Wednesday, agricultural products giant Monsanto Co. (MON) reported a wider loss for the fourth quarter on weak sales, largely reflecting a sales decline for Monsanto's Roundup and other glyphosate-based herbicides, partly offset by higher sales of corn seeds and traits as well as sales of vegetable seeds. Further, the company confirmed earnings forecast for fiscal 2010, below consensus.
Q4 Review
The St. Louis, Missouri-based company's fourth-quarter net loss was $233 million or $0.43 per share, wider than a loss of $172 million or $0.31 per share in the year-ago quarter.
Monsanto noted that the as-reported results reflect the effects of restructuring and the divestiture of its sunflower operations. Charges related to this restructuring are reflected in EBIT and include the costs of staff reductions, streamlining brands, office and facility consolidations and the realignment of resources of its global seeds and traits business.
Net loss from continuing operations for the latest quarter was $233 million or $0.43 per share, compared to $179 million or $0.32 per share in the prior-year quarter.
Earnings from ongoing business totaled $0.02 per share, compared to a loss of $0.03 per share incurred in the same quarter of last year. On average, sixteen analysts polled by Thomson Reuters expected the company to post earnings of $0.01 per share. Analysts' estimates typically exclude special items.
Quarterly net sales declined to $1.88 billion from the previous year's net sales of $2.05 billion, and fell short of six Wall Street analysts' consensus revenue estimate of $1.97 billion for the quarter.
The company said the downswing in fourth-quarter net sales largely reflects a sales decline for Monsanto's Roundup and other glyphosate-based herbicides due to pricing competition and a global glyphosate supply and demand imbalance, offset by higher sales of corn seeds and traits as well as sales of vegetable seeds.
Segment Analysis
Monsanto's Seeds and Genomics segment, consisting of global seeds and related traits business and biotechnology platforms, generated fourth-quarter net sales of $908 million, down 4% from $941 million reported a year earlier.
Agricultural Productivity segment, which consists of crop protection products and lawn-and-garden herbicide products, witnessed net sales of $971 million, compared to $1.11 billion in the corresponding quarter of the previous year.
During the recent quarter, Monsanto fetched 10% growth in sales from its corn seed and traits business. Results in the quarter also benefited from improved sales of vegetable seeds. The company's results were partially offset by declines in fourth-quarter sales from Monsanto's cotton and soybean seed and traits business partially driven by higher than expected soybean returns.
FY09 Synopsis
For the fiscal year 2009, the company reported net income of $2.11 billion or $3.80 per share, higher than net income of $2.02 billion or $3.62 per share reported for last year.
Net income from continuing operations grew to $2.098 billion or $3.78 per share, compared to $2.007 billion or $3.59 per share in fiscal 2008.
Earnings from ongoing business advanced 21% to $4.41 per share from $3.64 per share in the previous year, aided by strong seeds and traits performance, the optimization of gross profit for Roundup and other glyphosate-based herbicides at $1.8 billion, and extraordinary cost reduction actions.
On average, sixteen analysts polled by Thomson Reuters expected the company to post earnings of $4.41 per share. Analysts' estimates typically exclude special items.
Total net sales for fiscal 2009 amounted to $11.7 billion, higher than the prior-year's net sales of $11.4 billion, driven by higher worldwide corn seed and traits revenue, increased soybean seed and traits revenue in the United States, and higher cotton seed and traits revenue driven by higher trait penetration in India and increased acres in Australia. Increased revenue from the company's vegetable seed portfolio also contributed to results in the year. Wall Street analysts had a consensus revenue estimate of $11.84 billion.
Future On Focus
Looking ahead, Monsanto affirmed its full-year ongoing 2010 earnings guidance in the range of $3.10 - $3.30 per share. On a reported basis, full-year 2010 earnings is still estimated to range between $2.85 and $3.11 per share. Analysts are looking for earnings of $3.43 per share for fiscal 2010.
Seeds and traits, targeted to account for 85% of Monsanto's business in 2012, is expected to cross the $5 billion gross profit mark for the first time in 2010 by creating new value for growers and increasing their profitability on farm.
Further, the company noted that the strength of the triple stack platform for corn, the launch of Genuity SmartStax in the United States and trait penetration in South America would be the key enablers for growth in 2010, when gross profit for corn is projected to be in the range of $3.1 billion - $3.2 billion. For soybeans, gross profit is expected to increase to about $950 million, driven in part by the full commercial launch of Genuity Roundup Ready 2 Yield and greater penetration of first-generation Roundup Ready in Brazil.
Cotton, which experienced a better than expected gross profit result in 2009, is forecast to increase to about $375 million gross profit in 2010 with the launch of new varieties and penetration of second-generation Bollgard in India. Vegetable gross profit is estimated to increase to about $525 million.
Monsanto also confirmed guidance for free cash flow for fiscal year 2010 in the range of $900 million - $1 billion, including the after-tax cash effect from the restructuring of about $250 million. The company expects net cash provided by operating activities to be $2 billion - $2.2 billion, and net cash required by investing activities to be about $1.1 billion - $1.2 billion for fiscal year 2010.
Stock Quotes
Monsanto shares, which have been trading between $63.47 and $96.79 in the past 52 weeks, closed Tuesday's trading session at $75.63, up 78 cents or 1.04%, on a volume of 8.12 million shares. In the pre-market session, the stock is currently trading at $75.61, up 25 cents or 0.33%.
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