Monument Circle Acquisition Corp (MON)

[DewDiligence]

MON Reports FY3Q10 Results

[Inasmuch as MON preannounced an awful quarter and a “reset” of the Roundup business in May, there’s nothing especially surprising in the quarterly results or the outlook. Non-GAAP EPS for the quarter was 0.81, slightly ahead of the (reduced) guidance of 0.75-0.80 issued in May. The $2.40-2.60 guidance for FY2010 non-GAAP EPS implies that non-GAAP EPS in FY4Q10 will be between a loss of 0.09 and a gain of 0.11.

The CC slides are at http://www.monsanto.com/pdf/investors/2010/06_30_10.pdf . Please see the link below for the financial tables.]

http://monsanto.mediaroom.com/index.php?s=43&item=859

›Wednesday June 30, 2010, 8:00 am

ST. LOUIS, June 30, 2010 /PRNewswire-FirstCall/ -- Monsanto Company (NYSE:MON) today announced its third-quarter financial results and highlighted some of the actions in progress to generate expected annual earnings growth percentages in the mid-teens. With its earnings results for the quarter and year-to-date in line with adjustments the company announced last month, company executives said the business is strong and well-positioned for future growth.

"We've made some real changes to our portfolio and business approach, and the positive feedback I'm hearing from our customers tells me we are on the right track," said Hugh Grant, chairman, president and chief executive officer for Monsanto. "We have demonstrated agility in the face of adversity, enhancing our portfolio and equipping our sales team with an unprecedented amount of product choices and price points to offer our customers. We've repositioned our Roundup® business to recognize its appropriate role in supporting our Seeds and Genomics segment. And we've demonstrated an ability to leverage our operational savings and sustain a strategic investment in research and development. This year has brought its challenges, yet we are quickly evolving into a newer, leaner, stronger Monsanto, well-positioned to meet our objective for mid-teens earnings growth driven by our seeds and traits business."

Results of Operations

Price decreases for Roundup® and other glyphosate-based herbicides affected the company's results as expected [and previously announced], despite the volume growth achieved for these products. Net sales decreased $199 million, or 6 percent, in the three-month comparison and $1.3 billion, or 13 percent, year to date. Net income in the third quarter was $384 million.

Gross profit declined 24 percent in the quarter to $1.4 billion, also driven by the price decreases for Roundup® and other glyphosate-based herbicides. For the first nine months, gross profit is down 28 percent or $1.7 billion.

Operating expenses were flat overall, with a slight decrease for selling, general and administrative (SG&A) expenses for the three month comparison. R&D expenses increased slightly as the company continues to manage more projects in advanced pipeline phases. As a percent of net sales, SG&A expenses were 17 percent and R&D expenses were 10 percent. Restructuring expense for the quarter was $86 million. This included $52 million charged to cost-of-goods related to discontinued products worldwide.

Earnings per share (EPS) for the third quarter was $0.70 on an as-reported basis [GAAP], and $0.81 on an ongoing basis [this is non-GAAP, which excluding restructuring charges]. EPS for the first nine months of fiscal year 2010 was $2.27 on an as-reported basis, and $2.49 on an ongoing basis.

Cash Flow

The company saw an expected increase in cash outflow for the quarter, attributed to the Roundup® business. For the first nine months of fiscal year 2010, cash flow required by operations was $538 million compared to a source of $443 million for the same period last year. Net cash required by investing activities for the first nine months of fiscal year 2010 was $614 million, as compared to $588 million for the same period of fiscal year 2009.

Net cash required by financing activities for the first nine months of 2010 was $323 million, compared to net cash required of $775 million for the same period of fiscal year 2009.

Free cash flow was a use of $1.15 billion for the first nine months of fiscal year 2010, compared to a use of $145 million for the first nine months of fiscal year 2009.

Seeds and Genomics Segment Detail

The Seeds and Genomics segment consists of the company's global seeds and related traits business, and biotechnology platforms.

For the quarter, sales in the segment have increased by 5 percent. In corn, approximately 33 million acres of its triple-stack and SmartStax™ products were planted in the United States, up from 31 million last year. [This is obviously not a great growth rate for a new product; the tepid growth reflects MON’s acknowledged mistake of overpricing SmartStax.] More than 75 percent of the company's branded corn portfolio in the United States is either a triple stack or Genuity® SmartStax™, which represents a step change improvement over last year. [However, the growth in non-SmartStax triple-stack products does not provide as much profit as the anticipated growth of SmartStax would have done.] This complements growth in South America, where the increase in trait acres in Brazil and Argentina has had a positive overall mix effect on the business. [South America is perhaps the only bright spot in MON’s business this year.]

