Monsanto Q1 earnings fall 34% on lower corn seed sales

Monsanto’s sales posted a 8.7% decrease to $ 2,870 million in the first quarter of FY 2015 ended Nov 30, 2014. Agrochemical sales dropped by 14.9% to $1,249 million, and the company continues to anticipate agrochemical gross profit to be down by up to 10% in fiscal year 2015, primarily driven by pricing. Net income for the quarter significantly declined by 34.0% to $243 million.

Monsanto’s sales result ($ million)
Q1 ended Nov 30	Q1 FY2014	Q1 FY2015	Change%
Sales	3,143	2,870	-8.7
-Seeds & traits	1,676	1,621	-3.3
-Agrochemicals	1,467	1,249	-14.9
EBIT1	554	427	-22.9
- Seeds & traits	104	43	-58.7
- Agrochemicals	450	384	-14.7
Net income	368	243	-34.0
1 Earnings before interest & taxes

Sales in seed and trait in this quarter were $1,621 million, led by the performance of the company’s soybean business - its fastest growing growth driver.

In South America, the company anticipates exceeding its 10-12 million acres target for Intacta RR2 PRO™ soybeans as growers embraced the technology across multiple growing regions this season. The company noted it has expanded its production of Intacta RR2 PRO™ varieties for the third year of commercialization as it plans to increase from offering roughly 66 varieties in Brazil this year to more than 100 varieties across all maturity zones in Brazil next year. The company’s soybean performance in South America in the first quarter was balanced against macro conditions resulting in lower planted corn acres in Brazil and Argentina.

Within the United States, the company noted its broad portfolio enables it to manage a large portion of the variability across acres in any given season, as its order book and pre-pays point to strong soybean demand and lower acres in corn.

Within its U.S. soybean business, the company expects growth in its Roundup Ready 2 Yield® platform again this season, building off the 53 million acres reached across its branded and licensing businesses in fiscal year 2014. The company also continues to make progress on pre-commercial activities for its Roundup Ready® 2 Xtend Crop System as it prepares for the anticipated largest biotech trait launch in its history in fiscal year 2016, with six times the number of varieties from what was available with the launch of Roundup Ready 2 Yield®.

Within its U.S. corn business, the company noted it continues to see strong demand for the newest hybrids in its portfolio and a continued trade up by farmers to the reduced refuge family of products.

Within its cotton business, the company continues to make progress toward the limited introduction of Bollgard II®XtendFlex™ cotton this spring in the United States, pending regulatory approvals. The company is targeting roughly a half million acres for the product in the introduction.

Outlook

Following a stronger than expected first quarter and what now appears to be lower U.S. corn acres, the company expects second quarter ongoing earnings per share to be down in the range of five to 10 percent versus the prior year. This leaves growth for the year to the third and fourth quarters, the latter of which Monsanto continues to expect is break-even to positive year-over-year on an absolute basis.

With the expectation of lower global corn acres, the seeds and genomics gross profit growth percentage for the year is expected to be more in the range of high single digits. The company continues to see its next generation of soybean technologies as being a core factor in delivering gross profit growth in the segment for the fiscal year, as underscored by the more than $100 million in gross profit growth and seven points of margin lift in soybeans in the first quarter. The company also expects growth in its corn business for the full year, from a combination of share gains and price mix lift in its portfolio.