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Seeds and traits buisness drives record second-quarter and first-half sales for Monsanto Company
St. Louis, Missouri
April 5, 2006

Corn seed and traits meeting higher targets for market penetration

Report in PDF format

($ in millions)

Second
Quarter
2006

Second
Quarter
2005

Six
Months
2006

Six

Months

2005

Net Sales by Segment

       

Corn seed and traits

$   811

$   646

$1,078

$   873

Soybean seed and traits

449

443

622

623

Vegetable and fruit seed

148

273

All other crops seeds and traits

97

92

188

153

TOTAL Seeds and Genomics

$1,505

$1,181

$2,161

$1,649

 

 

 

 

 

Roundup and other glyphosate-based herbicides

$   427

$   480

$   976

$   915

All other agricultural productivity products

268

247

468

$   416

TOTAL Agricultural Productivity

$   695

$   727

$1,444

$1,331

 

 

 

 

 

TOTAL Net Sales

$2,200

$1,908

$3,605

$2,980

 

 

 

 

 

Gross Profit

$1,240

$1,015

$1,874

$1,506

 

 

 

 

 

Operating Expenses

$   566

$   448

$1,084

$   846

 

 

 

 

 

Interest Expense – Net

$     20

$     14

$     38

$     30

Other Expense – Net

$     19

$     28

$     23

$   335

 

 

 

 

 

Net Income

$   440

$    373

$    499

$    333

 

 

 

 

 

Diluted Earnings per Share

$  1.60

$   1.37

$   1.82

$   1.23

Items Affecting Comparability – EPS Impact

 

 

 

 

Solutia-Related Charge

– 

– 

– 

0.67 

Tax Benefit on Loss from European Wheat and Barley Business

                        –

                      –

                      – 

(0.39)

Restructuring Charges – Net

                        –

0.02

                      – 

0.03

Income on Discontinued Operations

                        –

(0.01)

                      –

(0.01)

Diluted Earnings per Share from Ongoing Business (For the definition of ongoing EPS, see note 1.)

$  1.60

$  1.38

$  1.82

$  1.53

 

 

 

 

 

Effective Tax Rate (Continuing Operations)

31%

29%

32%

17%

 

 

Comparison as a Percent of Net Sales:

Second Quarter 2006

Second

Quarter 2005

Six Months

2006

Six

Months

2005

Gross profit

56%

53%

52%

51%

Selling, general and administrative expenses (SG&A)

18%

16%

21%

19%

Research and development expenses (excluding acquired in-process R&D)

8%

7%

9%

8%

Income from continuing operations before income taxes

29%

28%

20%

10%

Net income

20%

20%

14%

11%



Comment from Monsanto Chairman, President and Chief Executive Officer Hugh Grant:

 

“Our business performed solidly in the first half of this fiscal year. Our second-quarter results, which serve as a key contributor to our overall fiscal year performance, were strong based on greater adoption of our corn seed and traits, and the addition of our Seminis business. These businesses are contributing nicely to our overall portfolio and should help us build positive momentum as we head into the crop season in the United States – the largest market for our business.

 

“We continue to see strong adoption of our corn seed and traits offerings, including our stacked-trait products which allow farmers to get more benefits out of a single seed. This adoption, in combination with our breeding efforts, has our business poised for market share gains in the U.S. corn seed market for a fifth consecutive year.”

 

Market Conditions

Farmers in the United States are gearing up for the 2006 crop season, both taking delivery of their crop inputs as well as evaluating their field conditions and planting windows. Over the next two months, U.S. farmers are slated to plant their corn hybrids, as well as their soybean and cotton varieties. Pre-season estimates from the U.S. Department of Agriculture (USDA) suggest that corn will be planted on 78 million acres, soybeans will be planted on more than 76 million acres and cotton will be planted on more than 14 million acres. Ultimately, the number of acres may change based on weather conditions and other variables related to planting.

 

In the Southern Hemisphere, the harvest season is under way. In Brazil, a consensus of industry sources note that soybean farmers are nearly halfway through their harvest by the first week of April. Soybean farmers in Argentina have also started harvesting beans, and estimates suggest that they will reach the mid-point by early May. Following last season’s drought in parts of South America, the late-season rains are expected to have provided some benefit to this year’s production.

