St. Louis, Missouri
June 28, 2007Source:
http://monsanto.mediaroom.com/index.php?s=43&item=504
Monsanto sees increased use of its corn seeds and traits globally, company expects sixth consecutive year of branded corn market share gains in U.S.
The Monsanto Company has announced its third quarter and year-to-date results.
($ in millions) Third Third Nine Nine
Quarter Quarter Months Months
2007 2006 2007 2006
Net Sales by Segment
Corn seed and traits $891 $502 $2,443 $1,580
Soybean seed and traits 325 311 868 933
Vegetable and fruit seed 170 142 444 415
All other crops seeds
and traits 326 341 467 519
TOTAL Seeds and
Genomics $1,712 $1,296 $4,222 $3,447
Roundup and other
glyphosate-based
herbicides $757 $654 $1,936 $1,630
All other agricultural
productivity products 373 359 832 827
TOTAL Agricultural
Productivity $1,130 $1,013 $2,768 $2,457
TOTAL Net Sales $2,842 $2,309 $6,990 $5,904
Gross Profit $1,503 $1,169 $3,633 $3,039
Operating Expenses $684 $614 $1,860 $1,686
Interest Expense - Net $1 $25 $7 $63
Other Expense - Net $12 $23 $32 $45
Net Income $570 $334 $ 1,203 $833
Diluted Earnings per Share
(See note 1.) $1.03 $0.60 $2.17 $1.51
Items Affecting
Comparability -
EPS Impact
Loss (Income) on
Discontinued
Operations $(0.01) $ (0.02) $0.01 $(0.01)
Diluted Earnings per
Share from Ongoing
Business (For the
definition of ongoing
EPS, see note 2.) $1.02 $0.58 $2.18 $1.50
Effective Tax Rate 29% 34% 30% 33%
Comparison as a Percent
of Net Sales: Third Third Nine Nine
Quarter Quarter Months Months
2007 2006 2007 2006
Gross profit 53% 51% 52% 51%
Selling, general and
administrative expenses
(SG&A) 17% 19% 19% 20%
Research and development
expenses 7% 8% 8% 9%
Income before income taxes
and minority interest 28% 22% 25% 21%
Net income 20% 14% 17% 14%
Comment from Monsanto Chairman, President and Chief Executive Officer Hugh Grant:
"The 2007 season is shaping up to be an extraordinary year for agriculture. We've been able to deliver strong results through this point of the year, and we expect that our gains will contribute to added momentum for our business through the end of the decade."
Market Conditions
The 2007 crop season is well under way throughout the Northern Hemisphere. In the United States, farmers planting corn, cotton and soybean worked with varied temperatures and conditions, including excessive dry and wet areas, as they worked to plant this season's crops. Currently, reports from the U.S. Department of Agriculture (USDA) note that the majority of corn, cotton and soybean varieties are facing good crop growing conditions with the vast majority of these crops already having emerged. Monsanto continues to see strong customer demand for its branded corn seed products in the U.S. corn seed market. The company is also seeing strong customer demand for its branded corn seed products in key countries in Europe particularly in Italy, France and Germany.
In the Southern Hemisphere, the harvest season is under way. The USDA's world production report suggests that corn farmers in Argentina and Brazil both experienced higher yields this season. Both countries are also expected to see higher production in soybeans as farmers expanded their planted crop areas. In India, Monsanto continues to see strong demand for its Bollgard insect-protected cotton technologies. In the 2007 season, Indian cotton farmers planted an estimated 13 to 14 million acres of Monsanto's cotton trait technologies, or up by approximately two-thirds from last year.
Operations Update
Monsanto reported record net sales of $2.8 billion for the third quarter of fiscal year 2007, which were 23 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 the North America and Europe-Africa regions. Increased sales in the current quarter were partially offset by lower cotton trait revenues in the United States, as farmers reduced the number of acres planted to cotton.
Net sales in the company's first nine months of fiscal year 2007 resulted in year-to-date sales of $7.0 billion, which were 18 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, as well as higher sales of Roundup and other glyphosate-based herbicides globally. Sales in the first nine months were partially offset by lower soybean seed and trait revenues, as U.S. farmers reduced the number of acres planted in favor of corn. Results in the first three quarters also reflected lower cotton trait revenues, as the total number of acres planted in Australia and the United States were reduced compared with the prior year.
