Monsanto delivers solid 2017 Q3

Net sales in quarter were $4.23 billion, compared to $4.19 billion last year.

Continued momentum in soybean technologies helped boost third-quarter profits, Monsanto Co. said upon releasing its 2017 third-quarter results this week. The company said it remains focused on delivering on its operational plan and key business milestones while simultaneously working with Bayer toward completion of the pending merger by the end of the calendar year.

"Our innovation leadership and commitment to our grower customers is driving our growth, and the completion of the third quarter bolsters our confidence in the full year," said Hugh Grant, Monsanto chairman and chief executive officer. "I’m very pleased with what our teams have accomplished this year, balancing meaningful progress on both delivering the business and working to close the deal with Bayer."

Net sales for the fiscal 2017 third quarter were $4.23 billion versus $4.19 billion in the prior year, according to Monsanto. Quarterly gross profit was $2.4 billion for fiscal 2017, nearly flat with the same period in 2016. For the first nine months of fiscal 2017, net sales were approximately $12 billion versus $10.9 billion in fiscal 2016. Gross profit for the first nine months in 2017 was $6.6 billion, up from $5.9 billion in the prior-year period.

The company said its selling, general and administrative costs and research-and-development expenses increased about 8% year over year, primarily because of the continued increase in the accrual for incentives and the investment in the Climate Corp. business. However, the company said it remains on track with its target of $380 million in savings by the end of the fiscal year across cost of goods and operating expenses, compared to a fiscal year 2015 base.

Monsanto's fiscal 2017 third quarter earnings per share (EPS) was $1.90 on an as-reported basis and $1.93 on an ongoing basis. This is compared to as-reported EPS of $1.63 and ongoing EPS of $2.17 in 2016. In the first nine months of fiscal 2017, as-reported EPS was $5.06 and ongoing EPS was $5.32, compared to $3.40 as reported and $4.40 ongoing in the same period of 2016.

Segment performance

The Seeds & Genomics segment posted net sales of approximately $9.2 billion in the first nine months of fiscal year 2017. Segment sales  in the third quarter alone reached $3.1 billion, the company said. 

“In soybeans, Monsanto has seen strong demand for the latest technologies, with growth of approximately 30% in global gross profit now expected for fiscal year 2017. U.S. growers have planted 20 million acres of Roundup Ready 2 Xtend soybean varieties across the country, and early season results underscore the efficacy of the company's integrated crop system.”

The company added that strong performance of INTACTA RR2 PRO soybeans in South America has led to record market adoption. “The technology is delivering a more than 4 bushel per acre advantage on average over other soybean varieties, and total planted acreage in South America now exceeds 50 million acres.”

The company’s corn platform also continues to perform well. In the U.S., the company expects genetic share gains for fiscal year 2017 and sold out of its DEKALB Disease Shield hybrids. In Europe, acres planted to corn year-over-year were relatively flat, and the company saw modest germplasm price-mix lift in local currency, along with anticipated genetic share gains. Overall, the company expects its global corn germplasm price-mix lift, in local currency, to be flat to up low-single digits, as a percent, for the full year.

The company said its digital ag platform Climate FieldView has now surpassed 35 million paid acres, exceeding the original target of 25 million paid acres for fiscal 2017.

“The Climate Corporation continues to forge new partnerships to build a unified digital system where farmers can access an interconnected set of tools, services and data in a single interface,” the company said.

The company announced in May the integration of imagery from innovative aerial imagery partners Ceres Imaging, TerrAvion and Agribotix, to deliver valuable, high-resolution imagery to farmers through Climate FieldView. In addition, Climate acquired Hydrobio, an agriculture software company with unique, irrigation-focused data analytics capabilities.

The Agricultural Productivity segment posted net sales of approximately $2.8 billion in the first nine months of fiscal 2017. Third-quarter 2017 net sales for the segment was $1.1 billion, up slightly from the same periods last year.

The company said Agricultural Productivity gross profit increased approximately 12% for the third quarter due to improvements in pricing and volumes for glyphosate-based herbicides and continued sales of XtendiMax dicamba-based herbicide.

Fiscal 2017 outlook

Monsanto said it expects as-reported EPS to be at the high end of the range of $4.09-4.55 and confirmed ongoing EPS at the high end of the range of $4.50-4.90.

The Seed & Genomics segment gross profit is now expected to increase by high-single digits in terms of percentage for the year. For the Agricultural Productivity segment, gross profit is still expected to be in the range of $850-950 million as the segment continues to deliver expected results.

Looking ahead to the fourth quarter, the company said it expects to receive the benefit of about $70 million in non-core asset sale gains from strategic deals. Roughly half of these gains are expected to benefit the Agricultural Productivity segment, and half are expected to benefit the Seeds & Genomics segment. Both are expected to be recorded in other income and are part of the company's ongoing strategic portfolio management efforts.

For the full year, Monsanto still expects these earnings to translate to the high end of the range of $1.2-1.6 billion of free cash flow, reflecting operating cash flow at the high end of the range of $2.4-2.8 billion and capital expenditures of $1.2 billion for fiscal 2017.

Total operating spend in 2017, excluding the pending Bayer transaction-related costs and restructuring charges, is still anticipated to increase mid-single digits, as a percent, for the year.

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