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Monsanto is optimistic about the closure of its merger with Bayer
The company shows its financial results for the second quarter of fiscal year 2018.
10/04/2018

Acquisition of Monsanto by Bayer.

In the middle of its fiscal year, Monsanto Company (NYSE: MON) highlighted the progress related to its 2018 fiscal year business objectives, including the expected acres of INTACTA RR2 PROTM soy in South America and Roundup Ready 2 Xtend® soy in the US. . UU with the benefits of the improved price of glyphosate. The company also noted that the results of its second quarter of fiscal year 2018 represented a solid performance, with reported earnings per share of $ 3.27 and $ 3.22 in earnings per share in progress.

With Bayer leading the regulatory process for the pending merger, the companies continue to cooperate with regulators and have seen solid progress. The number of antitrust approvals continues to rise, especially from the European Commission, China and Brazil, and, as part of this process, Bayer has announced several planned divestments. With these actions, Monsanto continues to rely on the collective capacity of the companies to ensure the required approvals within the second calendar quarter of 2018 and in the time foreseen by the agreement.

"The business goals we achieved in the first half of fiscal year 2018 reflect our team's unwavering commitment to our farmer customers," said Hugh Grant, president and CEO of Monsanto. "Despite the harsh economy of agriculture, we delivered a solid second quarter and are being disciplined in the execution of the business in the short term.We continue to look for new innovations to benefit modern agriculture, as evidenced by several recent agreements, and we hope to reach additional milestones for the merger with Bayer. "

"We met our goal of INTACTA RR2 PROTM soybean acres in South America, and the Roundup Ready Xtend® growing system is on track to register the adoption of traits," added Brett Begemann, president and chief operating officer of Monsanto. "In just the third year of the trait in the market, US farmers are about to plant nearly 50 million acres of dicamba-tolerant soybeans and cotton in 2018, almost double the area of ​​last season. Based on anticipated market demand, we expect 60 million acres by 2019. Farmers clearly see the value of this weed control technology and look forward to partnering with them to successfully utilize this vital tool. "

Results of operations

Net sales for the second quarter of the company's fiscal year 2018 were essentially flat compared to the second quarter of the previous year at approximately $ 5.0 billion. Gross profit was approximately $ 3 billion for the second quarter of fiscal years 2018 and 2017.

The results of the second quarter were driven by the improvement in glyphosate prices, as well as better prices and acres of INTACTA RR2 PROTM soya, compensated by the decrease in corn volumes from the combination of time and planted hectares lowest in the US UU continued the lowest prices of commodities in Brazil.

Sales, general and administrative costs were $ 652 million, and research and development expenses were $ 394 million for the second quarter, basically, while others decreased by more than $ 60 million due to lower sales profits from assets and related costs the fourth. Finally, the effective tax rate decreased to 21 percent, mainly from the lowest corporate tax rate in the US. UU More some discrete elements.

The EPS of the second quarter of fiscal year 2018 of the company, as reported, was $ 3.27, compared to $ 3.09 the previous year. The EPS in continuous form was $ 3.22, just above the $ 3.19 of the previous year. The company is modestly ahead of the previous year in the brand of the first half, with EPS for the first six months of fiscal year 2018 of $ 3.65 according to reports and $ 3.63 on an ongoing basis. (For a reconciliation of EPS reported with EPS in progress, see note 1).

Cash flow

For the first half of fiscal year 2018, cash flow from operations was a source of approximately $ 1.6 billion, compared to $ 1.5 billion in the same period last year. The net cash required by the investment activities for the first half of fiscal year 2018 was approximately $ 366 million, compared to $ 438 million for the same period of fiscal year 2017. The net cash required by the financing activities for the First half of 2018 was $ 714, net cash of $ 494 million is required for the same period of fiscal year 2017.

 Finally, the free cash flow was a source of $ 969 million for the first semester of fiscal year 2018, compared to a source of $ 994 million for the first semester of fiscal year 2017. The results of 2018 were driven by the annual improvement in the year. net profit, offset by the increase in capital expenditures as the company continues to invest in its dicamba manufacturing plant, whose completion is scheduled for 2020. (NOTE: free cash flow is defined as operating cash flows less expenses of capital).

Outlook

For the whole year, the company continues to expect growth driven by glyphosate prices and the continued adoption of new technologies in Seeds and Genomics, such as INTACTA RR2 PROTM soya, Roundup Ready 2 Xtend® soybeans and Bollgard® II XtendFlex® cotton, as well as as reductions in related launch costs for these products.

The company also remains diligent in its work to complete the restructuring and cost-saving initiative that began in fiscal year 2015. It is expected that sales, general and administrative and research and development costs will decrease slightly year after year.

In addition, the company expects the benefits related to strategic asset sales and license contributions to be approximately 30 percent lower than the average annual pre-tax contribution of approximately $ 350 million in the last three years.

In general, with the solid start to the first half of the year and taking these factors into account, Monsanto continues to expect an increase in pretax income for fiscal year 2018, independently.

