparison.  R&D expenses increased slightly as the company continues to manage more projects in advanced pipeline phases.  As a percent of net sales, SG&A expenses were 17 percent and R&D expenses were 10 percent.  Restructuring expense for the quarter was $86 million. This included $52 million charged to cost-of-goods related to discontinued products worldwide. 

Earnings per share (EPS) for the third quarter was $0.70 on an as-reported basis, and $0.81 on an ongoing basis. EPS for the first nine months of fiscal year 2010 was $2.27 on an as-reported basis, and $2.49 on an ongoing basis.

Cash Flow

The company saw an expected increase in cash outflow for the quarter, attributed to the Roundup business.  For the first nine months of fiscal year 2010, cash flow required by operations was $538 million compared to a source of $443 million for the same period last year.  Net cash required by investing activities for the first nine months of fiscal year 2010 was $614 million, as compared to $588 million for the same period of fiscal year 2009. 

Net cash required by financing activities for the first nine months of 2010 was $323 million, compared to net cash required of $775 million for the same period of fiscal year 2009.

Free cash flow was a use of $1.15 billion for the first nine months of fiscal year 2010, compared to a use of $145 million for the first nine months of fiscal year 2009.

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

For the quarter, sales in the segment have increased by 5 percent.  In corn, approximately 33 million acres of its triple-stack and SmartStax products were planted in the United States, up from 31 million last year.  More than 75 percent of the company's branded corn portfolio in the United States is either a triple stack or Genuity SmartStax, which represents a step change improvement over last year.  This complements growth in South America, where the increase in trait acres in Brazil and Argentina has had a positive overall mix effect on the business.

The company also cited progress with its Genuity Roundup Ready 2 Yield soybean, with more than 40 percent of its branded customers trying even more varieties this year.  That next-generation soybean platform is gaining momentum as third parties, including new commercial licensees, continue to evaluate and choose Roundup Ready 2 Yield.

Cotton and vegetables continue to track well with expectations, delivering volume and margin improvements to the seeds-and-traits portfolio.

In total, sales for Monsanto's Seeds and Genomics segment in the third quarter of fiscal 2010 increased slightly over last year's third quarter, consistent with company's expectations.  The company expects total gross profit for the segment to come in at a range of $4.6 to $4.7 billion for the year, an increase over 2009.

The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products. Sales in the third quarter of fiscal 2010 for Monsanto's Agricultural Productivity segment declined 34 percent or $313 million compared with the same period last year.  Gross profit was a loss of $189 million in the quarter for Roundup and other glyphosate-based herbicides, reflecting the impact associated with the repositioning of the Roundup business.

For the third quarter, the company released strong results from the Other Agricultural Productivity part of this segment, reflecting a record year in the lawn-and-garden business.  For the fiscal year, the segment is expected to deliver approximately $450 million to $600 million in gross profit, which includes a Roundup contribution of between $50 and $200 million after the repositioning actions.