AgroPages-Monsanto sales up 19% in Q1 FY 2017-Agricultural news

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Monsanto’s net sales increased by 19.4% to $2,650 million in the first quarter of FY 2017 ended Nov 30th of 2016, with gross profit up by 39.7% to $1,250 million. In 2017, the company remains focused on delivering on its operational plan and key business milestones while simultaneously working with Bayer on the necessary steps to finalize the deal to merge the companies, which is targeted for the end of calendar year 2017. Additionally, in its annual research-and-development update, the company will highlight more than 20 phase advancements across the industry’s broadest pipeline, which is focused on helping farmers address current and future challenges.

Seeds & Genomics Business

Net sales for the Seeds and Genomics segment in the first three months of fiscal 2017 were $1.8 billion. This included a greater than 25 percent increase in planted corn acres in Argentina and more than a 10 percent increase in corn acres planted in Brazil accompanied by double-digit price increases in corn germplasm in local currency in both countries. In the U.S., demand for year-one hybrids remains strong and the early read on the order book supports the company’s intention to grow genetic share.

The company continues to build on the momentum of Intacta RR2 PRO™ soybeans in South America as it remains on track to reach a target of 45 to 55 million acres in fiscal year 2017. In the U.S., demand for Roundup Ready 2 Xtend™ soybeans remains strong and the company is well-supplied for more than 15 million acres of the product. With the EPA approval for in-crop use of dicamba in-hand, the company has received nearly two-thirds of the necessary state approvals for both soybeans and cotton, and expects to have the rest before planting. The company has provided extensive, ongoing customer training and expects customers will have an outstanding experience with the Roundup Ready® Xtend crop system.

Cotton had a strong start in the first quarter with increased acres in Australia. In the U.S., Bollgard II® XtendFlex™ cotton area is expected to exceed 4 million acres this year. Additionally, this season the company looks forward to an introductory release of Bollgard 3 XtendFlex™ cotton, with a full-scale launch planned for 2018. This is the first cotton product ever to combine three modes of action for both insect control and weed control. The company expects 2017 to be the third consecutive year of share growth in U.S. cotton.

Moving beyond seeds, Monsanto continues to see major advancements in its Climate FieldView™ platform as the business and platform continues to evolve. The company recently released four new product enhancements for 2017 and these upgrades, together with outstanding demand for FieldView Drive and FieldView Plus, set the company up to reach its goal of 25 million paid acres. Simultaneously, the company expects to add several more partners to the platform in the coming year.

Agrochemical Business

Though glyphosate volumes were up in the first quarter, net sales for the Agricultural Productivity segment in the first three months of fiscal 2017 were $802 million, reflecting glyphosate pricing headwinds that are expected to continue into the second quarter as the current global pricing is lower than the prior comparable period. As a partial offset to EBIT, the company recently signed an agreement to sell its Latitude wheat fungicide business for $140 million and expects to receive an EBIT benefit of approximately $85 million in this segment in the second quarter.

Moving beyond the first quarter, the company continues to focus on the launch of Xtendimax™ herbicide with VaporGrip™ Technology.

Outlook

With the expected strong start in the first quarter and continued focus on return on innovation and financial discipline, the company remains confident in its fiscal year 2017 outlook. Despite the fact that the year-over-year change in currency rates was modestly favorable in the first quarter of fiscal year 2017, the company continues to assume that the change in rates will have a relatively neutral effect on a full year basis given the recent strengthening of the U.S. dollar against several currencies.

The company expects roughly $100 million of gross profit from strategic licensing deals towards the end of the fiscal year which is anticipated to be roughly split between Seeds and Genomics and Ag Productivity. Seeds and Genomics segment gross profit is expected to increase to mid-single digits as a percent year-over-year, with soybean gross profit alone expected to grow by more than 20 percent, driven by new trait penetration and an anticipated reduction in cost of goods sold. In corn, growth is expected to come from global genetic share gains and global germplasm price mix lift in local currency that is flat to up low-single-digits, in terms of percentages. The company expects global corn acres to be roughly flat, with declines in U.S. corn acreage offset by the early increases in South America.

The company adjusted Ag Productivity gross profit to the expected range of $850-to-$950 million, reflecting year-over-year price declines in glyphosate-based herbicides in the first half of the year, offset partially by the benefit of licensing opportunities and expected higher volumes. The adjustment in gross profit outlook is a result of the approximately $85 million benefit from the sale of the Latitude® wheat fungicide business that was ultimately recorded in other expense, net for the segment, as opposed to gross profit as anticipated.

The company’s restructuring and cost savings initiatives remain on track, with the opportunity to deliver approximately $380 million in annual savings at the close of fiscal 2017 in operating expenses and cost of good sold, as compared to fiscal year 2015. However, setting aside pending Bayer transaction related costs and restructuring expenses, overall operating expenses in fiscal 2017 are expected to increase slightly with inflation and the costs associated with the return to growth of the business more than offsetting the savings. The expected tax rate for the year remains in the range of 25-to-28 percent.