uploads///Fiscal Quarters Net Sales and Growth

How Monsanto Plans to Grow Its Sales in the Coming Years

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Apr. 8 2016, Published 9:55 a.m. ET

Net sales

In fiscal 2Q16, about 84% of Monsanto’s net sales came from its Seeds and Genomics segment, while the rest came from its Agricultural Productivity segment.

Under the Seeds and Genomics segment, corn seed and traits sales accounted for 59% of net sales, followed by soybean and traits at 17.3% of net sales in fiscal 2Q16.

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Sales fall

Usually, the second quarter is when most of Monsanto’s (MON) sales take place. This is around the time when farmers refill their seed inventories for the planting season, which takes place between March and June. However, second-quarter sales are forming lower peaks year-over-year (or YoY).

Overall net sales in fiscal 2Q16 fell to $4.5 billion, a 12.7% fall from $5.2 billion in the corresponding quarter a year ago. Seeds and Genomics sales fell 8.6% YoY to $3.8 billion from $4.1 billion, while the Agricultural Productivity segment fell 29% to $0.7 billion from $1 billion over the same period.

Peers’ expectations

DuPont (DD), which earned 29% revenue from its agricultural segment (including seeds and chemicals) in its previous quarter, is expected to report its earnings on April 26, 2016. Its revenue has fallen 22% to $7.2 billion YoY.

Dow Chemical (DOW), which will report its earnings on April 28, is expected to report revenue of $10.6 billion, a fall of 14% YoY. PotashCorp, which is set to release its earnings on April 28, is expected to report a 30% fall in sales YoY. The YoY revenue falls of these companies underscore the weakness in the industry (IYM).

What Monsanto’s management has to say

Monsanto’s fall in revenue is concerning, and the company is under pressure to look for future opportunities. Recently, Monsanto’s bid to acquire Syngenta (SYT) fell apart.

Now, the company is looking at ways to expand internally. During a recent earnings call, its management stated, “Our strategy is not and was not dependent on large-scale M&A [mergers and acquisitions]. Rather, our strategy is innovation-driven and it’s highly collaborative.”

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