[MON’s numbers for the fiscal quarter ended 5/31/11 were uniformly bullish. FY3Q11 sales of $3.59B and GAAP/non-GAAP EPS of $1.26 blew away the Street consensus figures and were +21% and +77%, respectively, vs FY3Q10. As a result, MON raised FY2011 non-GAAP EPS guidance from the old range of $2.72-2.82 to a new range of $2.84-2.88 (the lower bound of the GAAP EPS forecast is $.02 lower); the midpoint of this range ($2.86) is a 19% increase relative to FY2010 non-GAAP EPS, exceeding MON’s long-term guidance for “mid teens” annual EPS growth. (FY2011 non-GAAP EPS to date is $3.14, so MON’s implicit guidance for FQ4Q11 is a loss of $0.26-0.30; the fourth fiscal quarter is always weak insofar as it too late for growers in the Northern Hemisphere and too early for growers in the Southern Hemisphere to be buying large quantities of seed.)
Investors evidently liked these results insofar as the share price rose about 10% on the week.
Admittedly, FY2010 provided an easy comparison and it will be numerically harder for MON to beat its own EPS guidance in FY2012. However, I think they have a good chance of pulling it off because I expect Refuge-in-a-Bag corn to be a big hit and competitors don’t yet have anything to match it. Moreover, I do not foresee the kind of price war between MON and DuPont that Democritus_of_Abdera expects (#msg-64797026), but I will defer further comment on this after the companies disclose whether they gained or lost market share in corn and soybeans during the current growing season.
(The SEC investigation disclosed in this PR is a non-issue, IMO; according to the company’s subsequent statements, the investigation pertains only to revenue recognition for Roundup rebates during FY2009 and FY2010.)
›Milestone Achievements for Seeds and Traits and Improved Performance Across Core Business Drive Stronger Outlook for Monsanto
Company Raises Full-Year Ongoing Earnings Per Share Guidance to $2.84 to $2.88, or $2.82 to $2.86 As-Reported, While Increasing Free Cash Flow Guidance for the Second Time
June 29, 2011, 8:00 am EDT
ST. LOUIS, June 29, 2011 /PRNewswire/ -- Looking at the scorecard of milestones to achieve this year, Monsanto Company (NYSE:MON) executives today said the strength of its seeds and traits business in the United States and Latin America combined with the well-received implementation of its agricultural productivity strategy drove a successful fiscal third quarter for the company. The key third quarter – one of the company's most significant historically – is a highlight in a year that has created real momentum with the establishment of key products in the United States, accelerated adoption in Latin America and the growth of other key markets. The company is well-positioned to conclude fiscal 2011 at a high-teens ongoing earnings growth target and translate that growth into greater free cash flow.
"The third quarter is always an important quarter for Monsanto, as it effectively concludes our fiscal year from an operational standpoint," said Hugh Grant, Monsanto's president and chief executive officer. "Our U.S. selling season is almost complete, and farmers in Latin America are now harvesting their crops. That gives us real data to validate the momentum we've felt. We made significant changes to our business this year, and those changes resonated with our customers. We earned their business and achieved what we set out to achieve: unit volume growth in our core crops, a successful implementation of our agricultural productivity strategy and sustained cost-discipline across our operations. That positions us well for the coming years and the mid-teens earnings growth opportunity we see for this company."
Results of Operations
Net sales increased $628 million, or 21 percent, in the three-month comparison driven by unit volume growth in both the seeds and genomics and agricultural productivity segments. Net income attributable to Monsanto Company in the third quarter was $680 million.
Gross profit rose 41 percent in the quarter to approximately $2 billion, with margins higher due to mix and cost improvements. For the first nine months, gross profit is up 20 percent or $856 million.
Operating expenses were up $124 million in the third quarter compared to the prior year, as expected. In the three-month comparison, selling, general and administrative (SG&A) expenses were up 20 percent, tracking with the increase expected as the company realizes more investments in employee and sales incentives and new product launches. Research & Development (R&D) expenses increased as the company continues to make incremental investments in R&D to help fuel future growth.
Earnings per share (EPS) for the third quarter were $1.26 on both an as-reported basis and an ongoing basis. EPS for the first nine months of fiscal year 2011 were $3.14 on both an as-reported basis and an ongoing basis.
Cash Flow
The company's strong cash position continued in the third quarter. For the first nine months of the fiscal year, cash flow from operations was a source of $944 million compared with a use of $538 million in the first nine months last year. Net cash required by investing activities for the first nine months of fiscal year 2011 was $707 million, compared to $614 million for the same period of fiscal year 2010.
Net cash required by financing activities for the first nine months of 2011 was $766 million, compared to net cash required of $323 million for the same period of fiscal year 2010.
Free cash flow was a source of $237 million for the first nine months of fiscal year 2011, compared to a use of nearly $1.2 billion for the first nine months of fiscal year 2010.
The company continues to make progress on its current $1 billion, three-year share repurchase authorization, representing one of its most significant uses of cash. The company spent $105 million on repurchases in the third quarter for total repurchases to date of $487 million, nearly half the authorization.
Outlook
The company raised its full-year as-reported and ongoing EPS guidance and free cash flow guidance. The company expects full-year 2011 ongoing[i.e. non-GAAP]EPS in the range of $2.84 to $2.88. Full-year 2011 EPS guidance on an as-reported basis is expected in the range of $2.82 to $2.86.
The company expects free-cash for fiscal year 2011 in the range of $1.1 billion to $1.3 billion. The company expects net cash provided by operating activities to be $2 billion to $2.3 billion, and net cash required by investing activities to be approximately $900 million to $1 billion for fiscal year 2011.
The Seeds and Genomics segment consists of the company's global seeds and related traits business.
In total, sales for Monsanto's Seeds and Genomics segment in the third quarter of fiscal 2011 increased 12 percent or $285 million over the prior year period, driven by global unit volume growth and a mix upgrade in the United States. The company expects to reach the high end of its gross-profit range of $5.1 billion to $5.2 billion for the business on the strength of the double-digit gross profit results year-to-date.
The company expects to achieve the mid-teens millions of U.S. acres it had targeted for both its Genuity® Roundup Ready 2 Yield® soybeans and the Genuity® reduced refuge corn family this year, adding a positive mix improvement across its U.S. soybean and corn portfolios and establishing a foundation for future growth across both crops. U.S. corn volume growth is complemented by volume growth in Europe and Latin America, where Monsanto has seen volume increases in Argentina and a rebound in planted acres in Brazil.
The cotton business continues to deliver a strong performance, with an increase in acres and breeding improvements bringing growth. Monsanto expects to grow volume as the cotton market expands.
The company continues to work towards achieving sales growth and margin expansion in vegetables.
The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products. The segment saw a strong quarter, with gross profit of $249 million led by the positive response to the repositioning of the glyphosate business and contributions from the lawn-and-garden business, which despite unfavorable weather is set to achieve its second year of above-historical profitability.
The company now expects the segment to deliver gross profit of roughly $700 million for the year, an increase from the previous estimate.
Sales in the third quarter of fiscal 2011 for Monsanto's Agricultural Productivity segment increased 57 percent, with gross profit improvement as well as a function of volume and cost improvements.
Monsanto announced the staff of the Securities and Exchange Commission is conducting an investigation regarding Monsanto's customer incentive programs relating to its glyphosate products in fiscal years 2009 and 2010, and Monsanto has received a subpoena for documents in connection therewith. Monsanto is cooperating with the staff's investigation.
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 future expectations and may 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" or at http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=122069&eventID=4137207. 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.‹
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