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U.S. corn seeds and traits business leads strong second-quarter and first-half performance for Monsanto Company

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St. Louis, Missouri
April 4, 2007
 
Monsanto national brands see strong demand for higher-yielding corn seed offerings, expect market share and corn acreage gains
  ($ in millions)         Second       Second          Six          Six
                         Quarter      Quarter       Months       Months
                            2007         2006         2007         2006
  Net Sales by Segment
    Corn seed and traits  $1,192         $811       $1,552       $1,078
    Soybean seed and
     traits                  373          449          543          622
    Vegetable and
     fruit seed              174          148          274          273
    All other crops seeds
     and traits               98           97          148          188
  TOTAL Seeds and
   Genomics               $1,837       $1,505       $2,517       $2,161

    Roundup and other
     glyphosate-based
     herbicides             $530         $427       $1,179         $976
    All other agricultural
     productivity products   249          268          459          468
  TOTAL Agricultural
   Productivity             $779         $695       $1,638       $1,444

  TOTAL Net Sales         $2,616       $2,200       $4,155       $3,605

  Gross Profit            $1,450       $1,240       $2,130       $1,874

  Operating Expenses        $623         $566       $1,189       $1,084

  Interest Expense - Net      $3          $20           $6          $38
  Other Expense - Net         $6          $18          $20          $22

  Net Income                $543         $440         $633         $499

  Diluted Earnings per
   Share (See note 1.)     $0.98        $0.80        $1.14        $0.91
  Items Affecting
   Comparability - EPS
   Impact
    None                       -            -            -            -
  Diluted Earnings per Share
   from Ongoing Business
   (For the definition of
   ongoing EPS, see
   note 2.)                $0.98        $0.80        $1.14        $0.91

  Effective Tax Rate         34%          31%          31%          32%


  Comparison as a         Second       Second          Six          Six
   Percent of            Quarter      Quarter       Months       Months
   Net Sales:               2007         2006         2007         2006
  Gross profit               55%          56%          51%          52%
  Selling, general and
   administrative
   expenses (SG&A)           17%          18%          20%          21%
  Research and development
   expenses                   7%           8%           9%           9%
  Income before income
   taxes and minority
   interest                  31%          29%          22%          20%
  Net income                 21%          20%          15%          14%

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

"While the 2007 agriculture season is shaping up to be an outstanding one, the strong demand that we've seen for our higher-yielding corn seeds and our higher-margin, triple-trait corn technology has translated into an excellent second quarter and first half for our business. For the sixth straight year, our business is poised for market share gains in the U.S. corn seed market. These results, which underscore our continued ability to deliver a higher- yielding corn product to farmers, highlight the value that each of our six growth drivers can contribute to our overall business and, ultimately, our growth trajectory through the end of the decade."

Market Conditions

Farmers in the United States are gearing up for the 2007 crop season as planting is already underway in parts of the south. The 2007 season is shaping up to be a strong one for both farmers and the companies that support their business. During the next two months, U.S. farmers will plant corn, soybeans and cotton. Monsanto's pre-season U.S. crop estimates are consistent with the pre-season reports by the U.S. Department of Agriculture and suggest that corn could be planted on as many as 90 million acres, soybeans could be planted on 67 million acres, and cotton could be planted on 12 million acres. Ultimately, the number of acres may change based on weather conditions and other variables related to planting.

In the Southern Hemisphere, combines are rolling through the fields and harvest is underway. In Brazil, the soybean harvest is ahead of schedule and expected to reach the mid-point during the next two weeks. Farmers in Argentina have also started harvesting their soybeans as well as this year's summer corn crop. Across the globe, farmers in Australia are gearing to harvest this year's drought-limited cotton crop while cotton farmers in India will begin planting in earnest come May.

Operations Update

Monsanto reported record net sales of $2.6 billion for the second quarter of fiscal year 2007, which were 19 percent higher than sales in the same period in fiscal year 2006. Key drivers for the quarter were increased corn seed and traits revenues in the United States, as well as higher sales of Roundup and other glyphosate-based herbicides in Brazil, the Europe-Africa region and Argentina. Increased sales in the current quarter were partially offset by lower soybean seed and traits revenues in the United States, as the total number of soybean acres is expected to be reduced in favor of corn.

Net sales in the company's first half of fiscal year 2007 resulted in record year-to-date sales of $4.2 billion, which were 15 percent higher compared with sales in the same period last year. Key contributors to the company's growth included higher U.S. corn seed and traits revenues, and higher sales of Roundup and other glyphosate-based herbicides in Brazil, the United States, Argentina and the Europe-Africa region.

Monsanto's net income for the second quarter of fiscal year 2007 was 23 percent higher than net income in the same period last year. For the first six months of fiscal year 2007, net income was 27 percent higher than net income in the same period last year.

Earnings per share (EPS), both on an as-reported and ongoing basis, was $0.98 for the second quarter and $1.14 for the first six months of the 2007 fiscal year.

Cash Flow

For the first half of fiscal year 2007, net cash provided by operating activities was $520 million, compared with $331 million in the same period in 2006. Net cash required by investing activities was $230 million for the first six months of 2007, compared with net cash required of $466 million for the same period last year. As a result, free cash flow was $290 million for the first half of fiscal year 2007, compared with a use of $135 million in the same period in fiscal year 2006. (For a reconciliation of free cash flow, see note 2.) Higher net income and lower spending compared to the first half of fiscal year 2006, which included payments for a license agreement related to the animal ag business and a contingency payment related to the Seminis acquisition, contributed to the increase in free cash flow in the first half of 2007. Net cash required by financing activities was $200 million for the first six months of 2007, compared with net cash provided of $191 million for the same period last year.

