Monsanto Endures Paltry Corn Market in First Quarter of Fiscal 2015, Shifts Profit Outlook to Year's Second Half

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Researched by Industrial Info Resources (Sugar Land, Texas)--Agricultural technology and product leader Monsanto Company (NYSE:MON) (St. Louis, Missouri) reported overall declines in sales and profits for the first quarter of the company's 2015 fiscal year, following globally weak results for planted corn--particularly in South American markets, where the company has been expanding--and a shift to third- and fourth-quarter business strengths. Net income was reported to be $243 million, a 33.94% decrease from the first quarter of fiscal 2014.

Industrial Info is tracking more than $284 million in projects involving Monsanto, including the $12 million, Phase I expansion of a corn seed-processing plant in Grinnell, Iowa. The project, which is still in its planning and analysis stage, involves adding a dryer and dry bulk storage bins, and constructing new processing areas for huskers and receiving lines, as well as constructing a new building at the currently 200,000-square-foot facility.

Total net sales stood at $2.87 billion, an 8.69% decrease from the same period last year. Among the major factors cited for the weaker results were a decline in acres of planted corn in South America, where Monsanto has been focusing much of its marketing efforts in recent years, and fewer acres of cotton in Australia. The Agricultural Productivity segment, which consists of crop-protection and lawn-and garden herbicide products, saw its sales and profits slide as it shifted focus to branded-product sales, which typically are strongest in the third quarter.

Still, the company's core Seeds and Genomics segment saw strong results from its soybean business, where the Intacta RR2 PRO product is expected to surpass its target for 10 million to 12 million planted acres.

Capital expenditures were reported to be $347 million for the first quarter of the 2015 fiscal year, compared with $303 million in the same period last year.

"First and foremost, we expect to be above the high end of our target of 10 million to 12 million acres of Intacta in South America with a record second year ramp," said Hugh Grant, the chairman and chief executive officer of Monsanto, in a conference call. "Secondly, we received USDA recommendations for deregulation for both Roundup Ready XTEND soybeans and Bollgard II 2 Xtend flex cotton, and that brings us a step closer to the planned launches. Third, the U.S. order book indicates that there is likely continued acre shifting this year as soybeans are well ahead of the five-year pace, while corn is tracking at a slower pace."

Monsanto executives point to soybean technology as the driving factor in boosting profits for the 2015 fiscal year, with U.S. corn acres currently lower than expected. However, they predict most of the fiscal year's growth will be in the third and fourth quarters, following a generally slower second quarter. The Roundup Ready 2 Yield product is expected to continue its growth in the soybean market after hitting 53 million acres of application in 2014, but the Agricultural Productivity segment is expected to see lower profits due to pricing.

"In the U.S. corn business, the order book indicates a downward trend from the prior year, pointing to the expectation of lower corn acres and what many now believe appears to be a protracted purchasing cycle, given the ample corn seed supply across the industry," said Brett Begemann, the president and chief operating officer of Monsanto, in the conference call. "We do, however, continue to see demand for our newer hybrids in our portfolio and a continued trade up to the reduced refuge family of products."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.