Monsanto (MON) Updates on Core Pipeline, Innovation; Affirms FY16 EPS Guidance at Low-End of Outlook
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During Monsanto Company’s (NYSE: MON) eighth Whistle Stop tour event for investors, chairman and chief executive officer Hugh Grant and other members of the Monsanto executive leadership team will highlight how the industry’s leading technology platforms and digital integration are addressing evolving grower needs and accelerating the future of agriculture, underpinning the company’s confidence in its long-term growth opportunities.
- Core pipeline expected to deliver up to $25 billion in peak net sales with incremental value from new platforms and expected to deliver the fourth consecutive year of more than 20 advancements
- Company reconfirms FY16 as-reported EPS guidance at the low end of the range of $3.36 to $4.14 and ongoing EPS at the low-end of the range of $4.40 to $5.10
- Innovation, platform expansion and financial discipline expected to drive strong long-term earnings power, with expected return to growth in EPS in FY17, accelerating to a mid-teens compounded annual EPS growth rate from the end of FY17 through FY21
- The Climate Corporation announces commitment to extend its leading Climate FieldViewTM digital ag platform to other agricultural technology providers, coinciding with announcement to develop the industry’s first in-field sensor network
“Monsanto has the right strategic plan in place to create significant shareowner value over the long term, built on strong business fundamentals,” said Grant. “With proven leadership in seeds, traits, digital agriculture and a robust supporting R&D pipeline, Monsanto remains uniquely positioned to address evolving grower needs through our integrated solutions strategy, while delivering on our long-term earnings potential.”
Leading Share Position and Innovation Drives Strong Long-Term Earnings Power
Monsanto confirmed it remains on track to be at the low end of its $3.36 to $4.14 as-reported 2016 full-year guidance range and at the low end of its ongoing EPS 2016 full-year guidance range of $4.40 to $5.10. Net cash provided by operating activities is expected to be $2.2 billion to $2.6 billion, and net cash required by investing activities to be approximately $900 million to $1.1 billion for fiscal year 2016. The company also confirmed its 2016 full-year free cash flow guidance range of $1.3 billion to $1.5 billion. (For a reconciliation of ongoing EPS and free cash flow, see note 1).
Looking ahead to fiscal year 2017, the company continues to expect a return to growth in EPS driven by the return on innovation for products such as Intacta RR2 PROTM and Roundup Ready 2 XtendTM soybeans, improved cost of goods and financial discipline. Beyond fiscal year 2017, the opportunity to expand is expected to be driven by a continued return on innovation for the company’s growth drivers, coupled with continued financial discipline and a balanced approach to capital allocation. This includes an expected target of mid-teens compounded annual EPS growth rate from the end of fiscal year 2017 through fiscal year 2021.
Leading Technology Platforms and Digital Integration are Addressing Evolving Grower Needs
During the event, Monsanto executives will also highlight the company’s industry-leading core pipeline with a value of up to $25 billion in peak net sales. The event will focus on cutting-edge innovation that continues to fuel the company’s leadership in its breeding, biotechnology, chemistry, biologicals and data science platforms. It will also showcase in-field demonstration of late-stage technologies including SmartStax® PRO corn, Roundup Ready 2 Xtend® soybeans, DEKALB® Disease ShieldTM corn hybrids, next-generations of Intacta RR2 PROTM soybeans and the latest offerings in its Climate FieldViewTM platform.
This technology underpins the company’s growth targets, highlighted by the key growth drivers featured at the event:
- Corn –Steady growth is enabled by upgrading the germplasm in its leading share positions around the world, as well as next-generation trait platforms, such as SmartStax PRO® and TreceptaTM corn. The company also announced its investment plans for greenhouses in Arizona, which will support protected culture capabilities and serve to increase the long-term rate of genetic gain in both corn and soybeans.
- Soybeans – For soybeans, the coming years are significant, with key blockbuster traits such as Intacta RR2 PROTM and Roundup Ready 2 Xtend® soybeans accelerating penetration. The recent royalty-bearing license agreement for Syngenta to sell dicamba-tolerant soybean technologies further enables the opportunity for 55 million acres of Roundup Ready 2 Xtend soybeans in the U.S. by fiscal year 2019. Management also sees the opportunity for 45 to 55 million acres of Intacta RR2 PRO in South America in fiscal year 2017.