 

Operations Update

Monsanto reported record net sales of $2.2 billion for the second quarter of fiscal year 2006, which were 15 percent higher than sales in the same period in fiscal year 2005. Key drivers for the quarter were increased corn seed and traits revenues in the United States, as well as the addition of revenues from the Seminis vegetable and fruit seed business, which was not part of the company’s operations during this period last year. Increased sales in the current quarter were partially offset by lower sales of Roundup and other glyphosate-based herbicides in the Europe-Africa and Asia-Pacific regions.

 

Record net sales in the company’s first and second quarters of fiscal year 2006 resulted in record year-to-date sales, which were 21 percent higher compared with sales in the same period last year. Key contributors to the company’s organic growth included higher U.S. corn seed and traits revenues and stronger purchases of Roundup herbicides in the United States and Argentina. The addition of revenue from the Seminis business was also a key driver for the increase in the first six months.

 

Monsanto recorded higher net income for the second quarter of fiscal year 2006, which was 18 percent higher than net income in the same period last year. Higher revenue from the company’s U.S. corn seed and traits business contributed to the net income increase in the second quarter. Net income for the first six months of fiscal year 2006 was 50 percent higher than net income in the same period last year.

 

Earnings per share (EPS), both on an as-reported and ongoing basis, was $1.60 for the second quarter and $1.82 for the first six months of the 2006 fiscal year.

 

Cash Flow

For the first half of fiscal year 2006, net cash provided by operating activities was $331 million, compared with $453 million in the same period in 2005. Net cash required by investing activities was $466 million for the first six months of 2006, compared with net cash provided of $47 million for the same period last year. As a result, free cash flow was $(135) million for the first half of fiscal year 2006, compared with $500 million in the same period in fiscal year 2005. (For a reconciliation of free cash flow, see note 1.) The first-half decrease, when compared with free cash in the same period last year, was related to lower proceeds from maturities of short-term securities, lower accrued liabilities because of timing of tax payments, higher spending on capital and investments as well as greater receivables from increased seed and traits revenue. Net cash provided by financing activities was $191 million for the first six months of 2006, compared with net cash required of $441 million for the same period last year.

 

Outlook

Monsanto confirmed that its full-year 2006 EPS guidance, both on a reported and ongoing basis, will be toward the upper end of its previously announced range of $2.35 to $2.50. The company also confirmed that its guidance for free cash flow in fiscal year 2006 remains in the range of $825 million to $900 million. The company confirmed that in fiscal year 2006 it expects net cash provided by operating activities to be in the range of $1.375 billion to $1.450 billion, and net cash required by investing activities to be approximately $550 million. Free cash flow guidance excludes cash that may be used for a rights offering in connection with the bankruptcy proceedings of Solutia, Inc. Monsanto’s current guidance also does not reflect any equity in Solutia, Inc., that the company may receive as a result of the bankruptcy process. (For a reconciliation of free cash flow, see note 1.)

 

Seeds and Genomics Segment Detail

 

($ in millions)

Net Sales

Gross Profit

Seeds and Genomics

Second

Quarter 2006

Second  Quarter 2005

Six Months

2006

 Six Months

2005

Second

Quarter 2006

Second  Quarter 2005

Six Months

2006

Six Months

2005

Corn seed and traits

$   811

$   646

$1,078

$  873

$538

$407

$  691

$  535

Soybean seed and traits

449

443

622

623

338

334

452

449

Vegetable and fruit seed

148

273

86

149

All other crops seeds and traits

97

92

188

153

47

34

103

73

TOTAL Seeds and Genomics

$1,505

$1,181

$2,161

$1,649

$1,009

$775

$1,395

$1,057




 

($ in millions)

Earnings Before Interest & Taxes (EBIT)

Seeds and Genomics

Second Quarter

2006

Second

Quarter

2005

Six Months

2006

Six Months   2005

EBIT (For a reconciliation of EBIT, see note 1.)

$615

$492

$634

$506

Unusual Items Affecting EBIT

 

 

 

 

Restructuring charges – net

None

$ (7)

None

$ (7)

 

The Seeds and Genomics segment consists of the company’s global seeds and related traits business, and genetic technology platforms.

 

Sales for Monsanto’s Seeds and Genomics segment were $1.5 billion for the second quarter of fiscal year 2006, or 27 percent higher than sales in the same period last year.

