Monsanto's second quarter EPS down 17%

Monsanto's second quarter EPS down 17%

Net sales for FY16 second quarter decreased from FY15 as did gross profit.

Monsanto Company's announced second quarter results in line with expectations April 6. The company's fiscal year 2016 second quarter EPS was $2.41 on an as-reported basis and $2.42 on an ongoing basis. On an as-reported basis, second quarter 2016 EPS was down 17%, while ongoing second quarter 2016 EPS was essentially in line with the prior year period on a currency neutral basis.

Related: Monsanto lowers earnings forecast

Result of operations

Monsanto Company announced second quarter 2016 results in line with expectations on April 6. (WellesEnterprises/Thinkstock)

Net sales for the fiscal year 2016 second quarter decreased over the prior year’s second quarter to about $4.5 billion, with gross profit for the quarter also decreasing over the prior year period to about $2.6 billion. For the first six months of fiscal year 2016, net sales were about $6.8 billion and gross profit was about $3.5 billion.

The company recently completed its $3 billion accelerated share repurchase (ASR) agreements and its estimate for fiscal year 2016 as-reported EPS guidance improved to $3.72 to $4.48.

Selling, general and administrative costs were $586 million and research and development expenses were $340 million for the second quarter of fiscal year 2016.

The positive drivers in the quarter, namely the benefits of the company's reduced share count, Brazil corn pricing, increased Intacta RR2 PRO soybean adoption and reduced operating expenses, were offset by glyphosate declines, increased discounting in the United States in corn and soybeans, lower soybean volumes with the slower start to the U.S. season and expected lower acres, as well as higher corn cost of goods sold resulting from smaller production plans in the prior year.

EPS for the first six months of fiscal year 2016 was $1.80 on an as-reported basis and $2.25 on an ongoing basis.

Outlook

The company confirmed ongoing EPS guidance in the range of $4.40 to $5.10 per share.

The company also reaffirmed its full-year free cash flow projections to be in the range of $1.4 billion to $1.6 billion for fiscal year 2016. The company expects net cash provided by operating activities to be $2.2 billion to $2.6 billion, and net cash required by investing activities to be approximately $800 million to $1 billion for fiscal year 2016.

The company continues to expect gross profit growth from its core seeds and genomics segment in fiscal year 2016 to be relatively flat with the previous year. Exclusive of currency headwinds of nearly $400 million, seeds and genomics gross profit is estimated to be up single digits, driven primarily by the expected increase in potential licensing deals in the range of more than $300 million to as much as $450 million in fiscal year 2016, increased Intacta RR2 PRO soybean adoption and global corn market expansion. With generic glyphosate pricing holding relatively steady, the company continues to expect the agricultural productivity segment gross profit to be roughly at the mid-point of the range of $900 million to $1.1 billion of gross profit in fiscal year 2016.

The company continues to expect operating expenses for fiscal year 2016, exclusive of restructuring expense and legacy environmental and litigation matters, to be down slightly versus fiscal year 2015.

Seeds and Genomics

The seeds and genomics segment consists of the global seeds and related traits business, biotechnology platforms and digital agriculture.

Net sales for Monsanto's seeds and genomics segment in the first half of fiscal 2016 were approximately $5.2 billion, with sales for the segment in the second quarter of fiscal year 2016 reaching approximately $3.8 billion.

In soybeans, Monsanto continues to build on grower adoption of Intacta RR2 PRO soybeans in South America as the company remains on track to reach 35 million acres in fiscal year 2016. The company also has seen strong grower interest for its Roundup Ready 2 Xtend soybeans and is pleased with the recent announcement of the U.S. Environmental Protection Agency's open comment period regarding the in-crop use of dicamba herbicide. Monsanto still awaits the final EU approval of the stacked product.

Related: China clears Monsanto's Xtend soybeans fo import

In cotton, Bollgard II XtendFlex is expected to reach two million acres.

Related: USDA approves Monsanto's dicamba-tolerant soy, cotton

Through new hybrid portfolio introductions across key corn growing regions, Monsanto expects to grow corn share in 2016. In the United States, Monsanto’s year one to year three hybrids are tracking at 50% to 60% of its portfolio, with SmartStax corn remaining roughly at the same percentage of the portfolio mix as last year.

In Brazil, the company grew share in the first season of the year and its VT Triple PRO product has achieved strong grower interest and adoption.

In Argentina, the company’s share remains above 50% and across Europe and South Africa, the company expects to hold or grow share of corn acres.

Monsanto continues to expect the Climate FieldView platform to expand to more than 90 million acres in 2016 with more than 12 million of these acres using its premium offerings. Climate recently announced data connectivity agreements with several agronomic and retailer software systems as well as the John Deere Operations Center, enabling farmers and their trusted advisors to transfer certain field data between these systems and the Climate FieldView platform.

Source: Monsanto

TAGS: Soybean USDA
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