Monsanto sales up 8% in Q3 of FY 2015

Monsanto delivered solid results for the third quarter. Net sales for the fiscal year 2015 third quarter increased by 7.7% over the prior year’s third quarter to $4.6 billion, with gross profit for the quarter increasing by 17.4% over the prior year period to $2.7 billion. For the first nine months, net sales were down by 4.4% to $12.6 billion and gross profit decreased by 2.1% to $7.2 billion.

The third-quarter results were above the range outlined at the company’s second-quarter earnings, with the performance reflecting the change in the U.S. Channel® seed brand business model increasing gross profit in the third quarter, as well as strong Agricultural Productivity segment performance due to the recent agreement with Scotts Miracle Gro.

Selling, general and administrative (SG&A) costs were $718 million and R&D expenses were $374 million for the third quarter. Year-to-date, total operating expenses were flat, effectively absorbing more than $100 million inflationary increases and a ramp in spend in the company’s Climate and biological platforms to support the long-term growth prospects for these opportunities.

Seeds & Traits Business

Net sales in the Seeds and Genomics segment for the third quarter were up by 5.0% versus the same period last year to $3.2 billion. For the first nine months, net sales for the segment were $9.0 billion, down $372 million over the same period last year.

As Monsanto expands its portfolio of solutions for farmers, the Seeds and Genomics segment remains a differentiator and integral part of Monsanto’s long-term growth targets. That outlook is reflective of the company’s continued progress on several of the key milestones that are expected to fuel growth over the multi-year horizon.

In corn, the company continues to see demand for its newer hybrids and technologies. Exclusive of currency headwinds, the company expects to deliver positive germplasm mix lift for the full year. Additionally, the company continues to achieve footprint expansion even in the difficult ag environment, remaining on track to hold or grow branded share in every major market.

The company continues to see progress with its Intacta RR2 PRO™ performance. Reaching a record 15 million acres across South America this season, the product continues its record-setting progress with high adoption and performance. The product achieved a greater than four bushel per acre average yield advantage in its second-year of commercialization in Brazil.

Within its U.S. soybean business, the company expects growth in its Roundup Ready 2 Yield® platform again this season, as farmers continue to choose the product across its branded and licensing businesses.

Launch plans for Roundup Ready 2 Xtend™ soybeans also continue with European import approval in hand, marking another step forward in the company’s 2016 anticipated launch for the product.

Despite the pullback in cotton acres, the company sold out of Bollgard II® XtendFlex™ cotton in the United States as part of its limited commercial introduction on more than 750,000 acres.

As the company plans for the next step in ensuring growers have access to all elements of the Roundup Ready® Xtend Crop System to meet the global demand for food, today it announced preliminary plans for a meaningful capital investment at its Luling, Louisiana plant for the production of dicamba. Pending final approvals, the company expects a potential investment of more than $1.0 billion over the next three to five years at its Luling site.

The company’s investment in its Climate and biologicals platforms has ramped this fiscal year. With a focus on penetration and engagement, the company noted it has enrolled more than 75 million acres for its Climate platform. It also has exceeded five million acres for its Climate PRO™ premium acre offering, two and a half times its initial target.

Agrochemical Business

Net sales for the Agricultural Productivity segment for the third quarter were up by 14.5% to $1.4 billion. For the first nine months, net sales for the segment were $3.7 billion versus $3.9 billion over the same period last year. Agricultural Productivity segment gross profit results in the quarter were driven by the $274 million gross profit benefit from the recent agreement with Scotts Miracle Gro.

Outlook

Within its full-year guidance, Seeds and Genomics segment gross profit growth percentage for the full year is now expected to be flat year-over-year, with roughly a half a point in gross profit margin improvement. Agricultural Productivity segment gross profit is now expected to be down only slightly versus the prior year due to the agreement with Scotts Miracle Gro as an offset to the anticipated 15-to-17 percent decline in gross profit from continued softening of generic glyphosate pricing and currency headwinds.

The company’s fourth-quarter results are now expected to be break-even.

Monsanto will continue to focus on disciplined operational spend as a hedge to the current industry macro trends. Total operating expenses for fiscal year 2015, inclusive of new platform spend, is expected to remain down in the range of 3-to-5 percent versus the prior year. Looking beyond the current year, the company anticipates the continuation of several of the industry headwinds, ranging from weakening foreign currencies to low commodity prices driving reduced acres. In light of these industry challenges, the company is developing plans to reduce its operating spending potentially in the range of $300 million to $500 million by the end of fiscal year 2017.

Monsanto also reiterated the company’s vision and strategic rationale for the Syngenta proposal to create a new company that would provide a comprehensive portfolio of integrated solutions to help farmers around the world address current and future agricultural, environmental and sustainability challenges.