ST. LOUIS–(BUSINESS WIRE)–Oct 4, 2017–Monsanto Company (NYSE: MON) today announced it concluded fiscal year 2017 with as-reported earnings per share (EPS) of $5.09, as compared to last year’s as-reported full-year EPS of $2.99, adding that EPS is expected to grow in the first quarter of fiscal 2018. Reflecting the value its innovation brings, the company delivered exceptionally on its operational plan, while continuing to progress on the closing of the merger with Bayer as it looks forward to the opportunity to create even greater benefits for growers with the companies’ combined pipelines.
|Fourth Quarter||Fiscal Year|
|($ in millions, except per share amounts)||2017||2016||2017||2016|
|Net Sales by Segment|
|Corn seed and traits||$||928||$||801||$||6,270||$||5,825|
|Soybean seed and traits||304||249||2,662||2,162|
|Cotton seed and traits||53||70||615||440|
|All other crops seeds and traits||170||170||551||760|
|TOTAL Seeds and Genomics||$||1,747||$||1,565||$||10,913||$||9,988|
|TOTAL Agricultural Productivity||$||939||$||997||$||3,727||$||3,514|
|TOTAL Net Sales||$||2,686||$||2,562||$||14,640||$||13,502|
|Interest Expense – Net||$||91||$||81||$||376||$||362|
|Other (Income) Expense – Net||$||(9||)||$||(138||)||$||(50||)||$||22|
|Net Income (Loss) Attributable to Monsanto Company||$||20||$||(191||)||$||2,260||$||1,336|
|Diluted Earnings (Loss) per Share||$||0.05||$||(0.44||)||$||5.09||$||2.99|
|Items Affecting Comparability – EPS Impact|
|Environmental and Litigation Matters||0.03||0.34||0.05||0.38|
|Pending Bayer Transaction Related Costs||0.05||—||0.32||—|
|Argentine-Related Tax Matters||0.07||0.08||0.10||0.56|
|Income on Discontinued Operations||—||—||(0.03||)||(0.04||)|
|Diluted Earnings per Share from Ongoing Business (For the definition of ongoing EPS, see note 1.)||$||0.20||$||0.07||$||5.50||$||4.48|
|Effective Tax Rate||117||%||—||%||22||%||35||%|
|Fourth Quarter||Fiscal Year|
|Comparison as a Percent of Net Sales:||2017||2016||2017||2016|
|Selling, general and administrative expenses||35||%||38||%||20||%||21||%|
|Research and development expenses||16||%||16||%||11||%||11||%|
|(Loss) income from continuing operations before income taxes||(5||)%||(8||)%||20||%||15||%|
|Net income (loss) attributable to Monsanto Company||1||%||(7||)%||15||%||10||%|
“Our record sales and gross profit in the Seeds and Genomics segment this year, fueled by the outstanding penetration of our latest soybean and cotton technologies and continued adoption of our newest corn hybrids around the world, reflects the need for new solutions in what continues to be a challenging ag economy,” said Hugh Grant, chairman and chief executive officer for Monsanto. “Our proven ability to innovate and our unique platform advantages position us well to meet the production challenges of today, as well as the demands of tomorrow.”
Results of Operations
Monsanto reported net sales of $2.7 billion for the fourth quarter of fiscal year 2017. Net sales for the full fiscal year were $14.6 billion. Full-year net sales were up more than $1 billion year-over-year, due primarily to record technology adoption for the newest soybean technologies across the Americas and global corn pricing.
Seeds and Genomics segment net sales were $1.7 billion for the quarter. For the full year, net sales for the Seeds and Genomics segment were $10.9 billion. Agricultural Productivity segment net sales were $939 million for the quarter, while net sales for the Agricultural Productivity segment for the fiscal year were $3.7 billion.
The company’s total operating expenses were up slightly year-over-year on an as-reported basis, at $4.7 billion. Selling, General & Administrative expenses increased to $3.0 billion for the year, primarily from increased incentives and commissions, with the return to growth of the business. R&D expenses increased due to incentives and increased investment in digital tools for agriculture. Finally, restructuring charges were a net reversal of $36 million in fiscal year 2017 compared to a $297 million of spend in fiscal year 2016.
The company reported a net income attributable to Monsanto of $20 million in the fourth quarter of fiscal year 2017, compared with a reported net loss attributable to Monsanto of $191 million in the same period last year. Net income attributable to Monsanto for fiscal year 2017 was approximately $2.3 billion compared to net income of $1.3 billion attributable to Monsanto in fiscal year 2016.
The company’s fiscal year 2017 EPS on an as-reported basis was $5.09, reflecting both the company’s focus on delivering its operational plan and its strategic portfolio management. On an ongoing basis, this translated to $5.50. (For a reconciliation of as-reported EPS to ongoing EPS, see note 1.) For the full year, strategic licensing deals and non-core asset sales contributed about $380 million of pre-tax benefit, similar to fiscal year 2016.
For the fourth quarter, the company reported $0.05 EPS on an as-reported basis which translated to $0.20 EPS on an ongoing basis, versus a $0.44 loss per share on an as-reported basis and $0.07 EPS on an ongoing basis in the same period last year. The ongoing EPS results for the quarter were better than initially projected, mostly due to tax benefits and the fact that the company had the opportunity to grant the right to some key corn licenses in Brazil. The latter resulted in a pre-tax benefit of more than $200 million in the fourth quarter of 2017.
For fiscal year 2017, net cash provided by operating activities was a source of $3.2 billion, compared with $2.6 billion in fiscal year 2016. Net cash required by investing activities was $1.1 billion in fiscal year 2017, compared with $864 million in fiscal year 2016. Net cash required by financing activities was $2.0 billion in fiscal year 2017, compared with $3.7 billion in fiscal year 2016. Free cash flow was a source of $2.0 billion for fiscal year 2017, compared to a source of $1.7 billion in fiscal year 2016, due to the significant growth in the business. (NOTE: free cash flow metric reflects the company’s new definition of free cash flow, which conforms to the more commonly used definition by publicly-traded companies of operating cash flows less capital expenditures. For a reconciliation of free cash flow, see note 1.)
Given the pending combination with Bayer, the company will not provide financial guidance for fiscal year 2018, but instead will highlight key guideposts to consider. This includes growth drivers in the Seeds and Genomics segment such as adoption and pricing of INTACTA RR2 PRO TM soybeans in South America; continued adoption of Roundup Ready 2 Xtend ® soybeans, and price and share gains from the launch of new corn hybrids around the world. In addition, the company expects to reach 50 million paid acres globally for the Climate FieldView TM platform, and growth from the multi-crop U.S. launch of NemaStrike TM Technology. The company also anticipates lower planted corn acres in Brazil and challenging commodity pricing for corn around the globe.
In Ag Productivity, the pricing for glyphosate is expected to improve, at least through the first quarter of the fiscal year, and volumes of XtendiMax ® Herbicide with VaporGrip ® Technology are expected to expand.
The company expects that its tax rate will normalize and that contributions from strategic portfolio management will likely fall below the roughly $350 million average annual pre-tax contribution from the last three years.
Finally, in fiscal year 2018, the company also anticipates completing its restructuring and cost savings initiative that began in fiscal year 2015, with the expectation that S,G&A and R&D expenses in fiscal year 2018 will be relatively flat year-over-year compared to 2017. Upon completion of the initiative, the company expects to realize nearly $500 million in annual savings as compared to its fiscal year 2015 baseline.