Monsanto Beats and Reaffirms

Today before the market opened, Monsanto Co. (MON - Snapshot Report), the largest chemicals and biotech seed maker reported results for the fourth quarter of fiscal year 2009, ended August 31, 2009.

Excluding one-time items (on an ongoing basis), the company reported earnings of 2 cents per share, compared to a loss of 3 cents per share in the year-ago quarter. This was above the Zacks Consensus Estimate of 1 cent per share.

However, the company posted a wider loss in the quarter, which increased to 43 cents per share on an as-reported basis, from 31 cents in the year-ago quarter, due to restructuring charges and the divestiture of the company's sunflower operations. Restructuring lowered earnings by 53 cents.

During the quarter, the company also increased the restructuring reserve to the $550 - $600 million range to support its cost-cutting effort. SG&A as a percentage of revenue was 25% in the quarter versus 35% in the year-ago quarter.

Total revenue fell 8.4% to $1.88 billion from the year-ago quarter, primarily due to a fall in sales of the company’s Roundup and other glyphosate-based herbicides business. This business has been negatively impacted by severe pricing pressure and supply-demand imbalance, offset by higher sales of corn seeds and traits, as well as higher sales of vegetable seeds.

The Seeds and Genomics segment posted sales of $908 million, down 3.5% year over year, and accounted for 48.3% of the total revenue in the quarter, while sales for the Agricultural Productivity segment were $971 million, down 12.5% from the fourth quarter of fiscal 2008. The segment is responsible for the remaining 51.7% of total revenue.

For the full year 2009, Monsanto revenue growth was 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 good results in the year.
 
Guidance Reaffirmed

For fiscal 2010, Monsanto affirmed its prior guidance of $3.10 to $3.30 per share on an ongoing basis, based on expectations of continued progress in the seeds and traits, cotton and vegetable products.
 
The company also re-iterated guidance for free cash flow for fiscal year 2010, which is expected to be in the range of $900 million to $1 billion, including the after-tax cash effect from the restructuring of approximately $250 million. The company expects net cash provided by operating activities to be $2 billion to $2.2 billion for fiscal year 2010.

As a result of growing competition and pricing pressure in its herbicide business, Monsanto has been shifting its focus to its highly profitable seeds and traits, which are targeted to account for 85% of Monsanto's business in 2012 and expected to cross the $5 billion gross profit mark for the first time in 2010.