Including the effects of the recent tax reform legislation of the US. The company expects the effective tax rate to be from 23 to 25 percent, for the entire fiscal year, since it is expected that Argentina's valuation reserve will increase during the second half of the year. For the 2019 fiscal year, the company expects an effective tax rate reportedly in the range of 24 to 28 percent, reflecting the new lower corporate tax rate in the US. UU., The loss of the American manufactured domestic deduction and the lack of some of the discrete benefits of this year.

Detail of the seeds and genomics segment

The Seeds and Genomics segment includes seeds, biotechnology traits and digital agriculture products.

Sales for Monsanto's seed and genomics segment in the second quarter were approximately $ 4.1 billion, a decrease of approximately two percent compared to the prior year period. Gross profit in the segment was $ 2.7 billion for the quarter, a decrease of approximately one percent compared to the previous year. This reflects the balance of the continued demand for new soy and cotton technologies, juxtaposed with challenging commodity prices in markets where the demand for grains continues to grow.

For soybeans, gross profits grew seven percent worldwide to $ 672 million, despite an extremely competitive US market. UU A key contributor was the continued demand for features especially suited to the geographies of South America. The company reached its target of 60 million hectares planted with INTACTA RR2 PROTM soya in South America, where the team continued to deliver better local currency prices in the second quarter. In addition, the company recently received regulatory approval to plant the next-generation INTACTA 2 XTENDTM soybeans in Brazil and expects a commercial launch planned in 2021.

In the USA The company continues to expect 40 million acres of Roundup Ready 2 Xtend® soybeans to be planted in the 2018 fiscal year, which would be a record for the adoption of new traits in three years. In addition to the higher yields that producers have seen, the company is still dedicated to improving the grower's experience. Prior to the 2018 growth season, through the combined efforts of Monsanto, states and other industry participants, more than 25,000 applicators have been trained to use dicamba to control weeds in the Roundup Ready® Xtend culture system . Earlier this year, Monsanto worked with The Climate Corporation to create and launch a free mobile application to help applicators plan successful XtendiMax herbicide applications. This digital tool provides location-specific weather forecasts, digital record keeping capabilities and educational resources related to the Roundup Ready® Xtend Crop System and has been one of the most downloaded applications in recent weeks, with high early user ratings.

The gross profit of Monsanto's corn business fell by seven percent, mainly due to volumes, which decreased due to delays in time from the first half of the year to the second half, and due to the expectation of corn acres planted more low. Confirming this change in time, the company experienced an increase of almost 40 percent in shipments of US-branded corn seed in March compared to the previous year. The company also experienced a modest decline in corn prices in the quarter, mainly as a result of the 30 percent decrease in the price of corn raw materials in Brazil year after year. For the whole year, the company now expects to have genetic participation worldwide, depending on the performance of its portfolio, while anticipating that global germplasm prices will be modestly reduced in local currency.

In complementary crops, Bollgard® II XtendFlex® cotton is now expected to be planted on eight million acres in the US. UU., Compared to more than six million acres, as expectations for planted acres increase. This expansion helped contribute to a 31 percent increase in gross cotton earnings for the second quarter.

After a brief commercial break, the company is moving forward with another season of Ground Breakers® agricultural testing with NemaStrikeTM technology in the US. UU With almost 15% of the world agricultural production lost to the nematodes annually, there is clearly a need for the solution that this product can give.

The Climate Corporation continued to see important advances. In Europe, Climate continues its work following the recent announcements prior to the launch of the Climate FieldViewTM platform for Germany, France and Ukraine. The team also completed its first beta testing season in Argentina, complementing existing businesses in Brazil, Canada and the USA. UU

The connectivity is generating new opportunities for Climate, and the company signed seven new platform partners in the quarter, adding a total of 25. For example, in early February, Climate and CNH Industrial announced a new partnership to share bidirectional data to benefit to the customers of the brands Case IH and New Holland Agriculture. Strategic discussions with dozens of other potential partners and collaborators in the industry continue to facilitate farmers' sharing of data with their agronomic partners in order to improve decision making. Transparent data connectivity between Climate FieldViewTM and other agricultural software systems is a crucial step in enabling farmers to obtain customized field knowledge to help them get the most out of each acre.

Globally, acreage expectations paid on the Climate FieldViewTM platform for fiscal year 2018 remain at more than 50 million, more than 40 percent more than in fiscal 2017.

Detail of the agricultural productivity segment

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

Sales of Monsanto's Agricultural Productivity segment were $ 931 million for the second quarter of fiscal year 2018. The company made price increases over the previous year in the second quarter, as the generic prices for glyphosate continued to improve and reiterated the expectation that the overall average prices for the rest of the fiscal year should also be higher than the previous year.

By switching to dicamba-based formulations, the company expects volumes of XtendiMax® herbicide with VaporGrip® technology to grow with growing acres of Roundup Ready 2 Xtend® soybean and Bollgard® II XtendFlex® cotton acres, albeit in a very competitive position on the top of the formulation market.



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