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USA | Productivity
Monsanto’s Seeds and Traits Performance Drives Strong Second Quarter Growth Second quarter ongoing and as-reported EPS of $3.15 underpinned by growth in Seeds and Genomics segment, including record quarter for sales and gross profit in global soybean business. 4/2/2014
 Monsanto.
Monsanto Company announced today that solid growth from its core seeds and traits business, including expansion of its global corn and soybean businesses, drove the company’s strong second quarter results. With the second quarter performance, executives noted progress on all full year financial targets, including seeds and genomics gross profit growth, margin expansion and ongoing EBITDA growth. The company confirmed its fiscal year 2014 guidance for earnings per share of $5.00 to $5.20 on an ongoing basis and $5.02 to $5.22 on an as-reported basis and free cash flow guidance for fiscal year 2014, even with an estimated full year EPS effect of $0.15 to $0.20 from agricultural industry headwinds.
“Nearly 80 percent of our growth in the quarter came from our core seeds and traits business, providing an important proof point that our business is on track and positioned well to deliver the growth we anticipated for 2014 even against a backdrop of greater variability in the agricultural sector this year,” said Hugh Grant, chairman and chief executive officer for Monsanto. “The performance speaks to the value our technology has demonstrated on the farm and the overall strength of our global business. Our broader portfolio enables us to deliver growth today, while also building the platforms that will help us bring additional value to farmers around the world in the years to come.” Results of Operations The company achieved strong second quarter and first half results that reflect the continued growth of its global business. Net sales for the quarter increased $360 million to $5.8 billion in the three-month comparison driven in part by solid growth in both its soybean and corn portfolios. For the first six months, net sales increased to approximately $9 billion. After delays in the early part of the quarter from winter weather on logistics in the Northern Hemisphere, shipments in the company’s seed business improved in the latter part of the quarter, avoiding any significant timing impacts from weather in the quarter. Operating expenses were up $71 million in the second quarter compared to the prior year due in part to additional costs as the company invests in its precision agriculture and biologicals platforms. In the three-month comparison, selling, general and administrative (SG&A) expenses increased to $625 million. Quarterly research and development (R&D) expenses were up $44 million over the prior year period. The company's second quarter earnings per share (EPS) was $3.15 on an ongoing and as-reported basis, compared to an EPS of $2.73 on an ongoing and $2.74 on an as-reported basis in the same quarter last year. EPS for the first six months of fiscal year 2014 was $3.81 on an ongoing and $3.83 on an as-reported basis, compared to an EPS of $3.35 on an ongoing and $3.37 on an as-reported basis in the same quarter last year. (For a reconciliation of EPS to ongoing EPS see note 1). Cash Flow For the first half of fiscal year 2014, cash flow from operations was a source of approximately $1.8 billion, slightly lower than the same period last year. Net cash required by investing activities for the first half of fiscal year 2014 was approximately $1.6 billion, compared to $301 million for the same period of fiscal year 2013. Net cash required by financing activities for the first half of 2014 was $147 million, compared to net cash required of $422 million for the same period of fiscal year 2013. Free cash flow was a source of $290 million for the first half of fiscal year 2014, compared to a source of approximately $1.6 billion for the first half of fiscal year 2013. Key investments for business growth made in the first half of fiscal year 2014 include The Climate Corporation acquisition and Novozymes BioAg Alliance. (For a reconciliation of free cash flow, see note 1). Coming off a second-consecutive quarter of record amount of cash used for share repurchases, Monsanto spent an additional $203 million on share buybacks in the second quarter. The company has used more than $1.5 billion for share buybacks over the last 12 months. Outlook Monsanto confirmed its fiscal year 2014 ongoing earnings per share guidance 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’s guidance incorporates the effects related to agricultural industry headwinds, including currency fluctuations and lower corn acres in some key markets. The company estimates a $0.15 to $0.20 full year EPS effect incorporated into its guidance, largely driven by the currency effects. Monsanto also continues to expect strong operational growth from its core business, reflected in mid-to-high teens growth in EBITDA. Monsanto expects a strong second half of the fiscal year, punctuated by a strong conclusion in its fourth quarter as the company expects a significantly smaller loss than in recent years driven by a number of core factors. The company also reaffirmed free cash flow in the range of $600 million to $800 million for fiscal year 2014. The free cash flow guidance is inclusive of the cash used for the company’s fiscal year 2014 acquisition of The Climate Corporation and recent BioAg Alliance 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). Seeds and Genomics Segment Detail
The Seeds and Genomics segment consists of the company’s global seeds and related traits business. Sales in the Seeds and Genomics segment for the second quarter were $4.6 billion, an increase of $302 million over the same period last year. Growth in Seeds and Genomics gross profit represented almost 80 percent of the company’s overall gross profit increase in the quarter. For the first six months, sales for the segment are up $223 million over the same period last year. Monsanto's global corn and soy businesses have led the Seeds and Genomics segment performance. Monsanto achieved a record quarter for soybean sales and gross profit on the strength of its growing global soybean platform. That record quarter drove overall margin expansion in the soybean segment, with margins in the quarter improving by more than seven points. Within soybeans, Monsanto confirmed it reached three million acres of Intacta RR2 PRO™ soybeans, providing a revolutionary new platform for Latin America soybean growers and making it the largest launch of a soybean trait in the company's history. The company has focused on making sure farmers have a good experience with the product in its initial launch year and with new harvest results in hand confirmed Intacta RR2 PRO™ soybeans are matching the better than four bushel per acre yield advantage against first-generation Roundup Ready® soybeans that were achieved in Ground Breakers® trials. The current and emerging opportunities in the company’s global corn portfolio complement the quarterly performance of the soybean platform. In the quarter, the corn business delivered solid growth over last year’s strong second quarter, including an increase in margins of more than two and a half points that reflect the continued upgrade of its global portfolio and benefits from the company’s improved cost position. Agricultural Productivity Segment Detail
The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products. Net sales for the Agricultural Productivity segment in the first half of fiscal 2014 increasing $341 million over the same period last year. 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/9y2f29ss/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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