- Next-Generation Weed Control – The introduction of the Roundup Ready® Xtend Crop System is expected to enable the upgrade of the Roundup Ready platform, creating tremendous value through integrated solutions. With the recent receipt of the European import approval for the trait, the company is one step closer to delivering on a target of 15 million acres by fiscal year 2017. The continued advancement of the company’s Vapor GripTM Technology formulation of dicamba and signed agreement with DuPont to offer this technology further shows the value of the platform. The company looks forward to the EPA’s expected final decision by late summer or early fall for over-the-top dicamba use, which enables a full system launch in the U.S. in 2017.
- Complementary Crops – Bollgard II® XtendFlexTM cotton is expected to exceed 3 million acres in the U.S. in 2017 – a four-fold growth over 2016. In addition, the cotton lygus control trait, the first-ever biotech solution for the control of piercing and sucking insects, holds the potential to drive future growth.
- Ag Productivity – The Company’s emphasis on cost discipline and portfolio optimization enables potential growth in this segment after fiscal year 2017. With the expected introduction of the Roundup Ready® Xtend Crop System and its dicamba plant investment, Monsanto will have the world’s two largest agricultural herbicides – glyphosate and dicamba – in its portfolio. In addition, the company’s unique asset-light approach for externalized active ingredient discovery, such as the collaboration with Nimbus for a synthetic fungicide with broad spectrum control, provides for longer-term growth opportunities.
Climate FieldView Platform Expansion
With its strong “first mover” advantage, the company is well-positioned to make its Climate FieldView platform the go-to digital agriculture platform of the future due to the enhancement of its current digital tools, significant growth potential from its platform extension to third parties and global acre expansion. Climate FieldView services reached more than 14 million paid acres in fiscal year 2016 and is targeting 25 million paid acres in fiscal year 2017. By 2025, the target climbs to 300-400 million paid acres that have the potential to be “upgraded” annually with tailored applications to optimize the on-farm productivity.
The company revealed it is developing the agriculture industry’s first in-field sensor network, representing significant R&D advancement and enabling the development of a connected digital ecosystem for farmers. The company also plans to extend its Climate FieldView platform, currently on more than 92 million acres in the U.S., to enable other agriculture innovators to build on top of its software infrastructure and complement their offering with additional agriculture data inputs. This extension firmly establishes the Climate FieldView platform as the industry leader, provides new opportunities to capture value beyond row crops, and enables a faster path to market for other agriculture innovators to bring their products to farmers.
Webcast and Materials
Monsanto will provide a webcast of the overview presentations each day with sessions beginning at 12 p.m. CST, August 17 and the second-day session beginning at 7:00 a.m. CST on August 18. Presentation slides and a simultaneous audio webcast 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.
Full materials related to the Whistle Stop tour event are also available on the company’s website at www.monsanto.com/investors. These materials include a guide with an overview of the projects featured as a part of the investor field event and presentations by Monsanto executives.
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.
About Monsanto Company
Monsanto is committed to bringing a broad range of solutions to help nourish our growing world. We produce seeds for fruits, vegetables and key crops – such as corn, soybeans, and cotton – that help farmers have better harvests while using water and other important resources more efficiently. We work to find sustainable solutions for soil health, help farmers use data to improve farming practices and conserve natural resources, and provide crop protection products to minimize damage from pests and disease. Through programs and partnerships, we collaborate with farmers, researchers, nonprofit organizations, universities and others to help tackle some of the world’s biggest challenges. To learn more about Monsanto, our commitments and our more than 20,000 dedicated employees, please visit: discover.monsanto.com and monsanto.com. Follow our business on Twitter® at twitter.com/MonsantoCo, on the company blog, Beyond the Rows® at monsantoblog.com or subscribe to our News Release RSS Feed.
