Monsanto Announces Financial Results, Future Position as a Mid-Teens Growth Company

ST. LOUIS, April 7, 2010 /PRNewswire-FirstCall/ -- Looking at its second quarter results and competitive dynamics in the marketplace, Monsanto Company (NYSE: MON) today said it expects to emerge from 2010 in a position to generate annual earnings growth percentages in the mid-teens. As part of its earnings results for the quarter ending Feb. 28, 2010, the company discussed performance against projections in both the seeds and traits and agricultural productivity segments during a year of intense competitive pressure for both sides of the business.  While recommitting to full-year financial guidance for free cash flow and earnings per share at the low end of its previously stated range, the company acknowledged its goal of doubling 2007 gross profit by 2012 is unlikely.

"Over the course of a five-year operational plan, the landscape can change," said Hugh Grant, chairman, president and chief executive officer for Monsanto.  "While there may be options to make an accelerated push for 2012, it's clear to me that achieving that objective would involve making short-term choices that are not in the long-range interests of the business. Still, nothing has changed in my fundamental view of the business. We have the best products, we have a commercial and technology lead and we have the experience to apply the lessons of 2010. Given that, I am confident that we're a growth company going forward."

Results of Operations

Net sales decreased $145 million, or 4 percent, in the three-month comparison primarily as a result of lower prices for the company's glyphosate-based herbicides.  These price decreases were central to the company's strategy of increasing global volume, which increased in several regions including Brazil, Argentina, Asia, and the United States.  Net income in the second quarter was $887 million.

Gross profit declined 17 percent in the quarter to $2.1 billion, also driven by the price decreases for Roundup and other glyphosate-based herbicides.  For the first six months, gross profit is down 30 percent or $1.2 billion.

Operating expenses decreased 13 percent, or $128 million, in the second quarter 2010 compared to the prior year. In the three-month comparison, selling, general and administrative (SG&A) expenses decreased 2 percent.  R&D expenses increased 5 percent as the company continues to manage more projects in advanced pipeline phases.  As a percent of net sales, SG&A expenses were 13 percent and R&D expenses were 7 percent.  

Restructuring expense for the quarter was $84 million.  This included $54 million charged to U.S. corn cost-of-goods sold, as the result of a decision to exit some product lines in the U.S. branded corn business to streamline product SKUs across multiple brands.

Earnings per share (EPS) for the second quarter was $1.60 on an as-reported basis, and $1.70 on an ongoing basis. EPS for the first six months of fiscal year 2010 was $1.57 on an as-reported basis, and $1.68 on an ongoing basis. (For a reconciliation of EPS to ongoing EPS see page 1).

Cash Flow

The second quarter was a significant source of cash generation, which began to offset the use of cash from the first quarter.  For the first half of fiscal year 2010, cash flow from operations was a source of $256 million compared to $1.5 billion in the first half last year. Net cash required by investing activities for the first half of fiscal year 2010 was $345 million, a decrease from $359 million for the same period of fiscal year 2009.

Net cash required by financing activities for the first half of 2010 was $259 million, compared to net cash required of $601 million for the same period of fiscal year 2009.

Free cash flow was a use of $89 million for the first half of fiscal year 2010, compared to a source of $1.1 billion for the first half of fiscal year 2009. (For a reconciliation of free cash flow, see note 1.)

Outlook

The company affirmed its previously announced cash flow and EPS guidance, with EPS expected at the low end of its range. The company expects free cash flow for fiscal year 2010 will be in the range of $900 million to $1 billion, including the after-tax cash effect from a restructuring charge of approximately $250 million.  The company expects net cash provided by operating activities to be $1.9 billion to $2.1 billion, and net cash required by investing activities to be approximately $1 billion to $1.1 billion for fiscal year 2010. (For a reconciliation of free cash flow, see note 1.)

The company confirmed full-year 2010 ongoing EPS guidance is in the low end of the range of $3.10 to $3.30.  Full-year 2010 EPS guidance on an as-reported basis is in low end of the range of $2.85 to $3.11.  (For a reconciliation of EPS, see note 1.)

