January 7, 2011

  

Monsanto Q1 on track as company confirms full-year ongoing EPS and free cash flow guidance

 

Monsanto reported earnings per share growth and significant free cash generation for the first quarter of 2011, which ended November 30, 2010.

 

The company also reaffirmed its mid-teens earnings growth and free cash flow guidance for fiscal year 2011.

 

"Our first quarter tracked well with our operating plan across the crops, geographies and products we expect to be drivers in 2011," said Hugh Grant, chairman, president and chief executive officer for Monsanto. "We're executing against the areas most important to our business growth, particularly our seeds-and-traits focus in Latin America and delivering on our seed strategy in the US.  Our early US order books show farmers are interested in our newest products, Genuity^® Roundup Ready 2 Yield^® soys and the reduced-refuge corn family anchored by Genuity^® SmartStax^®. And our R&D pipeline remains strong, leaving the company well-positioned for long-term growth."

 

Net sales increased 8% in the quarter to US$1.8 billion, with increases across all major crops in the seeds and genomics segment. Gross profit for the total company increased 11%, and gross profit as a percent of sales improved one percentage point to 45%, driven by increases in seeds and traits revenue across all major crops - particularly corn and soy in Latin America and cotton in Australia.  

 

Selling, general and administrative (SG&A) expenses decreased 9% for the quarter due largely to the company's restructuring actions in the prior year. R&D expenses increased 13% as the company manages more projects in advanced pipeline phases. 

 

The company's first quarter earnings per share (EPS) was US$0.02 on an ongoing basis (US$0.01 on an as-reported basis).

 

The first quarter of fiscal 2011 was a significant source of cash. Free cash flow was US$500 million in the quarter compared with a use of cash of US$1.6 billion for the same period last year. This is primarily the result of a timing shift from last year's second quarter into this year's first quarter, as the later harvest in 2009 delayed prepayments in fiscal 2010. 

 

Net cash provided by operating activities was US$624 million, compared to a use of US$1.4 billion in the first quarter last year. Net cash required by investing activities for the first quarter of fiscal 2011 was US$124 million, compared with a use of US$197 million for the year-ago quarter.  Net cash required by financing activities was US$340 million, compared to net cash provided of US$102 million for the prior year's first quarter. The company spent US$267 million in the first quarter on share repurchases, crossing a quarter of the current US$1 billion, three-year authorisation.

 

The company affirmed its guidance of free cash flow for fiscal year 2011 in the range of US$800 million to US$900 million, reflecting an investment of US$600 to US$700 million in capital expenditures. The company expects net cash provided by operating activities to be US$1.7 billion to US$1.9 billion, and net cash required by investing activities to be approximately US$900 million to US$1 billion for fiscal year 2011.

 

The company confirmed full-year 2011 ongoing earnings per share (EPS) guidance is in the range of US$2.72 to US$2.82.  Full-year 2011 EPS guidance on an as-reported basis is in the range of US$2.69 to US$2.79. 

 

The Seeds and Genomics segment consists of the company's global seeds and related traits business. Sales for Monsanto's Seeds and Genomics segment increased 13% in the first quarter, reflecting increases across the corn, soy, cotton and vegetable platforms.

 

Corn seed and traits net sales increased 8% over last year's quarter. The primary driver was the company's Latin America seed business, with increased acres in Argentina and the mix benefit from increased overall trait penetration in Brazil. The company also gained an on-year volume increase in the United States as the US order book tracks well with the company's product strategy and acreage targets.

 

Volume increases brought soy seeds and trait sales up 12% compared to last year, and cotton sales saw growth led by an increase in planted acres in Australia. Vegetable sales were up 6% or US$10 million.

 

The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products. Sales in the first quarter of fiscal 2011 for Monsanto's Agricultural Productivity segment remained flat, with sales of Roundup and other glyphosate-based herbicides tracking well with expectations following last year's strategic repositioning. Sales of Roundup and other glyphosate-based herbicides increased 3%, reflecting the early Latin American sales-and-application season, leading an increase in volume offset by the lower net selling price.