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USA | Profitability
Monsanto Confirms Full Year Guidance with Global Business on Track to Deliver Mid-to-High Teens Operational Growth Monsanto Company delivered on track results for the first quarter of its fiscal year as the company reaffirmed its earnings growth and free cash flow guidance for fiscal year 2014. 1/8/2014
 Monsanto.
Monsanto Company delivered on track results for the first quarter of its fiscal year as the company reaffirmed its earnings growth and free cash flow guidance for fiscal year 2014. The company previewed a strong U.S. order book and noted that it is on track to deliver its largest soybean launch with an expected three million acres of Intacta RR2 PRO™. The company also highlighted a record 29 phase advancements across its research and development (R&D) platforms, including breeding, biotechnology, and new breakthrough areas such as Integrated Farming Systems® and agricultural biologicals.
“The first quarter demonstrated that our business performance is squarely on track with several key milestones and that we have the right growth strategy in place,” said Hugh Grant, chairman and chief executive officer for Monsanto. “The strength in our business is also seen in the record number of research and development advancements this year. It’s the innovation in our pipeline that’s going to define what’s next for our industry and help deliver on our commitment to bring additional opportunity for farmers around the world.” Results of Operations Net sales for the quarter increased over the prior year’s first quarter to $3.1 billion. Gross profit for the 2014 first quarter also increased over the prior year period to $1.6 billion. Selling, general and administrative (SG&A) costs were $589 million in the first quarter. R&D expenses increased year-over-year to $409 million for the quarter. Both SG&A and R&D costs increased based in part on investments to support new platforms and product launches. The company’s first quarter earnings per share (EPS) was $0.67 on an ongoing and $0.69 on an as-reported basis. (For a reconciliation of ongoing EPS, see note 1.) Cash Flow Free cash flow was a source of $457 million compared with a source of $1.5 billion for the prior year first quarter. (For a reconciliation of free cash flow, see note 1.) Net cash provided by operating activities for the 2014 fiscal year first quarter was a source of $1.7 billion, compared to a source of $1.6 billion in the first quarter last year. Net cash required by investing activities for the first quarter of 2014 was $1.2 billion, compared with $96 million for the same period of fiscal year 2013. Net cash provided by financing activities for the first quarter of 2014 was $346 million, compared to net cash required of $116 million for the prior year’s first quarter. In the quarter, Monsanto continued its more aggressive approach in the company’s cash deployment strategy, including investment in additional growth through The Climate Corporation acquisition. The first quarter free cash flow reflects $917 million (net of cash acquired) for the acquisition of The Climate Corporation. Additionally, the company completed a second-consecutive quarter of record amount of cash for share repurchases. The company has purchased approximately $1.1 billion in shares over the last two quarters, lowering the share count in comparison to the prior year first quarter by nearly eight million shares. Outlook In fiscal year 2014, Monsanto continues to expect strong operational growth from its core business, reflected in mid-to-high teens growth in EBITDA. The company also confirmed its fiscal year 2014 ongoing earnings guidance, stating that it continues to expect to achieve ongoing EPS of $5.00 to $5.20. Full-year 2014 EPS guidance on an as-reported basis is expected in the range of $5.02 to $5.22 per share. (For a reconciliation of EPS, see note 1.) The company also reaffirmed free cash flow in the range of $600 million to $800 million for fiscal year 2014, after approximately $917 million (net of cash acquired) in cash for The Climate Corporation acquisition and investment to support the recently announced alliance on microbials with Novozymes. The company expects net cash provided by operating activities to be $2.9 billion to $3.3 billion, and net cash required by investing activities to be approximately $2.3 billion to $2.5 billion for fiscal year 2014, including capital expenditures and acquisition-related costs. (For a reconciliation of free cash flow, see note 1.)
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 first quarter were $1.7 billion as the company achieved growth in its soybean business and strong corn portfolio upgrades, including expected trait upgrades across its Latin American portfolio. Those results are balanced against the expected decrease in corn acres in Latin America, some acre and timing effects related to cotton in Australia, and a more normalized U.S. sales contribution pattern after the step up from last year's accelerated season. Tracking the upcoming U.S. season, the company noted the pace of its U.S. order book and strong pre-pays are tracking well with 2014 targets, reflecting a strong end to the U.S. harvest for the company’s products. Corn trait upgrade and expansion is also on track in both Brazil and Argentina where the company is achieving strong demand for its newest corn products. Complementing the trait upgrade and expansion in corn, Monsanto noted that with the South America summer acres planted the company is expecting to reach three million acres in its launch of Intacta RR2 PRO™ soybeans. The company is focused on making sure farmers have a good experience with the product in its initial launch year and preparing for what it expects will be its fastest ramp up of any soybean product. Additionally, Monsanto announced today it has entered a memorandum of understanding with one of the company’s largest distribution partners and the largest U.S. agricultural retail distributor, WinField, to explore connections between Monsanto’s Integrated Farming Systems® and The Climate Corporation portfolio with Winfield’s industry-leading R7® Tool, with integrated Satellite Imagery Technology licensed from Geosys, for precision farming. The joint work would represent a first-of-its kind opportunity on new technology for precision agriculture and the development of new broad decision-support tools to help farmers produce more food with fewer resources.
The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products. Net sales in the first quarter of fiscal 2014 for Monsanto’s Agricultural Productivity segment increased $283 million, reflecting the continued benefit of a favorable marketplace environment. 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, product performance, and an update of projects within the company’s R&D pipeline. The call may include a discussion of strategic initiatives 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 website at www.monsanto.com/investors or http://edge.media-server.com/m/p/kpropn5v/lan/en. 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 website for three weeks. Monsanto publishes details on upcoming webcasts on this website in both the Presentation and Financial Reports section and the Calendar of Events section. Investors should look to this site as the source of information on future investor conference webcasts. The site includes a calendar of upcoming investor events, details on accessing scheduled webcasts and information from previous investor events.
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