 

During the second quarter of fiscal year 2006, the company realized increased U.S. corn seed and traits revenue. The company expects continued growth in the upcoming planting season from its U.S. corn seed and traits business, which is poised to gain market share in the U.S. corn seed market for a fifth consecutive year.

 

The addition of sales from the Seminis business also contributed to increased sales in the second quarter. Seminis sales, which were not part of the company’s operations in the second quarter last year, were lower compared with pro forma sales for the same period last year. First-half sales from Seminis were flat when compared with pro forma sales for the first six months of fiscal year 2005.

 

Sales for the segment were also higher for the first six months of the 2006 fiscal year compared with sales in the same period last year. First-half segment sales were $2.2 billion, or 31 percent higher than first-half segment sales in fiscal year 2005. The key drivers for growth in the second quarter were also the primary contributors to growth in the first-half of the fiscal year.

 

As expected, the second quarter of fiscal year 2006 also included the continuing effect of an inventory step-up related to the Seminis acquisition of $12 million for the quarter, and $23 million for the first half of the 2006 fiscal year.


 

Agricultural Productivity Segment Detail

 

($ in millions)

Net Sales

Gross Profit

Agricultural Productivity

Second

Quarter 2006

Second  Quarter 2005

Six Months

2006

Six Months

2005

Second

Quarter 2006

Second  Quarter 2005

Six Months

2006

Six Months

2005

Roundup and other glyphosate-based herbicides

$427

$480

$   976

$   915

$104

$137

$286

$288

All other agricultural

productivity products

268

247

468

416

127

103

193

161

TOTAL Agricultural Productivity

$695

$727

$1,444

$1,331

$231

$240

$479

$449




 

($ in millions)

Earnings Before Interest & Taxes (EBIT)

Agricultural Productivity

Second Quarter

2006

Second

Quarter

2005

Six Months

2006

Six Months   2005

EBIT (For a reconciliation of EBIT, see note 1.)

$40

$49

$133

$(179)

Unusual Items Affecting EBIT

 

 

 

 

      Pre-tax charge associated with certain liabilities in connection with the Solutia bankruptcy

None

None

None

$(284)

Restructuring charges – net

None

None

None

$    (1)

Income on Discontinued Operations

None

$ 2

None

$      2

 

The Agricultural Productivity segment consists primarily of crop protection products, the lawn-and-garden herbicide business, and the company’s animal agricultural business.

 

Sales for Monsanto’s Agricultural Productivity segment were $695 million for the second quarter of fiscal year 2006, or 4 percent lower compared with sales in the same period last year. Sales of Roundup and other glyphosate-based herbicides were down modestly in the Europe-Africa and Asia-Pacific regions during the quarter; however, this decrease was partially offset by higher sales of Roundup herbicide in the United States.

 

Sales for the segment were higher for the first six months of the 2006 fiscal year compared with sales in the same period last year. First-half segment sales were $1.4 billion or 8 percent higher than first-half segment sales in fiscal year 2005. Improved sales of Roundup and other glyphosate-based herbicides in the United States and Argentina were key drivers for growth in the first half of the fiscal year. Segment sales in the first half also benefited from increased sales from the company’s selective chemistry and dairy businesses.

 

Webcast Information

In conjunction with this announcement, Monsanto will hold a conference call at 8 a.m. central time (9 a.m. eastern time) today. The call will focus on these results, future expectations and an update of the company’s U.S. business operations. The call may also 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. For more information on Monsanto, see www.monsanto.com.

 

 

Roundup is a registered trademark owned by Monsanto Company and its wholly owned subsidiaries.

 

References to Roundup herbicides in this release mean Roundup branded herbicides, excluding lawn-and-garden herbicide products, and references to “Roundup and other glyphosate-based herbicides” exclude all lawn-and-garden herbicides.


