Monsanto agchem sales down 34% in Q1 FY 2016

Date:01-13-2016

Monsanto’s net sales decreased by 22.7% to $2,219 million in the first quarter of FY 2016 ended Nov 30th, with gross profit down by 36.1% to $901 million. As expected, the decline in the quarter is due to weaker foreign currencies, glyphosate pricing and lower corn volumes in Latin America.

Seeds & Traits Business

Sales for Monsanto’s Seeds and Genomics segment in the first quarter were $1.4 billion. The company continues to build on the momentum of Intacta RR2 PRO™ soybeans in South America as the company remains on track to reach its target of 30 million acres in fiscal year 2016. With its greater than four bushel per acre yield advantage and ability to reduce insecticide use, grower interest and adoption of the technology continues to grow.

The company also is making progress on pre-commercial activities for its Roundup Ready 2 Xtend™ Crop System in soybeans, which is expected to be the largest biotech trait launch on more than three million acres in fiscal year 2016. In cotton, Bollgard II® XtendFlex™ is expected to reach 1.5 million acres in just the technology’s second year of commercialization.

Through new hybrid portfolio introductions across key corn growing regions, Monsanto affirmed its intent to hold or grow share in every major corn market again in 2016, with germplasm price mix lift in the low single digit range in local currency.

Moving beyond seeds, as grower interest grows, Monsanto continues to expect the Climate platform to expand to more than 90 million acres in 2016 with more than 12 million of these acres using its premium offerings.

Agrochemical Business

Segment sales for the first quarter reached $820 million. Monsanto continues to expect Agricultural Productivity segment gross profit to be in the range of $900 million to $1.1 billion in fiscal year 2016 with the expectation that timing related declines in volumes from the first quarter will be recovered in the latter half of the year. The company continues to expect to sell approximately 300 million gallons of glyphosate for the full year at a premium close to that of generics.

Outlook

With the anticipated continuation of several global and industry headwinds that include the recent currency devaluation in Argentina, Monsanto expects full-year ongoing EPS guidance to be at the lower half of the range of $5.10 to $5.60. Ongoing EPS guidance reflects in part an estimated $0.60 to $0.70 of headwinds from currency, greater than previous estimates of $0.35 to $0.40. Full-year EPS guidance on as as-reported basis improved modestly to $4.12 to $4.79 as a result of the anticipated timing of charges related to announced restructuring actions. With a focus on disciplined cash management, the company continues to project free cash flow in the range of $1.6 billion to $1.8 billion for fiscal year 2016. The company expects net cash provided by operating activities to be $2.6 billion to $3 billion, and net cash required by investing activities to be approximately $1 billion to $1.2 billion. 

The company now expects five to seven percent gross profit growth from its core Seeds and Genomics segment in fiscal year 2016. This growth is expected to be led by new global corn hybrid portfolio introductions, continued significant Intacta RR2 PRO™ soybean adoption and additional licensing opportunities in the range of $275 million. The company also expects the Agricultural Productivity segment to continue to deliver $900 million to $1.1 billion of gross profit in fiscal year 2016 as the company stays consistent with its strategy to maintain a slight premium over generics.

The company expects operating expenses for fiscal year 2016, exclusive of restructuring expense and environmental and litigation settlements, to be flat versus fiscal year 2015. This expectation is inclusive of new platform spend to support the long-term growth prospects for these opportunities.

Company executives reinforced that a focus on key priorities and milestones in fiscal year 2016 is expected to set the foundation for rapid future growth. The company’s expanding core growth drivers and R&D leadership advantage, emergence of new platforms and financial discipline all underpin confidence in its growth target. The company expects innovation to drive 80 percent of the expected $3.5 billion in gross profit growth from the end of fiscal year 2016 to fiscal year 2019.