With half the fiscal year complete, Monsanto Co. executives today said the strong performance of the seeds and traits business and the timing of an early U.S. season drove a record quarter.
In reporting earnings results, executives said the cumulative strength of the business, including the best second quarter for the company's seeds and genomics segment, translated to an increase in full-year ongoing and as-reported earnings per share guidance. The company also increased its free cash flow guidance for the full year, according to a news release.
"Our strong U.S. selling season and growth from Latin America during the first six months have come together to set us up for a great 2012," said Hugh Grant, chairman, president and CEO for Monsanto. "We've seen contributions from growth across crops and geographies, which position us well to deliver high-teens ongoing earnings growth this year. We're also pleased growers have recognized the value of our product portfolio and given us the opportunity to earn their business."
Results of Operations
Net sales increased $617 million or 15 percent in the three-month comparison driven by global gains in corn and a strong selling season in the United States. Second quarter gross profit rose 17 percent to $2.7 billion compared to the prior year second quarter. For the first six months, gross profit is up 21 percent or $667 million.
Operating expenses were up in the second quarter compared to the prior year, tracking with the increases the company would expect as it grows its business. In the three-month comparison, selling, general and administrative (SG&A) expenses increased to $543 million. R&D expenses increased to $353 million for the quarter based on investments to support future growth opportunities.
The company's second quarter earnings per share (EPS) was $2.28 on an ongoing basis, $2.24 on an as-reported basis.
Cash Flow
For the first half of fiscal year 2012, cash flow from operations was a source of nearly $1.7 billion compared to $1.4 billion over the same period last year.
Net cash required by investing activities for the first half of fiscal year 2012 was $402 million, compared to $524 million for the same period of fiscal year 2011. Net cash required by financing activities for the first half of 2012 was $672 million, compared to net cash required of $668 million for the same period of fiscal year 2011.
Free cash flow was a source of nearly $1.3 billion for the first half of fiscal year 2012, compared to $917 million for the first half of fiscal year 2011. \
Outlook
The company raised its full-year ongoing EPS guidance to $3.49 to $3.54 per share. Full-year 2012 EPS guidance on an as-reported basis is expected in the range of $3.45 to $3.50.
The company also raised full-year free cash flow guidance to $1.6 to $1.8 billion. The company expects net cash provided by operating activities to be $2.5 billion to $2.8 billion, and net cash required by investing activities to be $900 million to $1 billion for fiscal year 2012.
Monsanto is a leading global provider of agricultural products.
Cautionary Statements Regarding Forward-Looking Information
Certain statements contained in this release are "forward-looking statements," such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits and the previously-announced SEC investigation; the previously reported material weakness in our internal controls over financial reporting; developments related to foreign currencies and economies; successful operation of recent acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's most recent Form 10-K Report to the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results.