Monsanto Company

Selected Financial Information

(Dollars in millions, except per share amounts)

Unaudited

 

Statement of Consolidated Operations

Three Months

Ended

Feb. 28, 2006

Three Months

Ended

Feb. 28, 2005

Six Months

Ended

Feb. 28, 2006

Six Months

Ended

Feb. 28, 2005

Net Sales

$2,200

              $1,908

$3,605

$2,980

Cost of Goods Sold

960

                  893

1,731

1,474

Gross Profit

1,240

                1,015

1,874

1,506

Operating Expenses:

 

 

 

 

      Selling, General and Administrative Expenses

393

                  314

743

580

      Research and Development Expenses

173

                  127

341

246

      Acquired In-Process Research and Development

                       —

12

      Restructuring Charges – Net

                        —

                      7

8

Total Operating Expenses

566

                  448

1,084

846

Income From Operations

                      674

                 567

790

660

Interest Expense

33

                   24

65

49

Interest Income

                       (13)

                     (10)

                        (27)

                       (19)

Solutia-Related Expenses

7

                     9

13

293

Other Expense – Net

12

                   19

10

42

Income From Continuing Operations Before Income Taxes

                  635

                 525

729

295

Income Tax Provision

                  195

                 154

230

50

Income From Continuing Operations

                  440    

                 371

499

245

Discontinued Operations:

 

 

 

 

      Income From Operations of Discontinued Businesses

 

 

                     2

 

 

                      2

      Income Tax Benefit

                        —

                           —     

(86)

Income on Discontinued Operations

                      2

88

Net Income

             $   440 

$   373

$   499

$   333

EBIT (See note 1)

             $  655

$   541

$   767

$   327

Basic Earnings per Share:

 

 

 

 

Income From Continuing Operations

              $  1.63

             $ 1.39

$  1.86

$  0.92

Income on Discontinued Operations

                  0.01

0.33

Net Income

              $  1.63

             $  1.40

$  1.86

$  1.25

 

 

 

 

 

Diluted Earnings per Share:

 

 

 

 

Income From Continuing Operations

              $  1.60

              $  1.36

$  1.82

$  0.90

Income on Discontinued Operations

                         —

                     0.01

                —

0.33

Net Income

              $  1.60

               $  1.37

$  1.82

$  1.23

 

 

 

 

 

Weighted Average Shares Outstanding:

 

 

 

 

     Basic

269.6

266.5

269.0

265.6

     Diluted

275.3

272.9

274.8

271.3

 

 

Monsanto Company

Selected Financial Information

(Dollars in millions)

Unaudited

 

Condensed Statement of Consolidated Financial Position

As of
Feb. 28, 2006

As of
Aug. 31, 2005

Assets

 
 

 

 

 

Current Assets:

 

 

    Cash and Cash Equivalents

$    581

$     525

Short-Term Investments

171

150

    Trade Receivables – Net of Allowances of $302 and $275, respectively

 

2,010

 

1,473

    Miscellaneous Receivables         

391

370

    Deferred Tax Assets

321

374

    Inventories

1,856

1,664

    Assets of Discontinued Operations

10

15

    Other Current Assets

124

73

Total Current Assets

5,464

4,644

 

 

 

Property, Plant and Equipment – Net

2,353

2,378

Goodwill

1,462

1,248

Other Intangible Assets – Net

1,265

1,153

Noncurrent Deferred Tax Assets

610

680

Other Assets

449

476

Total Assets

$11,603

$10,579

 

 

 

Liabilities and Shareowners’ Equity

 

 

 

 

 

Current Liabilities:

 

 

    Short-Term Debt

$     566

$     282

    Accounts Payable

379

369

Income Taxes Payable

163

208

Accrued Compensation and Benefits

171

273

Accrued Marketing Programs

313

457

Deferred Revenues

357

43

Grower Accruals

60

18

    Liabilities of Discontinued Operations      

4

11

    Miscellaneous Short-Term Accruals

638

498

Total Current Liabilities

2,651

2,159

 

 

 

Long-Term Debt

1,378

1,458

Postretirement Liabilities

717

732

Long-Term Portion of Solutia-Related Reserve

175

184

Other Liabilities

463

433

Shareowners’ Equity

6,219

5,613

Total Liabilities and Shareowners’ Equity

$11,603

$10,579

 

 

 

Debt to Capital Ratio:

24%

24%


 

Monsanto Company

Selected Financial Information

(Dollars in millions)

Unaudited

 

Statement of Consolidated Cash Flows

Six Months Ended

Feb. 28, 2006

Six Months Ended

Feb. 28, 2005

 

Operating Activities:

 

 

    Net Income

$   499

 $   333

    Adjustments to reconcile cash provided (required) by operations:

 

 

    Items that did not require (provide) cash:

 

 

