Monsanto Company delivered EPS for the first quarter ahead of expectations as operating expenses and soybean sales in Brazil both were better than original expectations for the first quarter of fiscal year 2016.
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Net sales for the quarter decreased over the prior year’s first quarter to $2.2 billion. Gross profit on an as-reported basis for the 2016 first quarter also decreased over the prior year period to $901 million. As expected, the decline in the quarter is due to weaker foreign currencies, glyphosate pricing and lower corn volumes in Latin America.
Selling, general and administrative (SG&A) costs were $543 million and R&D expenses were $364 million for the quarter. Total operating expenses for the quarter, excluding pre-tax restructuring charges of $266 million, were nine percent lower than the prior year, mostly driven by currency.
The company’s first quarter EPS was a loss of $0.11 on an ongoing basis, ahead of the company’s outlined guidance of a loss in the range of $0.23 to $0.33. This improvement was driven by lower than expected operating expenses and higher than expected Brazil Intacta RR2 PRO soybean results.
The company’s first quarter EPS was a loss of $0.56 on an as-reported basis, which was better than its outlined guidance of a loss in the range of $0.86 to $1.13.
As-reported results include $0.46 for restructuring charges, driven by the finalization of the company's plans to reach its previously outlined target of $500 million of annual savings by the end of fiscal year 2018.
Free cash flow was a source of more than $1.0 billion compared to a source of $969 million for the prior year first quarter, reflecting the disciplined reduction in inventory from the company's corn seed production plans and modest growth in its prepays in the United States.
Net cash provided by operating activities for the 2016 fiscal year first quarter was a source of $1.4 billion, compared to a source of $1.3 billion in the first quarter last year. Net cash required by investing activities for the first quarter of 2016 was $336 million, compared to $380 million for the same period of fiscal year 2015.
Net cash required by financing activities for the first quarter of 2016 was $2.4 billion, compared to net cash required by financing activities of $107 million for the prior year’s first quarter.
The increase in cash required by financing activities was driven by the initiation of the $3 billion accelerated share repurchase in the quarter. The program remains on track and is expected to close sometime in the next three months.
Monsanto expects full-year ongoing EPS guidance to be at the lower half of the range of $5.10 to $5.60. Ongoing EPS guidance reflects in part an estimated $0.60 to $0.70 of headwinds from currency, greater than previous estimates of $0.35 to $0.40.
Full-year EPS guidance on as as-reported basis improved modestly to $4.12 to $4.79 as a result of the anticipated timing of charges related to announced restructuring actions.
With a focus on disciplined cash management, the company continues to project free cash flow in the range of $1.6 billion to $1.8 billion for fiscal year 2016.
The company expects net cash provided by operating activities to be $2.6 billion to $3 billion, and net cash required by investing activities to be approximately $1 billion to $1.2 billion.
Monsanto said it will eliminate another 1,000 jobs as it expands a cost-cutting plan designed to deal with falling sales of biotech-corn seeds and other financial headwinds. ■