Monsanto's net income for the third quarter of fiscal year 2007 was 71 percent higher than net income in the same period last year. For the first nine months of fiscal year 2007, net income was 44 percent higher than net income in the same period last year.
Earnings per share (EPS) for the third quarter of fiscal year 2007 was $1.03 on an as-reported basis, and $1.02 on an ongoing basis. Earnings per share (EPS) for the first nine months of fiscal year 2007 was $2.17 on an as-reported basis, and $2.18 on an ongoing basis. EPS results for the third quarter and first three quarters reflects the effect of discontinued operations for the Stoneville® and NexGen® cottonseed businesses. (For a reconciliation of ongoing EPS, see note 2.)
Cash Flow
For the first nine months of fiscal year 2007, net cash provided by operating activities was $89 million, compared with $184 million in the same period in 2006. Net cash required by investing activities was $410 million for the first nine months of 2007, compared with net cash required of $408 million for the same period last year. As a result, free cash flow was a use of $321 million for the first nine months of fiscal year 2007, compared with a use of $224 million in the same period in fiscal year 2006. (For a reconciliation of free cash flow, see note 2.) Free cash flow in the first three quarters, when compared with free cash in the same period last year, reflected higher net income which was more than offset by higher working capital. Net cash required by financing activities was $204 million for the first nine months of 2007, compared with net cash provided of $294 million for the same period last year.
Outlook
Earlier this month, Monsanto announced that it was increasing its fiscal year 2007 ongoing earnings per share (EPS) guidance to $1.75 to $1.80 per share, up from its prior guidance of $1.60 to $1.65 per share on an ongoing basis. The company's ongoing EPS excludes the nonrecurring effect of the Stoneville and NexGen divestitures and the write-off of acquired in-process R&D associated with the acquisition of Delta and Pine Land Company (D&PL). On an as-reported basis, Monsanto expects EPS to be in the range of $1.36 to $1.54. (For a reconciliation of ongoing EPS, see note 2.)
The company expects that its free cash flow for fiscal year 2007 will now be in the range of a use of $250 million to a use of $200 million, compared with its previous guidance in the range of $875 million to $950 million. The company's free cash flow guidance for the 2007 fiscal year reflects the cash effect of Monsanto's $1.5 billion acquisition D&PL, net of cash acquired and debt assumed; as well as the receipt of $317 million for the sale of the Stoneville and NexGen cottonseed businesses. The company expects net cash provided by operating activities to be in the range of $1.71 billion to $1.76 billion, and net cash required by investing activities to be approximately $1.96 billion for fiscal year 2007. (For a reconciliation of free cash flow, see note 2.)
Monsanto's fourth quarter is largely influenced by its U.S. cotton and U.S. Roundup business. The company historically records a loss in the fourth quarter. This year, the company announced that earnings from its recent D&PL acquisition will also be consolidated into its results beginning in the fourth quarter. The company continues to expect that D&PL earnings will be moderately dilutive, as it historically has reported a loss in the fourth quarter.
Related News
As part of today's announcement, the company announced that it was revising its previously announced opportunities for its corn trait technologies in the United States. The company now estimates that:
-- Glyphosate-tolerant corn has the potential to be grown on 80 million
acres, up from its previous projection of 60 million acres;
-- Corn Borer insect protection product has the potential to be grown on
60 to 70 million acres, up from its previously announced range of 50 to
60 million acres; and
-- Rootworm insect protection product and higher-margin triple-trait corn
technology now have the potential to be grown on 45 million acres, up
from its previously announced range of 25 to 30 million acres.
Monsanto also announced that its Board of Directors recently approved a three-year, $610 million capital investment for the company's U.S. corn production facilities. The investment plan includes expansions at nine existing corn production facilities, as well as two greenfield sites in the heart of the Corn Belt. This represents the largest reinvestment that Monsanto has made in its history as an ag company. Additional details related to the expansion have not been disclosed at this time.
