Monsanto posts massive 1Q profit, ‘record number of R&D advancements’

PRESS RELEASE: Monsanto Company (NYSE: MON) delivered on track results for the first quarter of its fiscal year as the company reaffirmed its earnings growth and free cash flow guidance for fiscal year 2014. The company previewed a strong U.S. order book and noted that it is on track to deliver its largest soybean launch with an expected three million acres of Intacta RR2 PRO^™. The company also highlighted a record 29 phase advancements across its research and development (R&D) platforms, including breeding, biotechnology, and new breakthrough areas such as Integrated Farming Systems^® and agricultural biologicals.

“The first quarter demonstrated that our business performance is squarely on track with several key milestones and that we have the right growth strategy in place,” said Hugh Grant, chairman and chief executive officer for Monsanto. “The strength in our business is also seen in the record number of research and development advancements this year. It’s the innovation in our pipeline that’s going to define what’s next for our industry and help deliver on our commitment to bring additional opportunity for farmers around the world.”

Results of Operations

Net sales for the quarter increased over the prior year’s first quarter to $3.1 billion. Gross profit for the 2014 first quarter also increased over the prior year period to $1.6 billion.

Selling, general and administrative (SG&A) costs were $589 million in the first quarter. R&D expenses increased year-over-year to $409 million for the quarter. Both SG&A and R&D costs increased based in part on investments to support new platforms and product launches.

The company’s first quarter earnings per share (EPS) was $0.67 on an ongoing and $0.69 on an as-reported basis. (For a reconciliation of ongoing EPS, see note 1.)

Cash Flow

Free cash flow was a source of $457 million compared with a source of $1.5 billion for the prior year first quarter. (For a reconciliation of free cash flow, see note 1.) Net cash provided by operating activities for the 2014 fiscal year first quarter was a source of $1.7 billion, compared to a source of $1.6 billion in the first quarter last year. Net cash required by investing activities for the first quarter of 2014 was $1.2 billion, compared with $96 million for the same period of fiscal year 2013. Net cash provided by financing activities for the first quarter of 2014 was $346 million, compared to net cash required of $116 million for the prior year’s first quarter.

In the quarter, Monsanto continued its more aggressive approach in the company’s cash deployment strategy, including investment in additional growth through The Climate Corporation acquisition. The first quarter free cash flow reflects $917 million (net of cash acquired) for the acquisition of The Climate Corporation. Additionally, the company completed a second-consecutive quarter of record amount of cash for share repurchases. The company has purchased approximately $1.1 billion in shares over the last two quarters, lowering the share count in comparison to the prior year first quarter by nearly eight million shares.

Outlook

In fiscal year 2014, Monsanto continues to expect strong operational growth from its core business, reflected in mid-to-high teens growth in EBITDA. The company also confirmed its fiscal year 2014 ongoing earnings guidance, stating that it continues to expect to achieve ongoing EPS of $5.00 to $5.20. Full-year 2014 EPS guidance on an as-reported basis is expected in the range of $5.02 to $5.22 per share. (For a reconciliation of EPS, see note 1.) The company also reaffirmed free cash flow in the range of $600 million to $800 million for fiscal year 2014, after approximately $917 million (net of cash acquired) in cash for The Climate Corporation acquisition and investment to support the recently announced alliance on microbials with Novozymes. The company expects net cash provided by operating activities to be $2.9 billion to $3.3 billion, and net cash required by investing activities to be approximately $2.3 billion to $2.5 billion for fiscal year 2014, including capital expenditures and acquisition-related costs.