Strong US sales boosted Monsanto’s Q2 result

Global gains in corn and a strong selling season in the United States boosted Monsanto’s sales to $4.748 billion, up by 15.8% compared with last year in the second quarter of 2012 which ended February 29th. For the first half year, sales increased by 20.4% to $7.187 billion compared to the same period of last year. Second quarter gross profit rose 17% to $2.7 billion and first-half up by 21.3% to $3.8 billion compared to the prior year. EBIT (earnings before interest & taxes) for second quarter rose 21.6% to $1.781 billion and for first-half year boosted by 33.1% to $2.01 billion.

"Our strong U.S. selling season and growth from Latin America during the first six months have come together to set us up for a great 2012," said Hugh Grant, chairman, president and chief executive officer for Monsanto. "We've seen contributions from growth across crops and geographies, which position us well to deliver high-teens ongoing earnings growth this year. We're also pleased growers have recognized the value of our product portfolio and given us the opportunity to earn their business."

Sales in the Seeds and Genomics segment which consists of the company's global seeds and related traits business for the second quarter were $3.9 billion, representing an increase of $503 million over the same period last year and reaffirming the company's seeds and traits business as its central driver for growth in 2012. Gross profit in the second quarter was up $360 million or approximately 17 percent compared to the prior year second quarter. For the first six months, gross profit is up 21 percent over the same period last year. 

Second quarter growth was led by the strength of Monsanto's corn business, with the strongest contributor being the U.S. corn business. The strong start to the U.S. season reinforces the company's confidence in its product and pricing strategy and its ability to build on the branded corn volume increase achieved in 2011. The company also saw higher corn sales in Latin America in the quarter.

The soy and cotton businesses also continue to perform well year-to-date. In soybeans, second quarter seeds and traits sales were up 12 percent driven by an increased trait mix of Genuity® Roundup Ready 2 Yield® soybeans in the United States.

With the strong U.S. results, sales are tracking well for the expected increase in the company's newest corn and soybean platforms in the United States.  While still early in the season, Monsanto expects acres of its Genuity® Roundup Ready 2 Yield® soybeans and Genuity® reduced refuge corn family to increase by more than 10 million acres each. That step up is expected to allow the company to reach the projected 22 million to 24 million acre range for the Genuity® reduced refuge corn family and the 27 million to 30 million acre range for Genuity® Roundup Ready 2 Yield® soybeans in 2012. 

Vegetable sales were down from the same quarter of the prior year due primarily to current market conditions in Europe. Vegetable gross profit was also down compared to the same quarter of the prior year reflecting the European market decrease, as well as an inventory write-off that will also help support the company's vegetable business growth strategy.

Outlook

The company raised its full-year ongoing EPS guidance to $3.49 to $3.54 per share. Full-year 2012 EPS guidance on an as-reported basis is expected in the range of $3.45 to $3.50. The company also raised full-year free cash flow guidance to $1.6 to $1.8 billion. The company expects net cash provided by operating activities to be $2.5 billion to $2.8 billion, and net cash required by investing activities to be $900 million to $1 billion for fiscal year 2012.