Monsanto Sees Solid Sales for Big Brands in Fiscal Third-Quarter 2015, Pushes for Major Acquisition

Researched by Industrial Info Resources (Sugar Land, Texas)--Agricultural technology and product leader Monsanto Company (NYSE:MON) (St. Louis, Missouri) benefited from strong sales for its major brands in the third quarter of its 2015 fiscal year, while the company took a dim view of international markets, particularly for corn, and struggled to acquire a rival pesticide-and-seed maker. Net income was reported to be $1.14 billion for the quarter, a 32.98% increase from fiscal third-quarter 2014.

Industrial Info is tracking $332.9 million in active projects involving Monsanto, including the $200 million expansion of an agricultural research center in Chesterfield, Missouri. The 400,000-square-foot facility will include a research building and multiple greenhouses, laboratories, controlled-environment agricultural rooms and a conference center. Burns & McDonnell (Kansas City, Missouri) and Jacob KlingStubbins Architecture (Philadelphia, Pennsylvania) are performing architectural and engineering services on the project, which is under construction and expected to be completed by the end of 2016.

Net sales stood at $4.58 billion for the quarter, a 7.74% increase from the same period last year. Among the strongest-performing brand names in the Seeds & Genomics segment were U.S. Channel seeds; Intacta RR2 PRO, which reached 15 million planted acres in South America; the Bollgard II Xtend Flex cotton trait, which sold out in the U.S.; and the Climate PRO service, which exceeded 5 million acres. The company's $1 billion acquisition of The Climate Corporation in November 2013 continues to pay off, reaching 75 million acres to date.

Monsanto also recently agreed to extend its 15-year-plus relationship with The Scotts Miracle-Gro Company (NYSE:SMG) (Marysville, Ohio), which has served as Monsanto's exclusive agent for the marketing and distribution of Roundup domestically and in some foreign markets. According to a recent press release from Monsanto, Scotts will continue to use the non-selective herbicide in new lawn and garden product categories and broaden its marketing rights into new geographies. The extension added about $274 million to Monsanto's gross profits during the quarter.

Capital expenditures were reported to total $701 million for the quarter, compared with $688 million in the third quarter of fiscal-year 2014.

Monsanto hopes to broaden its portfolio by acquiring rival pesticide-and-seed maker Syngenta AG (NYSE:SYT) (Basel, Switzerland). Although Syngenta recently turned down a $45 billion bid, Monsanto executives remain optimistic that a deal eventually will be reached.

"The new company would bring a new set of options to farmers in certain regions of the world who, due to limitations in their access to technology, are not currently able to maximize production," said Hugh Grant, the chairman and chief executive officer of Monsanto, in a conference call. "Today, our foundation and our core crops reaches 400 million of the world's 3.5 billion acres of arable land. To fully address the demands for food production, we need to deliver technology and insights to every acre and every farmer, from large-scale operations in the Americas to smallholder farmers in Africa."

Although Monsanto executives expect the company's overall fourth-quarter results to be break-even, full-year profits in the Agricultural Productivity segment are expected to be slightly lower when compared with fiscal 2014, as generic glyphosate prices are projected to weaken and currency effects are likely to remain negative. Full-year profits for the Seeds & Genomics segment are expected to be flat, with low commodity prices reducing planted acreage.

The company also plans to broaden the 2016 launch of its Roundup Ready 2 Xtend product into Europe, following recent import approvals. Executives said operational expenditures are expected to be cut by between $300 million and $500 million by the end of fiscal 2017.

"The evolution since our [second-quarter 2015 results] is twofold," said Pierre Courduroux, the senior vice president and chief financial officer of Monsanto, in the conference call. "First, our global corn gross profit is now expected to be down more than $200 million for the full year, as we are not expecting Latin America to have as strong a start as originally anticipated, and because planted acres across Europe ended lower than we had expected while their [cost of goods sold] increased.

"Second, our global soybean gross profit, while still expected to grow by more than $200 million for the full year, is down slightly from prior estimates, as it now appears that U.S. acres will be modestly lower than expected."

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