Cautionary Statements Regarding Forward-Looking Information: Certain statements contained in this release are “forward-looking statements,” such as statements concerning the company’s anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company’s actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: continued competition in seeds, traits and agricultural chemicals; the company’s exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public understanding and acceptance of our biotechnology and other agricultural products; the success of the company’s research and development activities; the outcomes of major lawsuits; developments related to foreign currencies and economies; the impact of exploring, responding to, entering into or consummating potential acquisitions or other transactions and proposals; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company’s estimates related to distribution inventory levels; the recent increases in and expected higher levels of indebtedness; the company’s ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters, accidents, and security breaches, including cybersecurity incidents, on the agriculture business or the company’s facilities; and other risks and factors detailed in the company’s most recent periodic report to the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results.
Notes to editors: Monsanto and the Vine Design, Beyond the Rows, Intacta RR2 PRO, SmartStax PRO, Nemastrike, Roundup Ready 2 Xtend, Bollgard II XtendFlex, DEKALB, Disease Shield, Vapor Grip, Trecepta, Roundup Ready and FieldView are trademarks of Monsanto Company and its wholly-owned subsidiaries. All other trademarks are the property of their respective owners.
Monsanto CompanySelected Financial Information(Dollars in millions, except per share amounts)Unaudited
1. This press release uses the non-GAAP financial measures of diluted earnings per share (EPS) on an ongoing basis and free cash flow. These measures are intended to supplement investor’s understanding of our operating performance and liquidity. They are different from and not intended to replace diluted EPS or cash flows, and they are not measures of financial performance as determined in accordance with U.S. generally accepted accounting principles (GAAP). These non-GAAP financial measures may not be comparable to similar measures used by other companies.
Ongoing EPS excludes certain items that we do not consider part of ongoing operations. We believe that ongoing EPS presented with these adjustments is useful to investors as it best reflects our ongoing performance and business operations during the period presented and is also useful to investors for comparative purposes. In addition, management uses ongoing EPS as a guide in its budgeting and long-range planning processes, and it is used as a guide in determining incentive compensation.
We define free cash flow as the total of net cash provided or required by operating activities and net cash provided or required by investing activities. Free cash flow does not represent the residual cash flow available for discretionary expenditures. We believe that free cash flow is an important liquidity measure for the company and that it is useful to investors and management as a measure of the ability of our business to generate cash. Once business needs and obligations are met, this cash can be used to reinvest in the company for future growth or to return to our shareowners through dividend payments or share repurchases. Free cash flow is also used as one of the performance measures in determining incentive compensation.
The following tables reconcile those measures to the respective most directly comparable financial measure calculated in accordance with GAAP.
Reconciliation of EPS to Ongoing EPS: Ongoing EPS is calculated excluding certain after-tax items which Monsanto does not consider part of ongoing operations.
|Fiscal Year 2016|
|Diluted Earnings per Share||$3.36-$4.14|
|Environmental and Litigation Matters||$0.04|
|Argentine-Related Tax Matters||$0.48-$0.52|
|Income from Discontinued Operations|
|Diluted Earnings per Share from Ongoing Business||$4.40-$5.10|
Reconciliation of Free Cash Flow: Free cash flow represents the total of cash flows from operating activities and investing activities as reflected in the Statements of Consolidated Cash Flows. With respect to the fiscal year 2016 free cash flow guidance, Monsanto does not include any estimates or projections of Net Cash Provided (Required) by Financing Activities because in order to prepare any such estimate or projection, Monsanto would need to rely on market factors and conditions that are outside of its control.
|Fiscal Year 2016|
|Net Cash Provided by Operating Activities||$2,200-2,600|
|Net Cash Required by Investing Activities||(900)-(1,100)|
|Free Cash Flow||$1,300-1,500|
|Net Cash Provided (Required) by Financing Activities||N/A|
|Effect of Exchange Rate Changes on Cash and Cash Equivalents||N/A|
|Net Increase (Decrease) in Cash and Cash Equivalents||N/A|
|Cash and Cash Equivalents at Beginning of Period||N/A|
|Cash and Cash Equivalents at End of Period||N/A|
Carly Scaduto, 314-694-3247
Laura Meyer, 314-694-8148
Source: Monsanto Company
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