ST. LOUIS, Aug. 31, 2010 /PRNewswire-FirstCall/ -- As its fiscal year draws to a close, Monsanto Company (NYSE: MON) today confirmed the drivers of its fourth-quarter operating plan have tracked well with management expectations, positioning the company to conclude the fiscal year within its previous guidance ranges for ongoing earnings per share (EPS) and free cash flow.
The company expects ongoing EPS for the fiscal year in the range of $2.40 to $2.45 a share, at the low end of its previous $2.40 to $2.60 guidance range. This expectation reflects strong quarterly seed and trait sales in Latin America and other international markets, solid fourth-quarter performance of Monsanto's crop-protection business, and the realization of discrete tax benefits. The company continues to expect free cash flow in the range of $400 million to $500 million for the fiscal year. (For a reconciliation of EPS and free cash flow, see note 1.)
"Our operating plan for the quarter and the conclusion of the fiscal year focused on delivering on our revised commitments and setting up our business for mid-teens earnings growth going forward," said Chief Financial Officer Carl Casale. "With a solid wrap to the quarter, we'll turn the page and start a new chapter as our growth focus shifts squarely to our seeds-and-traits business."
Roundup® Strategic Repositioning Actions Successful
Implementation of the company's strategic repositioning of the Roundup® business has been successful, Casale indicated. Earlier this year, Monsanto announced it would lower prices of Roundup and other glyphosate-based herbicides in key geographies to bring them more in line with generics. In the fourth quarter, the company saw significant channel support for its new product positioning in multiple markets, reflected in stronger-than-expected branded volume, particularly among U.S. customers. Additionally, the company resolved outstanding issues related to a supply agreement in the quarter, which contributed to the quarter and helps align the business going forward.
Casale reported that the company continues to make good progress with its new weed management approach built on using the Roundup brand to support the seeds-and-traits business. The strategy will allow Monsanto to offer multiple weed control options for farmers, while decreasing overall infrastructure and support for the crop-protection business, including reduced working capital and SG&A expense. This strategy enables the company to extend its cost-management efforts to streamline the Roundup business to scale it for its expected steady-state contribution to the ongoing business. Monsanto extended its restructuring program to cover an estimated $180 million pre-tax to conclude the crop protection strategic alignment and better align the resourcing for corporate supporting functions. Approximately $150 million of the charge is expected to be recorded in the fourth quarter of fiscal year 2010. The restructuring charge will affect as-reported EPS by approximately $0.22 and will be primarily reflected in fiscal year 2010 with the remaining charge in fiscal year 2011.
As a result of these actions, the company projects a steady-state gross profit contribution of $250 million to $300 million from the Roundup and other glyphosate-based herbicide business, and that the business will be both EBIT positive and a key contributor to cash for fiscal year 2011.
Casale indicated Monsanto continues to be on track to maintain SG&A expenses in the range of $2 billion to $2.1 billion for fiscal year 2010. With the incremental benefit of the additional cost-management, the company expects to be well within its expected range of flat to inflationary growth in SG&A expense for fiscal year 2011.
Additionally in the fourth quarter, Monsanto expects to recognize the benefits of several discrete tax items that are anticipated to further lower the company's projected tax rate below the previous range of better than 29 percent to 30 percent for the fiscal year.
Early Seeds-and-Traits Momentum
Monsanto's seeds and genomics segment has improved sales ahead of the local planting seasons in Latin America and other international markets versus the fourth quarter of the previous fiscal year. The start to the Latin American season reflects a carry through of momentum from the 2009-2010 growing season, with indicators of good growth in trait penetration and unit-volume growth cumulatively across the region, despite the fact that planted acres for corn in Brazil are expected to decrease going into the 2010-2011 planting season. Last week, the company also reached an important milestone toward the commercial introduction of Monsanto's Bt-Roundup Ready 2 Yield® soybean product in Brazil as the National Technical Biosafety Committee (CTNBio) approved the trait for planting.
Monsanto will provide a complete report on fourth-quarter and fiscal-year earnings on Oct. 6.
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 the company blog, Beyond the Rows at www.monsantoblog.com, 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, Roundup Rewards, 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.
Media – Kelli Powers (314-694-4003)
Analysts – Bryan Hurley (314-694-8148)
Selected Financial Information
(Dollars in millions)
- Ongoing EPS and Free Cash Flow: The presentations of ongoing EPS and free cash flow are not intended to replace net income (loss), cash flows, financial position or comprehensive income (loss), and they are not measures of financial performance as determined in accordance with generally accepted accounting principles (GAAP) in the United States. The following tables reconcile ongoing EPS and free cash flow to the respective most directly comparable financial measure calculated in accordance with GAAP.
Reconciliation of EPS to Ongoing EPS: Ongoing EPS is calculated excluding certain after-tax items which Monsanto does not consider part of ongoing operations.
Fiscal Year 2010 Guidance
Diluted Earnings per Share
Diluted Earnings per Share from Ongoing Business
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.
Fiscal Year 2010 Guidance
Net Cash (Required) Provided by Operating Activities
Net Cash (Required) Provided by Investing Activities
Free Cash Flow
Net Cash Provided (Required) by Financing Activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Decrease in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period
SOURCE Monsanto Company