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Monsanto misses estimates, no longer eyeing M&A

April 7, 2016
Chemical Value Chain

Monsanto missed estimates for its fiscal second quarter as continued weakness in agriculture markets forced the leading seed manufacturer to cut prices.

Monsanto chairman and CEO Hugh Grant also indicated during an earnings conference call this morning that he no longer sees large-scale mergers and acquisitions as a “likely strategy.” There had been speculation that Monsanto was eying the ag assets of BASF or Bayer, as well as a renewed bid for Syngenta, amid significant agchems consolidation that included ChemChina’s $43.3-billion bid for Syngenta and the Dow Chemical–DuPont merger.

“We believe the industry will continue to rationalize, focusing investment to the highest return options We now see this translating into further R&D or commercial partnerships for which we’re uniquely positioned to participate and no longer see large-scale M&A as a likely opportunity,” Grant says. “Let me be clear. Our strategy is not and was not dependent on large-scale M&A. Rather, our strategy is innovation-driven and it’s highly collaborative.”

Monsanto reports net income of $1.06 billion for the quarter ended 29 February 2016, down 25.3% year-on-year (YOY) Adjusted earnings of $2.42/share was 16.6% lower YOY and 2 cts below the analysts consensus estimate, as reported by Thomson Reuters (New York). Sales were down 12.8% YOY, to $4.5 billion.

“The positive drivers in the quarter, namely the benefits of the company’s reduced share count, Brazil corn pricing, increased Intacta RR2 PRO™ soybean adoption and reduced operating expenses, were offset by glyphosate declines in the Agricultural Productivity segment, increased discounting in the United States in corn and soybeans, lower soybean volumes with the slower start to the U.S. season and expected lower acres, as well as higher corn cost of goods sold resulting from smaller production plans in the prior year,” Monsanto says.

Seeds and genomics gross profit slipped 9.3% YOY, to $2.4 billion, on sales down 8.6%, to $3.8 billion. Corn and soybean sales were down 7.7% and 11.4% YOY, respectively. Agricultural productivity gross profit was down 53.0%, on sales down 29.8%, to $715 million.

Monsanto raised its 2016 earnings guidance from 3.42-4.29/share to $3.72-$4.48/share, primarily due to a change in timing for a restructuring expense. The outlook for ongoing earnings continues to be in the $4.40-$5.10 range.

By Rebecca Coons

Source: Chemical Week

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