Outlook

Monsanto now expects its full-year 2007 EPS guidance will be in the range of $1.60 to $1.65, both on a reported and ongoing basis. Previously, the company's full-year 2007 EPS guidance was at the upper end of the $1.50 to $1.57 range.

The company continues to expect free cash flow for fiscal year 2007 to be in the range of $875 million to $950 million. The company expects net cash provided by operating activities to be in the range of $1.425 billion to $1.5 billion, and net cash required by investing activities to be approximately $550 million for fiscal year 2007. (For a reconciliation of free cash flow, see note 2.)

The company's second and third quarters of fiscal year 2007 historically serve as the primary drivers for the company's fiscal year 2007 EPS results. The company historically records a loss in the fourth quarter.

                    Seeds and Genomics Segment Detail

  ($ in millions)          Net Sales                   Gross Profit
                Second  Second     Six    Six  Second  Second    Six    Six
  Seeds and    Quarter Quarter  Months Months Quarter Quarter Months Months
   Genomics       2007    2006    2007   2006    2007    2006   2007   2006
  Corn seed
   and traits   $1,192    $811  $1,552 $1,078    $790    $538 $1,013   $691
  Soybean seed
   and traits      373     449     543    622     256     338    378    452
  Vegetable and
   fruit seed      174     148     274    273      87      86    138    149
  All other
   crops seeds
   and traits       98      97     148    188      62      47     80    103
  TOTAL Seeds
   and Genomics $1,837  $1,505  $2,517 $2,161  $1,195  $1,009 $1,609 $1,395


  ($ in millions)            Earnings Before Interest & Taxes (EBIT)
                               Second    Second     Six        Six
  Seeds and Genomics          Quarter   Quarter  Months     Months
                                 2007      2006    2007       2006
  EBIT (For a reconciliation
   of EBIT, see note 2.)         $744      $615    $745       $634
  Unusual Items Affecting EBIT   None      None    None       None

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 $1.8 billion for the second quarter of fiscal year 2007, or 22 percent higher than sales in the same period last year.

During the second quarter of fiscal year 2007, the company realized increased U.S. corn seed and traits revenue. Strong customer demand for its branded corn seed products contributed to the increase in the quarter. This year, the company's national corn seed brands are poised to gain market share in the United States for the sixth consecutive year. In fact, the increase could be 3 or more percentage points, which would be the largest one-year gain for Monsanto brands in the corn seed market. Growth in the quarter was also driven by strong adoption of its higher-margin triple-trait corn technology, which the company effectively sold out in its national and regional corn seed brands. Monsanto technology trait acres were up across the board, with triple- trait corn technology expected to be grown on an estimated 16 million acres, or up more than 160 percent when compared with the 6 million acres the technology was planted on in 2006. The company also expects Roundup Ready corn to be planted on more than 50 million U.S. acres, with YieldGard Rootworm and YieldGard Corn Borer expected to be planted on more than 19 million U.S. acres and 40 million U.S. acres, respectively.

Results in the quarter were partially offset by lower soybean seeds and traits sales driven by an anticipated decrease in U.S. soybean acres.

Sales for the segment were also higher for the first six months of the 2007 fiscal year compared with sales in the same period last year. First-half segment sales were $2.5 billion, or 16 percent higher than first-half segment sales in fiscal year 2006. The key drivers for growth in the second quarter were also the primary contributors to growth in the first-half of the fiscal year. Results in the first half were partially offset by lower cotton traits sales as farmers in Australia planted fewer cotton acres in the face of a severe drought.

                 Agricultural Productivity Segment Detail

   ($ in millions)         Net Sales                   Gross Profit
                Second  Second     Six    Six  Second  Second    Six    Six
  Agricultural Quarter Quarter  Months Months Quarter Quarter Months Months
   Productivity   2007    2006    2007   2006    2007    2006   2007   2006
  Roundup and
   other
   glyphosate-
   based
   herbicides     $530    $427  $1,179   $976    $155    $104   $349   $286
  All other
   agricultural
   productivity
   products        249     268     459    468     100     127    172    193
  TOTAL
   Agricultural
   Productivity   $779    $695  $1,638 $1,444    $255    $231   $521   $479


  ($ in millions)            Earnings Before Interest & Taxes (EBIT)
                               Second    Second     Six        Six
  Agricultural                Quarter   Quarter  Months     Months
   Productivity                  2007      2006    2007       2006
  EBIT (For a reconciliation
   of EBIT, see note 2.)          $78       $40    $181       $133
  Unusual Items Affecting EBIT   None      None    None       None

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 $779 million for the second quarter of fiscal year 2007, or 12 percent higher compared with sales in the same period last year. Higher sales of Roundup and other glyphosate-based herbicides in Brazil, the Europe-Africa region and Argentina contributed to the results in the quarter.

Sales for the segment were higher for the first six months of the 2007 fiscal year compared with sales in the same period last year. First-half segment sales were $1.6 billion or 13 percent higher than first-half segment sales in fiscal year 2006. Improved sales of Roundup and other glyphosate- based herbicides in Brazil, the United States, Argentina and Europe-Africa regions were key drivers for growth in the first half of the fiscal year.

Full report: http://monsanto.mediaroom.com/index.php?s=43&item=478

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

 

 

 

 

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