Seeds and Genomics Segment Detail
($ in millions) Net Sales Gross Profit
Seeds and
Genomics Third Third Nine Nine Third Third Nine Nine
Quarter Quarter Months Months Quarter Quarter Months Months
2007 2006 2007 2006 2007 2006 2007 2006
Corn seed
and traits $891 $502 $2,443 $1,580 $530 $25 $1,543 $948
Soybean seed
and traits 325 311 868 933 203 203 581 655
Vegetable and
fruit seed 170 142 444 415 72 72 210 221
All other crops
seeds and
traits 326 341 467 519 241 262 321 361
TOTAL Seeds
and
Genomics $1,712 $1,296 $4,222 $3,447 $1,046 $794 $2,655 $2,185
($ in millions) Earnings Before Interest & Taxes (EBIT)
Seeds and Genomics Third Third Nine Nine
Quarter Quarter Months Months
2007 2006 2007 2006
EBIT (For a reconciliation
of EBIT, see note 2.) $557 $393 $1,302 $1,027
Unusual Items Affecting EBIT
Income (Loss) on
discontinued operations $8 $19 $(5) $11
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 $1.7 billion for the third quarter of fiscal year 2007, or 32 percent higher than sales in the same period last year.
During the third quarter of fiscal year 2007, the company realized increased U.S. corn seed and traits revenue as strong customer demand for its branded corn seed products contributed to a sixth consecutive year of market share gains in the U.S. corn seed market. The increase could be as large as 4 or 5 percentage points, pending final returns, which would be the largest historical one-year gain for Monsanto brands in the corn seed market. Results in the quarter also benefited from higher corn seed sales internationally, particularly in the Europe-Africa region and Argentina.
Segment sales in the quarter were partially offset by lower cotton trait revenues in the United States, as farmers reduced the number of acres planted to cotton.
Sales for the segment were also higher for the first nine months of the 2007 fiscal year compared with sales in the same period last year. Sales for the first nine months were $4.2 billion, or 22 percent higher than sales in fiscal year 2006. The key drivers for growth in the third quarter were also the primary contributors to growth in the first three quarters of the fiscal year. Sales through the first nine months were partially offset by lower sales of soybean seeds and traits in the United States, as well as lower sales of cotton traits in Australia and the United States.
Agricultural Productivity Segment Detail
($ in millions) Net Sales Gross Profit
Agricultural Third Third Nine Nine Third Third Nine Nine
Productivity Quarter Quarter Months Months Quarter Quarter Months Months
2007 2006 2007 2006 2007 2006 2007 2006
Roundup and
other
glyphosate-
based
herbicides $757 $654 $1,936 $1,630 $286 $216 $635 $502
All other
agricultural
productivity
products 373 359 832 827 171 159 343 352
TOTAL
Agricultural
Productivity $1,130 $1,013 $2,768 $2,457 $457 $375 $978 $854
($ in millions) Earnings Before Interest & Taxes (EBIT)
Agricultural Productivity Third Third Nine Nine
Quarter Quarter Months Months
2007 2006 2007 2006
EBIT (For a reconciliation
of EBIT, see note 2.) $242 $147 $423 $280
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 $1.1 billion for the third quarter of fiscal year 2007, or 12 percent higher compared with sales in the same period last year. Results in the quarter benefited from higher sales of Roundup and other glyphosate-based herbicides in the United States, the Europe-Africa region and Canada.
Sales for the segment were higher for the first three quarters of the 2007 fiscal year compared with sales in the same period last year. Segment sales through the first nine months were $2.8 billion or 13 percent higher than sales in the same period in fiscal year 2006. Results through the first three quarters benefited from higher sales of Roundup and other glyphosate-based herbicides globally, primarily in Brazil, the United States, the Europe-Africa region, Canada and Argentina.
Preliminary Trait Acreage Report
As part of today's announcement, Monsanto also published a preliminary report on the company's biotech trait acreage for fiscal year 2007. This report is available on Monsanto's web site.
Monsanto Company (NYSE: MON) 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 http://www.monsanto.com/.
Bollgard, Roundup, Roundup Ready and YieldGard are registered trademarks owned by Monsanto Company and its wholly owned subsidiaries. All other trademarks are the property of their respective owners.