SG&A expenses continued to run below planned spend, trending to the low end of the company's targeted range, and are expected to represent approximately 18 percent of sales for the year.  The company remains on track to deliver one-third of the $220 million to $250 million in annual cost savings in the fiscal year and the full savings in 2011 due to the restructuring.

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

The company said it has made solid progress on this year's main objectives for the segment:  expanding trait penetration in Latin America and establishing Genuity™ SmartStax™ corn and Genuity™ Roundup Ready 2 Yield® soybeans in their launch years.  With strong trait expansion achieved in Brazil and Argentina earlier this year, the company said this year's unprecedented product launches have it well-positioned in corn and soybeans.

While total returns are not final, the company said it expects total acreage to reach approximately 3 million acres for Genuity™ SmartStax™ corn and 6 million acres for Genuity™ Roundup Ready 2 Yield® soybeans.  More promising, the company said, are the broad trials in both crops.  More than 40 percent of the company's branded customers are trying Genuity™ Roundup Ready 2 Yield® and more than 20 percent of the company's branded customers are trying Genuity™ SmartStax™.

Cotton and vegetables are tracking well with expectations and may potentially boost overall seeds and traits gross profit contributions for the year.

In total, sales for Monsanto's Seeds and Genomics segment in the second quarter of fiscal 2010 increased 7 percent.  Corn seed and traits net sales increased 8 percent or $169 million due in large part to higher branded sales in Brazil, the United States and Argentina in the quarter.  Soybean sales were up by 3 percent or $18 million, driven by an increase in planted acres in Brazil, in the three-month period.  

The vegetable business continued to perform well as a result of improved product availability, with sales growing $14 million or 7 percent for the quarter.

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

Sales in the second quarter of fiscal 2010 for Monsanto's Agricultural Productivity segment declined 35 percent or $351 million compared with the same period last year.  Gross profit was break-even primarily because of the persistence of generic inventory in key markets paired with the use of sales incentives to address the competitive pricing environment.  Globally, most branded prices were in the targeted $10 to $12 range.  

Acknowledging some key trends that deviated from the core planning assumptions for Roundup and other glyphosate-based herbicides – including the continued presence of generic inventory and competitive pricing strategies – the company said it now sees gross profit for the segment at plus-or-minus $600 million for the 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 may include a discussion of Monsanto's strategic initiatives, product performance 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 web site at www.monsanto.com and clicking on "Investor Information." 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 Web site for three weeks.

About Monsanto Company

Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality. Monsanto remains focused on enabling both small-holder and large-scale farmers to produce more from their land while conserving more of our world's natural resources such as water and energy. To learn more about our business and our commitments, please visit: www.monsanto.com . Follow our business on Twitter® at www.twitter.com/MonsantoCo, on Facebook® at www.facebook.com/MonsantoCo, or subscribe to our News Release RSS Feed .

Cautionary Statements Regarding Forward-Looking Information:

Certain statements contained in this release are "forward-looking statements," such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits; developments related to foreign currencies and economies; successful operation of recent acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's most recent Form 10-K Report to the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results.

Notes to editors: Roundup, Genuity, SmartStax and Roundup Ready 2 Yield are trademarks of Monsanto Company and its wholly-owned subsidiaries.

References to Roundup herbicides in this release mean Roundup-branded herbicides, excluding lawn-and-garden herbicide products.

Reconciliation of EPS to Ongoing EPS:  Ongoing EPS is calculated excluding certain after-tax items which Monsanto does not consider part of ongoing operations.

Reconciliation of Free Cash Flow: Free cash flow represents the total of cash flows from operating activities and investing activities, as reflected in the Statements of Consolidated Cash Flows presented in this release. With respect to the fiscal year 2010 free cash flow target, Monsanto does not include any estimates or projections of Net Cash Provided (Required) by Financing Activities because in order to prepare any such estimate or projection, Monsanto would need to rely on market factors and conditions that are outside of its control.

SOURCE Monsanto Company