Monsanto Q2 Profit And Net Sales Down; Raises FY16 EPS View

(RTTNews) - Agricultural products giant Monsanto Co. (MON) reported a profit for the second-quarter decreased about 25% from last year. It raised its fiscal year 2016 as-reported earnings per share guidance, and reconfirmed annual ongoing earnings per share and free cash flow guidance.

"We continue to have a strong growth plan, backed by our commitment to delivering value to our customers through the industry's most-proven integrated pipeline. Not only does this give us the confidence that we can deliver a baseline EPS CAGR in the mid-teens from the mid-point of our fiscal year 2016 guidance through fiscal year 2019, but it fuels our belief that we can continue to be the innovation engine for the industry and the partner of choice in leading agricultural solutions,"said Hugh Grant, chairman and chief executive officer.

Monsanto raised its fiscal year 2016 as-reported earnings guidance to a range of $3.72 to $4.48 per share from the prior outlook of $3.42 to $4.29 per share, primarily due to a change in the expected timing for the accounting of restructuring expense.

The company confirmed ongoing earnings per share guidance in the range of $4.40 to $5.10 per share. Monsanto's guidance incorporates the anticipated continuation of several global and industry headwinds, including the expected $0.90 to $1.00 of currency headwinds. Analysts polled by Thomson Reuters expect the company to report earnings of $4.65 per share for fiscal year 2016. Analysts' estimates typically exclude special items.

The St. Louis, Missouri-based seed and agrochemical company's net income attributable to company for the second quarter of fiscal year 2016 decreased 25.40% to $1.063 billion from the prior year's $1.425 billion, with earnings per share declining to $2.41 from $2.92 last year.

On an ongoing basis, net income attributable to company for the quarter was $1.07 billion, or $2.42 per share, down from $1.42 billion or $2.90 per share last year. Analysts expected the company to report earnings of $2.44 per share for the second-quarter.

Fiscal second quarter 2016 included a pretax restructuring charge totaling $9 million, or $0.01 share (after-tax), of which $5 million related to certain asset impairment charges and $4 million related to various other operating charges and is included in restructuring charges.

Fiscal second quarter 2016 included pretax charges of $7 million, or $0.01 (after-tax), in selling, general and administrative expenses for legacy litigation matters arising under indemnities from the 2000 Pharmacia Separation Agreement.

Net sales for the fiscal year 2016 second quarter decreased to $4.53 billion from last year's $5.20 billion, with gross profit for the quarter also decreasing over the prior year period to approximately $2.6 billion. Wall Street expected revenues of $4.76 billion.

The company 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. This expectation is inclusive of new platform spend to support the long-term growth prospects for these opportunities. Other expense, net is expected to increase year-over-year by approximately $180 million due to the Argentine Peso devaluation expense.

Moving beyond the current fiscal year, Monsanto's outlook is for a baseline mid-teens compounded annual growth rate in its as-reported and ongoing EPS from the mid-point of its fiscal year 2016 guidance through fiscal year 2019. This is expected to be led by the company's soybean innovation growth drivers, strength and durability of its global corn platform, continued financial discipline, assumed stability in currencies and an improved cost of goods outlook for corn and soybeans.

MON closed Tuesday's regular trading at $86.10, down $0.56 or 0.64%.