        Depreciation and amortization expense

259

221

        Bad-debt expense

22

21

        Stock-based compensation expense

35

        Tax benefit on employee stock options

35

        Excess tax benefits from stock-based compensation

(38)

        Deferred income taxes

173

                (143)

        Equity affiliate expense – net

15

15

        Solutia-related charge

284

        Other items that did not require (provide) cash

                (5)

                    40

    Changes in assets and liabilities that provided (required) cash,     net of acquisitions:

 

 

        Trade receivables

       (64)

65

        Inventories

(207)

(157)

        Accounts payable and accrued liabilities

(353)

(163)

        PCB litigation settlement insurance proceeds

16

4

        Solutia-related payments

(15)

(29)

        Other Items

(6)

(73)

Net Cash Provided by Operating Activities

331

453

 

 

 

Cash Flows Provided (Required) by Investing Activities:

 

 

Purchases of short-term investments

(21)

Maturities of short-term investments

300

Acquisitions of businesses, net of cash acquired

(179)

(173)

Technology and other investments

(118)

(20)

Capital expenditures

(157)

(83)

Other investment and property disposal proceeds

9

23

Net Cash Provided (Required) by Investing Activities

(466)

47


 
   

Cash Flows Provided (Required) by Financing Activities:

 

 

Net change in financing with less than 90-day maturities

241

(95)

Short-term debt proceeds

6

5

Short-term debt reductions

(13)

(15)

Long-term debt proceeds

4

11

Long-term debt reductions

(45)

(278)

Payments on other financing

                     (4)

(3)

Treasury stock purchases

(74)

Stock option exercises

64

92

    Excess tax benefits from stock-based compensation

38

Dividend payments

(100)

(84)

Net Cash Provided (Required) by Financing Activities

191

(441)

 

 

 

Net Increase in Cash and Cash Equivalents

56

59

Cash and Cash Equivalents at Beginning of Period

525

1,037

Cash and Cash Equivalents at End of Period

$   581

$1,096


 

Monsanto Company

Selected Financial Information

(Dollars in millions)

Unaudited

 

1.       EBIT, Ongoing EPS and Free Cash Flow:  The presentations of EBIT, 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 EBIT and free cash flow to the respective most directly comparable financial measure calculated in accordance with GAAP. Ongoing EPS is calculated excluding certain after-tax items which Monsanto does not consider part of ongoing operations. The reconciliation of EPS to ongoing EPS is included on page 1 of this release.

 

Reconciliation of EBIT to Net Income (Loss):  EBIT is defined as earnings (loss) before interest and taxes. Earnings (loss) is intended to mean net income (loss) as presented in the Statement of Consolidated Operations under GAAP. The following table reconciles EBIT to the most directly comparable financial measure, which is net income (loss). 

    

 

 

 

           Three Months Ended

                         Feb. 28,

                 Six Months Ended

                         Feb. 28,

               2006

               2005

               2006

             2005

EBIT – Seeds and Genomics Segment

$  615

 $  492

 $  634

 $  506

EBIT – Agricultural Productivity Segment

     40

     49

     133

(179)

EBIT– Total

     655

     541

     767

     327

Interest Expense – Net

20

14

38

30

Income Tax Provision (Benefit)(1)

     195

154

     230

(36)

Net Income

$  440

$  373

$  499

$  333














 

(1)Includes the income tax provision from continuing operations and the income tax benefit on
discontinued operations.


 

Reconciliation of Free Cash Flow: Free cash flow represents the total of cash flows from operating activities and investing activities, as reflected in Monsanto’s Statement of Consolidated Cash Flows presented in this release.  With respect to the projected free cash flow guidance provided under the caption “Outlook,” 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

2006

Target

        Six Months Ended

                    Feb. 28,

          2006

          2005

Net Cash Provided by Operating Activities

$1,375 - $1,450

 $  331

 $   453

Net Cash Provided (Required) by Investing Activities

(550)

(466)

47

Free Cash Flow

 $825 -  $900

$(135)

$    500

Net Cash Provided (Required) by Financing Activities

   N/A

191

(441)

Net Increase in Cash and Cash Equivalents

   N/A

$    56

$      59

Cash and Cash Equivalents at Beginning of Period

   N/A

$  525

$ 1,037

Cash and Cash Equivalents at End of Period

   N/A

$  581

$ 1,096

 

 

 

 

 

Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality.

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