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
Statements of Three Months Three Months Nine Months Nine Months
Consolidated Ended Ended Ended Ended
Operations May 31 May 31 May 31 May 31
2007 2006 2007 2006
Net Sales $ 2,842 $ 2,309 $ 6,990 $ 5,904
Cost of Goods Sold 1,339 1,140 3,357 2,865
Gross Profit 1,503 1,169 3,633 3,039
Operating Expenses:
Selling, General and
Administrative
Expenses 487 429 1,299 1,167
Research and
Development Expenses 190 187 554 521
Acquired In-Process
Research and Development 7 -- 7 --
Restructuring Reversals -- (2) -- (2)
Total Operating Expenses 684 614 1,860 1,686
Income From Operations 819 555 1,773 1,353
Interest Expense 29 35 96 100
Interest Income (28) (10) (89) (37)
Solutia-Related Expenses 4 7 23 20
Other Expense (Income)
- Net 8 16 9 25
Income Before Income Taxes
and Minority Interest 806 507 1,734 1,245
Income Tax Provision 231 174 521 407
Minority Interest Expense
(Income) 10 11 7 12
Net Income from
Continuing Operations $565 $322 $ 1,206 $826
Discontinued Operations:
Income (Loss) from
Operations of
Discontinued
Businesses 8 19 (5) 11
Income Tax Expense
(Benefit) 3 7 (2) 4
Income (Loss) on
Discontinued Operations 5 12 (3) 7
Net Income $570 $334 $ 1,203 $833
EBIT (see note 2) $799 $540 $ 1,725 $ 1,307
Basic Earnings per Share
(see note 1):
Income from Continuing
Operations $1.04 $0.60 $2.22 $1.53
Income (Loss) from
Discontinued
Operations 0.01 0.02 (0.01) 0.01
Net Income $1.05 $0.62 $2.21 $1.54
Diluted Earnings per
Share (see note 1):
Income from
Continuing
Operations $1.02 $0.58 $2.18 $1.50
Income (Loss)
from Discontinued
Operations 0.01 0.02 (0.01) 0.01
Net Income $1.03 $0.60 $2.17 $1.51
Weighted Average Shares
Outstanding
(see note 1):
Basic 544.4 541.6 543.7 539.2
Diluted 555.2 552.3 554.4 551.0
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
Condensed Statements of Consolidated
Financial Position As of As of
May 31, 2007 Aug. 31, 2006
Assets
Current Assets:
Cash and Cash Equivalents $994 $1,460
Short-Term Investments -- 22
Trade Receivables - Net of Allowances of
$326 and $298, Respectively 3,414 1,455
Miscellaneous Receivables 422 344
Deferred Tax Assets 389 390
Inventories 1,664 1,688
Assets of Discontinued Operations 58 6
Other Current Assets 68 96
Total Current Assets 7,009 5,461
Property, Plant and Equipment - Net of
Accumulated Depreciation of $3,221 and
$2,999, respectively 2,467 2,418
Goodwill 1,530 1,522
Other Intangible Assets - Net 1,155 1,229
Noncurrent Deferred Tax Assets 693 625
Noncurrent Assets of Discontinued Operations 130 --
Other Assets 488 473
Total Assets $13,472 $11,728
Liabilities and Shareowners' Equity
Current Liabilities:
Short-Term Debt, Including Current
Portion of Long-Term Debt $561 $28
Accounts Payable 493 514
Income Taxes Payable 364 234
Accrued Compensation and Benefits 287 295
Accrued Marketing Programs 591 494
Deferred Revenues 90 120
Grower Accruals 57 26
Liabilities of Discontinued Operations 24 2
Miscellaneous Short-Term Accruals 654 566
Total Current Liabilities 3,121 2,279
Long-Term Debt 1,150 1,639
Postretirement Liabilities 576 600
Long-Term Portion of Solutia-Related Reserve 121 155
Noncurrent Liabilities of Discontinued Operations 5 --
Other Liabilities 569 530
Shareowners' Equity 7,930 6,525
Total Liabilities and Shareowners' Equity $13,472 $11,728
Debt to Capital Ratio: 18% 20%
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
Statements of Consolidated Cash Flows Nine Months Nine Months
Ended Ended
May 31, 2007 May 31, 2006
Operating Activities:
Net Income $1,203 $833
Adjustments to Reconcile Cash Provided
by Operations:
Items That Did Not Require (Provide) Cash:
Depreciation and Amortization Expense 386 386
Bad-Debt Expense 29 40
Stock-Based Compensation Expense 54 47
Excess Tax Benefits from Stock-Based Compensation (49) (81)
Deferred Income Taxes (10) 159
Equity Affiliate Expense - Net 30 21
