Monsanto Company announced third quarter earnings of $1.90 per share on an as-reported basis and $1.93 on an ongoing basis on June 28, 2017. The results were led by continued momentum in soybean technologies.
"Our innovation leadership and commitment to our grower customers is driving our growth, and the completion of the third quarter bolsters our confidence in the full year," said Hugh Grant, Monsanto chairman and CEO. "I’m very pleased with what our teams have accomplished this year, balancing meaningful progress on both delivering the business and working to close the deal with Bayer."
Results of Operations
- Net sales for the fiscal year 2017 third quarter were $4.23 billion versus $4.19 billion in the prior year. Quarterly gross profit was $2.4 billion for the fiscal year 2017, nearly flat compared to the same period in fiscal year 2016. For the first nine months of fiscal year 2017, net sales were approximately $12 billion versus $10.9 billion in fiscal year 2016. Gross profit for the first nine months of fiscal year 2017 was $6.6 billion, up from $5.9 billion in the prior year period.
- The company’s selling, general and administrative costs and research-and-development expenses increased about 8% year-over-year, primarily because of the continued increase in the accrual for incentives and the investment in the climate business. The company remains on-track with its target of $380 million in savings by the end of the fiscal year across cost of goods and operating expenses, as compared to a fiscal year 2015 base.
- The company's fiscal year 2017 third quarter EPS on an as-reported basis was $1.90 with ongoing EPS of $1.93. This is compared to as-reported EPS of $1.63 and ongoing EPS of $2.17 in fiscal year 2016. In the first nine months of fiscal year 2017, as-reported EPS was $5.06 and ongoing EPS was $5.32, compared to $3.40 as-reported and $4.40 ongoing in the same period of fiscal year 2016.
In the first nine months of fiscal year 2017, net cash provided by operating activities was a source of approximately $690 million, compared to $415 million in the same period in fiscal year 2016. Net cash required by investing activities for the first nine months of fiscal year 2017 was $752 million, versus $639 million for the prior year. Net cash required by financing activities for the first nine months of 2017 was approximately $4 million, compared to net cash required of $2.2 billion for the same period last year. Free cash flow for third quarter year-to-date is a use of cash of $158 million versus the prior year use of cash of $251 million. This improvement reflects the increase in operating cash flows from the first three quarters, as compared to the prior year.
Fiscal Year 2017 Outlook
- The company expects as-reported EPS to be at the high end of the range of $4.09 to $4.55, and confirms EPS at the high end of the range of $4.50 to $4.90 on an ongoing basis.
- The Seed and Genomics segment gross profit is now expected to be up high-single digits in terms of percentage for the year. For the Agricultural Productivity segment, gross profit is still expected to be in the range of $850 to $950 million as the segment continues to deliver expected results.
- Looking ahead to fourth quarter, the company expects to receive the benefit of about $70 million in non-core asset sale gains from strategic deals. Roughly half of these gains are expected to benefit the Agricultural Productivity segment, and half are expected to benefit the Seeds and Genomics segment. Both are expected to be recorded in other income and are part of the company's ongoing strategic portfolio management efforts.
- For the full year, the company still expects these earnings to translate to the high end of the range of $1.2 billion to $1.6 billion of free cash flow, reflecting operating cash flow at the high end of the range of $2.4 billion to $2.8 billion and capital expenditures of $1.2 billion for fiscal year 2017.
- Total operating spend in 2017, excluding the pending Bayer transaction related costs and restructuring charges, is still anticipated to increase mid-single digits, as a percent, for the year. Monsanto is working with Bayer toward completion of the pending merger by the end of the calendar year.
Soybeans and corn
In soybeans, Monsanto has seen strong demand for the latest technologies, with growth of approximately 30% in global gross profit now expected for fiscal year 2017. U.S. growers have planted 20 million acres of Roundup Ready 2 Xtend soybean varieties across the country, and early season results underscore the efficacy of the company's integrated crop system.
In South America, strong performance of Intacta RR2 Protm soybeans has led to record market adoption. Total planted acreage in South America now exceeds 50 million acres.
Monsanto's corn platform also continues to perform well. In the U.S., the company expects genetic share gains for fiscal year 2017 and sold out of its DeKalb Disease Shield hybrids. In Europe, acres planted to corn year-over-year were relatively flat, and the company saw modest germplasm price-mix lift in local currency, along with anticipated genetic share gains. Overall, the company expects its global corn germplasm price-mix lift, in local currency, to be flat to up low-single digits, as a percent, for the full year.
Meanwhile U.S. cotton growers had the ability to use dicamba herbicides over-the-top and in-season this past quarter, in part driving the adoption of Bollgard II XtendFlex cotton to more than five million U.S. acres, well over the anticipated four million acres. Monsanto also expects genetic share gains in cotton for the third straight year.
Finally, all other crops seeds and traits gross profit declined approximately $239 million due primarily to the absence of the benefit from the alfalfa license in the prior year.
Climate FieldView has now surpassed 35 million paid acres, exceeding the original target of 25 million paid acres for fiscal year 2017. The Climate Corporation continues to forge new partnerships to build a unified digital system where farmers can access an interconnected set of tools, services and data in a single interface. In May, the company announced the integration of imagery from innovative aerial imagery partners Ceres Imaging, TerrAvion and Agribotix, to deliver valuable, high-resolution imagery to farmers through Climate FieldView. In addition, Climate acquired Hydrobio, an agriculture software company with unique, irrigation-focused data analytics capabilities.
Net sales for the Agricultural Productivity segment in the first nine months of fiscal 2017 were approximately $2.8 billion, with third quarter 2017 net sales for the segment hitting $1.1 billion, up slightly from the same periods last year.
Agricultural Productivity gross profit increased approximately 12% for the third quarter, due to improvements in pricing and volumes for glyphosate-based herbicides and continued sales of XtendiMax dicamba-based herbicide.
Source: Monsanto Company