According to an earnings report released Oct. 30, Monsanto Company’s third-quarter and year-to-date results for 2002 are down considerably. But President and Chief Executive Officer Hendrik Verfaillie is optimistic about the remainder of the year.
Third-quarter sales of $679 million were down 27 percent from the same quarter last year, and for the first nine months of 2002, sales reached $3,453 million – but were still down $800 million compared to the same period in 2001. The company contributes these shortfalls to lower sales of Roundup herbicide as a result of competitive pressure and unfavorable weather conditions in the United States. Also, economic conditions in Latin America compelled Monsanto to reduce the risk of doing business south of the border, further lowering sales of seeds and Roundup.
In terms of net income (loss) and earnings (loss) per share for the third quarter 2002, the company reported a net loss of $165 million, or 63 cents per share, compared to a net loss of $45 million, or 17 cents per share, during the third quarter of 2001. Through the first nine months of 2002, Monsanto reported a net loss of $1,754 million or $6.67 per share, compared with a net income of $399 million, or a gain of $1.51 per share during the first nine months of 2001.
The Monsanto Company, however, is hopeful about the remainder of 2002.
“We’re aggressively implementing our plan to reduce the risk of doing business in Latin America, and while this is resulting in lower sales and earnings that previously expected, it’s also improving cash generation,” Verfaillie said. “We also made good progress on our cost management efforts. Additionally, we’re on track to significantly increase our free cash flow this year because of improvements we’ve made to our investment in working capital."
Cost management efforts are helping this effort, with research and development expenses down $10 million for the quarter and $24 million for the first nine months of the year. Though selling, general and administrative (SG&A) expenses were up $8 million compared to last year’s third quarter, Monsanto reports that these expenses were partially offset by cost reduction actions taken throughout the company. For the nine-month period, SG&A expenses are down by $82 million or 9 percent.
The company made up significant ground in the area of free cash flow. For the first nine months of 2002, Monsanto reported positive free cash flow of $68 million, compared with substantial negative free cash flow of $485 million during the same period in 2001. The improvement is attributed to a reduction of the company’s investment in working capital.
For the fourth quarter, Verfaillie said the Monsanto Company expects incremental growth in North American seed and traits businesses and will continue to sell seeds and herbicides in Latin America as the major planting season there comes to an end. Full-year earnings per share are forecast to be between $1.15 and $1.23, and the company repeated its goal of generating between $400 and $460 million in free cash flow by the end of the year.
For more information on Monsanto’s third-quarter results, visit www.monsanto.com and select the financial reports section under the investor information page.
The author is Assistant Editor of Lawn & Landscape magazine and can be reached at lspiers@lawnandlandscape.com.