Monsanto's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Monsanto (MON)

Q2 2012 Earnings Call

April 04, 2012 9:30 am ET


Bryan Hurley - Director of Investor Relations

Pierre Courduroux - Chief Financial Officer and Senior Vice President

Hugh Grant - Chairman, Chief Executive Officer, President and Chairman of Executive Committee


Vincent Andrews - Morgan Stanley, Research Division

James Sheehan - Deutsche Bank AG, Research Division

Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division

Robert Koort - Goldman Sachs Group Inc., Research Division

P.J. Juvekar - Citigroup Inc, Research Division

Laurence Alexander - Jefferies & Company, Inc., Research Division

Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division

Michael Picken - Cleveland Research Company

Donald Carson - Susquehanna Financial Group, LLLP, Research Division

Michael E. Cox - Piper Jaffray Companies, Research Division



Greetings. Welcome to the Second Quarter 2012 Monsanto Company Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bryan Hurley, Investor Relations lead for Monsanto. Thank you, Mr. Hurley. You may begin.

Bryan Hurley

Thanks, Rob. And good morning to everyone on the line. Thanks for joining Monsanto's second quarter earnings conference call. I'm joined this morning by Hugh Grant, our Chairman and CEO; and Pierre Courduroux, our CFO. Also joining me are Manny Cruz and Bryan Corkal, my colleagues in Investor Relations. This call is being webcast, and you can access the webcast and supporting slides at The replay will also be available at that address.

We're providing you today with EPS measures both on a GAAP basis and on an ongoing business basis. Where we refer to non-GAAP financial measures, we reconcile to GAAP in the slides and in the press release, both of which are posted to our website.

This call will include statements concerning future events and financial results. Because these statements are based on assumptions and factors that involve risk and uncertainty, the company's actual performance may vary in a material way from those expressed or implied in any forward-looking statements. A description of the factors that may cause such a variance is included in the Safe Harbor language in our most recent 10-K and in today's press release.

Today's conference call revolves around the results that confirm the momentum in our U.S. business in the second quarter and the step-up those results create for Monsanto's full year earnings and free cash flow outlook, as we've raised our guidance above the high end of our initial ranges for each. Given that, I'll let Pierre walk you through our financial results to give you the context of our strong 2012. Then Hugh will take a deeper look at where we stand in our overall strategy and how we see the layers of growth building from where we are today.

Pierre Courduroux

Thanks, Bryan. And good morning to everybody on the line. The second quarter was a record quarter for Monsanto. But more importantly, it provides the evidence of our business strength and creates the confidence we have in our full year performance as we increase our guidance expectations. So today, I will build by review around the step-up in our full year earnings and free cash guidance on Slide 4.

We raised our ongoing EPS expectations above the high end of our initial guidance to $3.49 to $3.54 per share. We also raised our free cash outlook to $1.6 billion to $1.8 million, also above the high end of our initial range. This is a significant step-up that confirms that the momentum we saw in the business has translated into financial results.

And before I go through the details, let me emphasize a couple of points. First, the completion of this quarter gives us the data points to confirm the strength we anticipated in our U.S. business. During this quarter, we've seen the translation of early indicators, like the strong order book and deferred revenues, into our financials. Second, with a record second quarter, we have an early punctuation mark on what we see as a great year. The strong showing in the U.S. builds nicely on the growth from our Latin American business. In just 2 quarters, it's clear we're delivering on our expectations of greater international growth, more balance across our businesses and continued expansion of our U.S. base. In fact, with the strong U.S. performance, we now see the U.S. becoming the largest contributor to our overall growth for the year. But it is nicely complemented by the strong and expected growth from our international business. Most importantly, if you take all of that together, we now expect to deliver ongoing earnings growth in the range of the high-teens this year, and that speaks to the great overall year we see in 2012.

If we now go to Slide 5, I will walk you through our financial results and give you the context for our increased guidance. For the quarter, ongoing earnings per share were $2.28 compared with $1.87 in prior year, an increase of more than 20%. That performance makes this second quarter a record in terms of ongoing EPS, as well as total sales and gross profit in our important Seeds and Genomics segment. That record quarter means that the second quarter will be our most significant earnings driver this year, and in turn, it changes the seasonality of our earnings flow in 2012. Given the combination of the absolute growth in our business, the early strong demand in the U.S. and a couple of timing benefits, the first half results largely capture the growth we expect to reach in our full year guidance. This has a practical effect on our full year earnings pattern as the stronger first half performance and timing shift also means that we expect overall earnings for the second half of the year to be effectively flat when compared with last year.

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