Acquired In-Process Research and Development 7 --
Other Items (1) 30
Changes in Assets and Liabilities That Provided
(Required) Cash, Net of Acquisitions:
Trade Receivables (1,969) (1,368)
Inventories 91 (51)
Accounts Payable and Other Accrued Liabilities 421 176
PCB Litigation Settlement Proceeds 21 21
Solutia-Related Payments (28) (23)
Other Items (96) (6)
Net Cash Provided by Operating Activities 89 184
Cash Flows Provided (Required) by
Investing Activities:
Purchases of Short-Term Investments -- (21)
Maturities of Short-Term Investments 22 150
Capital Expenditures (297) (234)
Acquisitions of Businesses, Net of Cash Acquired (125) (185)
Technology and Other Investments (35) (128)
Other Investments and Property Disposal Proceeds 25 10
Net Cash Required by Investing Activities (410) (408)
Cash Flows Provided (Required) by
Financing Activities:
Net Change in Financing With Less Than
90-Day Maturities 265 448
Short-Term Debt Proceeds -- 6
Short-Term Debt Reductions (8) (26)
Long-Term Debt Proceeds 4 4
Long-Term Debt Reductions (277) (78)
Payments on Other Financing (4) (5)
Treasury Stock Purchases (101) (87)
Stock Option Exercises 59 105
Excess Tax Benefits From Stock-Based Compensation 49 81
Dividend Payments (191) (154)
Net Cash Provided (Required) by Financing Activities (204) 294
Effect of Exchange Rate Changes on Cash and
Cash Equivalents 59 --
Net Increase (Decrease) in Cash and Cash Equivalents (466) 70
Cash and Cash Equivalents at Beginning of Period 1,460 525
Cash and Cash Equivalents at End of Period $ 994 $595
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
1. All earnings per share figures have been adjusted to reflect the
company's two-for-one stock split which was paid on July 28, 2006, in
the form of a 100 percent stock dividend.
2. 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, ongoing EPS and
free cash flow to the respective most directly comparable financial
measure calculated in accordance with GAAP.
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 Statements 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 Nine Months Ended
May 31, May 31,
2007 2006 2007 2006
EBIT - Seeds and Genomics Segment $557 $393 $1,302 $1,027
EBIT - Agricultural Productivity
Segment 242 147 423 280
EBIT - Total (A) 799 540 1,725 1,307
Interest Expense - Net 1 25 7 63
Income Tax Provision (B) 228 181 515 411
Net Income $570 $334 $1,203 $833
(A) Includes income (loss) from discontinued operations.
(B) Includes the income tax benefit on minority interest expense and the
income tax provision (benefit) from discontinued operations.
Reconciliation of EPS to Ongoing EPS: Ongoing EPS is calculated
excluding certain after-tax items which Monsanto does not consider part
of ongoing operations.
Three Three Nine Nine
Fiscal Year Months Months Months Months
2007 Ended Ended Ended Ended
Target May 31 May 31 May 31 May 31
2007 2006 2007 2006
Diluted
Earnings
per Share $1.36-$1.54 $1.03 $0.60 $2.17 $1.51
Loss (Income)
on Discontinued
Operations $0.01. $(0.01) $(0.02) $0.01 $(0.01) . In-Process R&D
Write-Off Related to the Delta & Pine Land Acquisition $0.25-$0.38
Diluted Earnings per share from
Ongoing Basis $1.75-$1.80 $1.02 $0.58 $2.18 $1.50 .
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 2007 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 Nine Months Ended
2007 May 31,
Target 2007 2006
Net Cash Provided by Operating
Activities $1,710 - $1,760 $89 $184
Net Cash Required by Investing
Activities (1,960) (410) (408)
Free Cash Flow $(250) - $(200) (321) (224)
Net Cash Provided (Required) by
Financing Activities N/A (204) 294
Effect of Exchange Rate Changes
on Cash and Cash Equivalents N/A 59 --
Net Increase (Decrease) in Cash
and Cash Equivalents N/A (466) 70
Cash and Cash Equivalents
Beginning of Period N/A 1,460 525
Cash and Cash Equivalents at
End of Period N/A $ 994 $595
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