1. What is Monsanto’s business plan? How is the marketing plan affecting the income statement and balance sheet?
Monsanto organized its business in 2 segments: Agricultural productivity & Seeds and Genomics. Over the long run, Monsanto planned to shift its focus away from the herbicides market, which was fast becoming a commodity business and focus more on crops and seeds. The emphasis on the seeds and genomics segment was clear – company’s capabilities in plant breeding and biotechnology research are generating a rich and balanced product pipeline that will drive long-term growth. Roundup brand will just be a source of cash to propel the research and development of the seeds and genomics segment.
Monsanto’s stock price declined modestly compared to other companies partly because of Monsanto’s star product Roundup – an agricultural herbicide with increase in volume and average selling price. Earnings more than doubled due to increase of 36% in sales.
Income statement shows no significant changes in %. Everything has increased in accordance to sales increase proportionally. Cost of Goods sold has decreased by 3%, and Selling and administrative expenses have increased as well. R&D investment decreased in accordance with sales resulting in lower total operating expenses (% by common size). Other expenses have been returned (this is probably written off bad debt expense return from Accounts receivable) and interest expense is the same despite increase of sales.
Monsanto’s balance sheet and liquidity positions are extremely strong. Cash from operations has averaged 24% of sales over the past 5 years, allowing the firm to consistently reinvest in product R&D and grow inorganically through the regular acquisitions of seed and chemical companies. Monsanto can easily cover their debt obligations of $1.09 billion with $1.63 billion in cash at the end of FY2008. Even through the recession, Monsanto has expanded their top-line...