St. Louis, Missouri
May 27, 2009
Monsanto Company (NYSE:
MON) announced that it is on track to meet the lower end of its
previous ongoing earnings guidance for fiscal year 2009 as it
balances continued outstanding performance from its seeds and
traits business against stronger-than-expected competition for
its Roundup agricultural herbicides business.
For fiscal year 2009, Monsanto now expects ongoing earnings per
share (EPS) guidance of approximately $4.40 per share, the
lowest point in its previously announced range of $4.40 to
$4.50. The results would translate to approximately 20 percent
growth year over year, and the company's fifth consecutive year
of 20 percent or greater earnings growth. Monsanto also noted
that free cash flow is now expected to be approximately $1.4
billion for fiscal year 2009, reflecting $2.4 billion in
operating cash and $1 billion in investing cash. (For a
reconciliation of ongoing full year EPS and free cash flow, see
note 1.)
Monsanto expects its seeds and traits segment to deliver gross
profit toward the upper end of its prior guidance of $4.4
billion to $4.5 billion in fiscal year 2009. The projected
increase of more than 15 percent year over year reflects the
combination of greater value, growth in the company's branded
seed businesses and expanded use of Monsanto's trait
technologies. With strong farmer demand for the company's
higher-yielding seeds and trait technologies, Monsanto projects
that its corn and soybean businesses combined could generate
$3.5 billion in gross profit in fiscal year 2009, or an
approximate 20 percent increase compared with the prior year.
The company now believes the Roundup and other glyphosate
business will generate approximately $2 billion in gross profit,
down from its previous forecast of $2.4 billion. The continued
strong performance of the company's seeds and traits business,
combined with lower spending for marketing, administrative
functions and incentives are helping to offset the expected
decline in the profitability of Monsanto's Roundup business and
enabling the company to maintain its full-year guidance.
"Even in the face of a $400 million decline in our expected
gross profit from Roundup, we can see a path to our fifth
consecutive year of 20 percent or greater earnings growth and a
lift in gross margins this year of more than three percentage
points for the entire company," said Hugh Grant, Monsanto
chairman, president and chief executive officer.
"Regardless of the business or world area, our strategy is
focused on delivering value to farmers while maximizing share
and penetration," Grant said in prepared remarks at the Sanford
Bernstein conference in New York today. "We've held true to this
strategy in one of the most dynamic and competitive years that
we've seen this decade, and this underscores the value that
farmers place on our seeds, our traits and our continuous
investment in delivering new innovation to them."
Because of the faster-than-anticipated decline in Roundup, the
company now expects to deliver third-quarter earnings, both on
an ongoing and as-reported basis, of approximately $1.15 per
share. For the second half of fiscal year 2009, the company
expects that an approximate 10 percent growth in gross profit
for its seeds and traits segment combined with lower spending
will offset the potential 20 percent gross profit decline in
Roundup.
Weather and Competition Pressuring Volume for Roundup
Business
Cooler, wetter weather in some parts of the U.S. Corn Belt has
delayed the application timing of Roundup and other
glyphosate-based herbicides over the top of Roundup Ready crops
this spring. At the same time, generic and other branded
competitors continue to aggressively move larger-than-expected
volumes of lower-priced material into the marketplace. While
Monsanto's supply of Roundup in the distribution channel is
within its historical range, the application of the product is
half that compared with product use at the end of May 2008.
Supply of glyphosate is now exceeding demand globally. In the
United States, Monsanto has chosen to focus on protecting the
premium of its high-performance products, which is having the
effect of reducing volumes. The company now anticipates total
volumes sales of approximately 200 million gallons, with a net
average selling price for its approximately 110 million gallons
of branded Roundup globally of more than $20 per gallon.
"Farmers' use of Roundup has made it the keystone for weed
control in the Roundup Ready system. Its extraordinary growth in
the last two years has allowed us to maximize the free cash
generated and return that value to shareowners through a
combination of investments, dividends and share repurchases. It
also has allowed us to reinvest in our seeds and traits pipeline
to bring new yield-enhancing solutions to farmers. We predicted
that Roundup was hitting its peak in terms of gross profit
contribution this year, and that forecast has proven to be
accurate, albeit at a lower level than we originally forecast,"
Grant added.
U.S. Seeds and Traits Business Remains on Track
Despite slower planting rates in parts of the Midwest, Grant
noted that the U.S. seeds and traits business remains on track
to deliver up to one point of market share growth in each of its
DEKALB and American Seeds branded corn seed businesses, and one
point of share growth in its Asgrow soybeans. The company's
triple-stack mix remains above 70 percent, with an estimated 32
million acres of triple-stacked corn sold or licensed by
Monsanto in the United States.
Overall, corn gross profit is expected to grow by approximately
20 percent to $2.6 billion for the full year, with a 1-to-2
percentage point lift in margins to 62 to 63 percent. Soybean
gross profit is expected to grow by better than 20 percent with
margins of roughly 62 percent. Cotton and vegetable seeds are on
track to meet their goals of approximately $300 million and $450
million in gross profit, respectively. Selling, general and
administrative (SG&A) expenses for the full year are trending
toward 18 percent of sales, while research and development (R&D)
should remain in the area of 10 percent of sales. The expected
corporate tax rate for the full year is 28 to 29 percent.
"With the seeds and traits side of the business accelerating,
our management team is focusing on how best to manage our
Roundup operations in a way that optimizes returns at a lower
percentage of overall revenue," Grant said. "That process
inherently will slow our overall growth in 2010 even as farmers
will have access to larger volumes of our new technologies next
year."
Grant said that the company will speak more specifically to the
longer-term outlook for Roundup during its third-quarter
earnings call on June 24.
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:
http://www.monsanto.com.
Roundup, Roundup Ready, DeKalb and Asgrow 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.
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
1. 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. The following is a reconciliation of EPS
to ongoing EPS for the twelve months ended Aug. 31, 2009.
Fiscal Year
2009
Guidance
Diluted Earnings Per Share $4.23 - $4.33
Income on Discontinued Operations ($0.02)
In-Process R&D Write-Off Related to the
Aly Participacoes Ltda. Acquisition $0.19
Diluted Earnings Per Share from Ongoing $4.40 - $4.50
Business
Reconciliation of Free Cash Flow: Free cash flow represents the total
of cash flows from operating activities and investing activities. With
respect to the fiscal year 2009 free cash flow guidance, 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
2009
Guidance
Net Cash Provided by Operating Activities $ 2,400
Net Cash Required by Investing Activities (1,000)
Free Cash Flow $ 1,400
Net Cash Required by Financing Activities N/A
Effect of Exchange Rate Changes on Cash and Cash
Equivalents
N/A
Net Increase (Decrease) in Cash and Cash Equivalents
N/A
Cash and Cash Equivalents at Beginning of Period N/A
Cash and Cash Equivalents at End of Period N/A
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