The company also cited progress with its Genuity® Roundup Ready 2 Yield® soybean, with more than 40 percent of its branded customers trying even more varieties this year. That next-generation soybean platform is gaining momentum as third parties, including new commercial licensees, continue to evaluate and choose Roundup Ready 2 Yield®.

Cotton and vegetables continue to track well with expectations, delivering volume and margin improvements to the seeds-and-traits portfolio.

In total, sales for Monsanto's Seeds and Genomics segment in the third quarter of fiscal 2010 increased slightly over last year's third quarter, consistent with company's expectations. The company expects total gross profit for the segment to come in at a range of $4.6 to $4.7 billion for the [fiscal] year, an increase over 2009. [The Seeds and Genomics segment had $4.5B of gross profit in FY2009—see #msg-42341821 and scan about halfway down.]

Agricultural Productivity Segment Detail

The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products. Sales in the third quarter of fiscal 2010 for Monsanto's Agricultural Productivity segment declined 34 percent or $313 million compared with the same period last year. Gross profit was a loss of $189 million in the quarter for Roundup® and other glyphosate-based herbicides, reflecting the impact associated with the repositioning of the Roundup® business.

For the third quarter, the company released strong results from the Other Agricultural Productivity part of this segment, reflecting a record year in the lawn-and-garden business. For the fiscal year, the segment is expected to deliver approximately $450 million to $600 million in gross profit, which includes a Roundup® contribution of between $50 and $200 million after the repositioning actions.

Outlook

Monsanto affirmed its cash flow and EPS guidance and provided preliminary financial guidance for fiscal year 2011. The company expects free cash flow for fiscal year 2010 will be in the range of $400 million to $500 million including the after-tax cash effect from a restructuring charge. Net cash provided by operating activities is expected to be $1.3 billion to $1.5 billion, and net cash required by investing activities is expected to be approximately $900 million to $1 billion for fiscal year 2010.

The company expects fiscal-year 2010 earnings per share to be in the range of $2.40 to $2.60 on an ongoing basis [non-GAAP, excluding restructuring charges] and $2.15 to $2.41 on an as-reported basis. [The $2.40-2.60 FY range for non-GAAP EPS implies that non-GAAP EPS in FY4Q10 will be between a loss of 0.09 and a gain of 0.11.].

SG&A expenses continued to track below expectations and are expected to represent approximately $2 billion to $2.1 billion for the year.

Sharing the first view of fiscal year 2011 since the company's repositioning of its Roundup® business last month, the company outlined the key metrics that will enable it to meet its objective of achieving earnings growth in the mid-teen percentages going forward. Monsanto's growth is expected to come exclusively from the Seeds and Genomics segment, where the company expects gross profit growth in the double digits. The company expects top-line growth from an increase in unit volume as well as mix improvement as Monsanto expands the availability of its new products.

Central to that strategy is U.S. corn, where Monsanto will offer more products at more price points. South America corn is also a key driver, as the company is poised to increase penetration of its first-generation double-stack corn in Argentina, which will serve as building block for the technology progression that's already under way in the United States. The same is true for Brazil, where stacked traits will create new opportunities for farmers as the company prepares to introduce its second-generation Corn Borer technology. In soybeans, Monsanto is confident that as its pricing approach enables more farmers to experience the benefits of Genuity® Roundup Ready 2 Yield® and see it perform on farm, it will enable the company to win new customers.

The company's R&D pipeline fuels the growth expected from seeds and traits, and Monsanto plans to resource that pipeline for success as it continues to support a higher number of projects in the more costly later stages of development. To reinforce this commitment, executives said Monsanto will move to providing a range for R&D spend annually rather than a metric that adjusts with sales. The range for 2011 is expected to represent an increase over the 2010 endpoint, but at a rate somewhat below the growth over the past few years.

The company expects gross profit for its Agricultural Productivity Segment at $550 million to $600 million in fiscal year 2011. Operational leverage is expected to be a key contributor to the earnings growth targets, and executives pointed to an institutionalized cost discipline that allows SG&A spend to hold at inflation-level growth.

Webcast Information

In conjunction with this announcement, Monsanto will hold a conference call at 8:30 a.m. central time (9:30 a.m. eastern time) today. The call will focus on these results and may include a discussion of Monsanto's strategic initiatives 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.‹