ST. LOUIS -- Monsanto Company reported its third-quarter financial results today, with net sales down 6 percent vs. the same quarter last year, down 13 percent year to date.

Results of Operations

Price decreases for Roundup(R) and other glyphosate-based herbicides affected the company's results as expected, despite the volume growth achieved for these products. Net sales decreased $199 million, or 6 percent, in the three-month comparison and $1.3 billion, or 13 percent, year to date. Net income in the third quarter was $384 million.

Gross profit declined 24 percent in the quarter to $1.4 billion, also driven by the price decreases for Roundup(R) and other glyphosate-based herbicides. For the first nine months, gross profit is down 28 percent or $1.7 billion.

Operating expenses were flat overall, with a slight decrease for selling, general and administrative (SG&A) expenses for the three month comparison. R&D expenses increased slightly as the company continues to manage more projects in advanced pipeline phases. As a percent of net sales, SG&A expenses were 17 percent and R&D expenses were 10 percent. Restructuring expense for the quarter was $86 million. This included $52 million charged to cost-of-goods related to discontinued products worldwide.

Earnings per share (EPS) for the third quarter was $0.70 on an as-reported basis, and $0.81 on an ongoing basis. EPS for the first nine months of fiscal year 2010 was $2.27 on an as-reported basis, and $2.49 on an ongoing basis

"We've made some real changes to our portfolio and business approach, and the positive feedback I'm hearing from our customers tells me we are on the right track," said Hugh Grant, chairman, president and CEO for Monsanto. "We have demonstrated agility in the face of adversity, enhancing our portfolio and equipping our sales team with an unprecedented amount of product choices and price points to offer our customers. We've repositioned our Roundup(R) business to recognize its appropriate role in supporting our Seeds and Genomics segment. And we've demonstrated an ability to leverage our operational savings and sustain a strategic investment in research and development. This year has brought its challenges, yet we are quickly evolving into a newer, leaner, stronger Monsanto, well-positioned to meet our objective for mid-teens earnings growth driven by our seeds and traits business."

Seeds and Genomics segment

In total, sales for Monsanto's Seeds and Genomics segment in the third quarter of fiscal 2010 increased slightly over last year's third quarter, consistent with company's expectations. The company expects total gross profit for the segment to come in at a range of $4.6 to $4.7 billion for the year, an increase over 2009.

Agricultural Productivity segment

The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products. Sales in the third quarter of fiscal 2010 for Monsanto's Agricultural Productivity segment declined 34 percent or $313 million compared with the same period last year. Gross profit was a loss of $189 million in the quarter for Roundup(R) and other glyphosate-based herbicides, reflecting the impact associated with the repositioning of the Roundup(R) business.


Monsanto affirmed its cash flow and EPS guidance and provided preliminary financial guidance for fiscal year 2011. The company expects free cash flow for fiscal year 2010 will be in the range of $400 million to $500 million including the after-tax cash effect from a restructuring charge. Net cash provided by operating activities is expected to be $1.3 billion to $1.5 billion, and net cash required by investing activities is expected to be approximately $900 million to $1 billion for fiscal year 2010.

The company expects fiscal-year 2010 earnings per share to be in the range of $2.40 to $2.60 on an ongoing basis and $2.15 to $2.41 on an as-reported basis.

SG&A expenses continued to track below expectations and are expected to represent approximately $2 billion to $2.1 billion for the year.

Sharing the first view of fiscal year 2011 since the company's repositioning of its Roundup(R) business last month, the company outlined the key metrics that will enable it to meet its objective of achieving earnings growth in the mid-teen percentages going forward. Monsanto's growth is expected to come exclusively from the Seeds and Genomics segment, where the company expects gross profit growth in the double digits. The company expects top-line growth from an increase in unit volume as well as mix improvement as Monsanto expands the availability of its new products.

Central to that strategy is U.S. corn, where Monsanto will offer more products at more price points. South America corn is also a key driver, as the company is poised to increase penetration of its first-generation double-stack corn in Argentina, which will serve as building block for the technology progression that's already under way in the United States. The same is true for Brazil, where stacked traits will create new opportunities for farmers as the company prepares to introduce its second-generation Corn Borer technology. In soybeans, Monsanto is confident that as its pricing approach enables more farmers to experience the benefits of Genuity(R) Roundup Ready 2 Yield(R) and see it perform on farm, it will enable the company to win new customers.

The company's R&D pipeline fuels the growth expected from seeds and traits, and Monsanto plans to resource that pipeline for success as it continues to support a higher number of projects in the more costly later stages of development. To reinforce this commitment, executives said Monsanto will move to providing a range for R&D spend annually rather than a metric that adjusts with sales. The range for 2011 is expected to represent an increase over the 2010 endpoint, but at a rate somewhat below the growth over the past few years.

The company expects gross profit for its Agricultural Productivity Segment at $550 million to $600 million in fiscal year 2011. Operational leverage is expected to be a key contributor to the earnings growth targets, and executives pointed to an institutionalized cost discipline that allows SG&A spend to hold at inflation-level growth.

SOURCE: Monsanto.