Monsanto (MON) Cuts FY15 EPS Outlook into BofA Conference

Monsanto Company’s (NYSE: MON) core business growth drivers, expanding new platform opportunities and financial discipline reinforce the company’s unique leadership position within the industry and confidence in its long-term growth opportunities, Pierre Courduroux, senior vice president and chief financial officer, will highlight with investors today at the Bank of America Merrill Lynch 2016 Global Agriculture & Chemicals Conference.

“Today, the macro-environment is proving to be even more challenging, yet we still see strong long-term growth opportunities for our business,” said Courduroux. “Monsanto’s business fundamentals remain solid and we are positioned well to continue to deliver best-in-class innovations within the industry’s leading integrated pipeline and through continued proven product performance. This position of strength within our industry is expected to enable us to continue to bring significant value to our customers and shareowners in the years ahead.”

In 2016, the company continues to execute on key initiatives within its core business led by new global corn hybrid portfolio introductions and continued significant Intacta RR2 PRO™ soybean adoption, which is now tracking to 35 million acres in South America. Courduroux will also note Monsanto remains disciplined in the execution of its Agricultural Productivity strategy, further optimization of spend and continuation of the targeted capital structure with the recent completion of its $3 billion accelerated share repurchase. Monsanto has returned more than $11 billion to shareowners through dividends and share repurchases since June 2014.

However, entering the fiscal year, the company indicated that there were several variables creating significant headwinds, namely: weak foreign currencies, generic glyphosate pricing and compressed grower margins coming from lower commodity prices. These have not abated and the company has seen additional headwinds from competitive dynamics and the delay in the EPA label for in crop use of dicamba. Given these factors, Monsanto has revised its full-year ongoing EPS guidance to $4.40 to $5.10. Full-year EPS guidance on as as-reported basis is expected to be $3.42 to $4.29. For the fiscal year 2016 second quarter, this translates to ongoing EPS expectations of $2.35 to $2.45, with the expected decline versus the prior year primarily driven by glyphosate pricing declines and the Argentine peso devaluation. Second quarter EPS guidance on as as-reported basis is expected to be $2.15 to $2.35.

*** NOTE: The company previously saw FY15 EPS of $5.10 - $5.60. The Street s at $5.14.

*** Consensus estimates also call for Q2 EPS of $2.84.

The company also revised its full-year free cash flow projections to be in the range of $1.4 billion to $1.6 billion for fiscal year 2016. (For a reconciliation of EPS and free cash flow, see note 1.)

Currency accounts for an estimated 25 to 30 cents of the reduction in the company’s revised 2016 ongoing EPS outlook, with another estimated 30 cents stemming from its Seeds and Genomics businesses as a result of several macro factors, including the delay in the EPA approval of dicamba for in-crop use in the Roundup Ready Xtend® system and greater-than-expected industry discounting. A reduction in the company’s spend outlook and financial discipline practically offsets some moderation in Agricultural Productivity due to generic pricing.

The company now expects gross profit growth from its core Seeds and Genomics segment in fiscal year 2016 to be relatively flat with the previous year and expects the Agricultural Productivity segment gross profit to migrate closer to the mid-point of the range of $900 million to $1.1 billion of gross profit in fiscal year 2016. To offset some of the increased headwinds, the company expects operating expenses for fiscal year 2016, exclusive of restructuring expense and legacy environmental and litigation settlements, to be down slightly versus fiscal year 2015. This expectation is inclusive of new platform spend to support the long-term growth prospects for these opportunities.

Moving beyond fiscal year 2016, Monsanto’s outlook is expected to improve anchored on the company’s expanding innovation growth drivers and R&D leadership advantage, financial discipline and balanced capital allocation. The company also expects significant benefits in fiscal year 2017 from improved comparisons from lower cost of goods and the absence of the significant Argentine peso devaluation. These variables underpin its confidence in its long-term growth outlook and opportunity for a baseline mid-teens compounded annual growth rate in its ongoing EPS from the mid-point of its fiscal year 2016 outlook through fiscal year 2019.

“It’s easy to focus on the current downturn in the agricultural cycle, but as the leader in the industry, we are in a unique position to take advantage of the inevitable rebound and accelerate the delivery of integrated solutions within the industry,” added Courduroux. “We have the leading trait and genetics platform, leading platform in data science and significant momentum from new product launches, all underpinned by actions to focus and reduce costs through financial discipline. We remain committed to the innovation-backed logic that fuels our strategic rationale for integrated solutions and expectation that we will remain the partner of choice in the industry.”

Webcast

In conjunction with this announcement, Courduroux will address investors at the Bank of America Merrill Lynch 2016 Global Agriculture and Chemicals Conference beginning at 12:45 p.m. ET (11:45 a.m. CT). Courduroux will discuss the company’s strategic initiatives and long-term growth drivers, future expectations, product performance and other matters related to the company’s business.

Presentation slides and a simultaneous audio webcast of the conference call may be accessed by visiting the company's website at www.monsanto.com/investors. Visitors may need to download Windows Media Player™ prior to listening to the webcast. Following the live broadcast, a replay of the webcast will be available on the Monsanto website for three weeks. Monsanto publishes details on upcoming webcasts on this website in both the Presentation and Financial Reports section and the Calendar of Events section. Investors should look to this site as the source of information on future investor conference webcasts. The site includes a calendar of upcoming investor events, details on accessing scheduled webcasts and information from previous investor events.

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