Monsanto Profit Gets Boost from Scotts Partnership
24 June 2015 Monsanto Co. posted higher-than-expected third-quarter earnings on the back of licensing payments for Roundup as part of its Scotts Miracle-Gro partnership.
Executives also reiterated Monsanto’s vision for its proposed merger with Syngenta, which it said would “provide a comprehensive portfolio of integrated solutions to help farmers around the world address current and future agricultural, environmental and sustainability challenges.”
Sales in its Agricultural Productivity segment, which encompasses crop protection, rose to $1.4 billion from $1.2 billion a year earlier. Seeds and Genomics unit sales climbed to $3.2 billion, compared with $3.0 billion last year.
Net income rose to $1.14 billion, or $2.39 per share, compared with $858 million, or $1.62 in the year-ago period.
“The challenges facing the world’s food supply continue to evolve. The growing population, along with our volatile and changing climate, place ever-increasing burdens on sustainable global food production,” said Hugh Grant, chairman and chief executive officer for Monsanto. “Equipping farmers with the right set of innovations that will help solve tomorrow’s food challenges today requires more than a new company – it requires a new vision and approach. Our proposal to combine with Syngenta is an exciting logical next step for our business, offering the opportunity to accelerate innovation and support a more diverse group of farmers around the world.”
“The strength of our global portfolio, and ability to innovate and create value has really been highlighted in the current agriculture environment,” said Brett Begemann, president and chief operating officer for Monsanto. “As I look at this year, we’ve delivered on many of the key milestones that we expect will enable us to continue to meet the needs of our customers and propel our growth. These milestones, along with licensing opportunities, disciplined spend and a solid capital allocation strategy, back our confidence in our ability to deliver on our target to more than double our 2014 ongoing earnings per share by 2019.”
Looking ahead, Monsanto said its Seeds and Genomics segment gross profit growth percentage for the full year is now expected to be flat year-over-year, with roughly a half a point in gross profit margin improvement. Agricultural Productivity segment gross profit is now expected to be down only slightly versus the prior year due to the agreement with Scotts Miracle Gro as an offset to the anticipated 15% to 17% decline in gross profit from continued softening of generic glyphosate pricing and currency headwinds.
The company’s fourth-quarter results are now expected to be break-even.
Monsanto said it will “continue to focus on disciplined operational spend as a hedge to the current industry macro trends.” Total operating expenses for fiscal year 2015, inclusive of new platform spend, is expected to remain down in the range of 3% to 5% versus the prior year. Looking beyond the current year, the company anticipates the continuation of several of the industry headwinds, ranging from weakening foreign currencies to low commodity prices driving reduced acres. In light of these industry challenges, the company is developing plans to reduce its operating spending potentially in the range of $300 million to $500 million by the end of fiscal year 2017.
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