Monsanto Co. (NYSE:MON)

The analysis of the financial data reveals several trends and patterns in the inventory components over the six-year period ending August 31, 2017.

Finished Goods

The finished goods inventory shows a general upward trend from 2012 through 2015, increasing from 1,050 million US dollars to a peak of 1,603 million in 2015. Subsequently, there is a decline in 2016 to 1,404 million, followed by a moderate recovery to 1,477 million in 2017. This suggests initial growth in produced stock available for sale, with a slight adjustment downward and stabilization in the last two years.

Goods in Process

The inventory of goods in process increased steadily from 1,537 million in 2012 to a high point of 1,721 million in 2014. However, after 2014, it shows a consistent decline to 1,446 million by 2017. This pattern indicates that the level of production in the intermediate stages increased early in the period but then reduced over the last three years, possibly reflecting improved efficiency or changes in production strategy.

Raw Materials and Supplies

Raw materials and supplies exhibit a gradual upward trend throughout the entire period, starting from 395 million in 2012 and reaching 561 million by 2017. This increase may signify growing procurement activities or stockpiling of input materials potentially in anticipation of increased production or price volatility.

Inventory at FIFO Cost

The total inventory valued at FIFO cost shows a notable rise from 2,982 million in 2012 to a peak of 3,757 million in 2014. After 2014, it declines to 3,391 million in 2016 and then slightly increases to 3,484 million by 2017. This pattern mirrors the trends seen in the subcomponents, with inventory accumulation reaching a maximum mid-period and then moderating.

Excess of FIFO over LIFO Cost

The excess of FIFO over LIFO cost remains negative throughout the period, fluctuating within a narrow range from -143 million in 2012 to -144 million in 2017. The relative stability suggests consistent inventory cost layering methods and relatively stable price changes affecting inventory valuation.

Inventory, Net

The net inventory (presumably LIFO-based) increased from 2,839 million in 2012 to 3,597 million in 2014, followed by a decline to 3,241 million in 2016 before slightly recovering to 3,340 million in 2017. This trend aligns closely with the FIFO cost inventory, indicating that net inventory level changes largely reflect underlying inventory volume changes rather than changes in inventory costing methodology.

Overall, the data depicts a phase of inventory growth until approximately 2014-2015, followed by a period of reduction or stabilization. The increase in raw materials contrasts somewhat with the declines seen in goods in process and finished goods in the latter years, suggesting possible shifts in inventory management or supply chain dynamics. The stable excess of FIFO over LIFO cost indicates consistent inventory valuation impacts over time.

Inventory Trends

Reported net inventory showed an overall increase from 2012 to 2014, rising from 2,839 million USD to a peak of 3,597 million USD in 2014. Following this peak, inventory levels declined through 2016 to 3,241 million USD, before slightly increasing again in 2017 to 3,340 million USD. Adjusted inventory, which likely accounts for LIFO reserves, followed a similar pattern but consistently reported higher values than the reported figures, suggesting LIFO adjustments increased inventory valuations by approximately 100-150 million USD yearly.

Current Assets

Reported current assets experienced moderate increases from 9,658 million USD in 2012 to a peak of 10,625 million USD in 2015. This was followed by a sharp decline to 8,157 million USD in 2016, with a slight recovery to 8,651 million USD in 2017. Adjusted current assets mirrored this trend closely but reported slightly higher values, indicative of consistent inventory-related adjustments affecting current asset totals.

Total Assets

Total assets remained relatively stable between 2012 and 2015, fluctuating around 20,000 to 22,000 million USD. In 2016, there was a notable decrease in reported total assets to 19,736 million USD, followed by a recovery to 21,333 million USD in 2017. Adjusted total assets showed a similar pattern, consistently registered above reported totals by a small margin, again reflecting the impact of inventory LIFO reserve adjustments on asset valuation.

Shareowners’ Equity

Reported shareowners’ equity exhibited significant volatility, starting at 11,833 million USD in 2012 and increasing to 12,559 million USD in 2013. A sharp decline followed, with equity dropping substantially to 7,875 million USD in 2014 and continuing to fall to 4,534 million USD by 2016. A partial recovery occurred in 2017, reaching 6,438 million USD. Adjusted equity values showed the same trend, with slightly higher amounts due to inventory adjustments. This pattern suggests material events, such as write-downs, restructurings, or losses impacting equity during 2014-2016.

Net Income

Net income attributable to the company increased steadily from 2,045 million USD in 2012 to a peak of 2,740 million USD in 2014. There was a subsequent decline to 1,336 million USD in 2016, followed by a recovery to 2,260 million USD in 2017. Adjusted net income was closely aligned with reported figures, with minor differences attributable to inventory accounting adjustments. The net income trend aligns with the volatility seen in shareowners’ equity, indicating operational or market challenges during the mid-period.

Overall Observations

Inventory and asset figures showed stability with moderate fluctuations over the period when adjusted for LIFO reserves, with adjustments consistently increasing reported amounts slightly. The company experienced a notable disruption in equity and profitability around 2014-2016, characterized by sharp decreases in equity and net income. By 2017, financial metrics demonstrated signs of recovery. The inventory adjustments did not materially alter the overall financial trends but provided a more accurate representation of asset values considering LIFO accounting effects.

Current Ratio

The reported current ratio demonstrates a declining trend from 2.29 in 2012 to 1.35 in 2017, with a slight recovery in 2017 after reaching the lowest point of 1.21 in 2016. The adjusted current ratio follows a similar pattern, starting at 2.32 in 2012 and decreasing to 1.37 by 2017. The consistent proximity of the reported and adjusted values suggests minimal impact from inventory LIFO reserve adjustments on liquidity measures.

Net Profit Margin

The net profit margin exhibits some volatility over the periods. Reported values rise from 15.14% in 2012 to a peak of 17.28% in 2014, then decline significantly to 9.89% in 2016 before rebounding to 15.44% in 2017. Adjusted margins mirror this trend closely, indicating that adjustments have negligible effect on profitability ratios derived from net income.

Total Asset Turnover

Reported total asset turnover remains relatively stable, fluctuating slightly between 0.67 and 0.72 from 2012 to 2017, with a slight decrease to 0.69 in 2017. Adjusted figures are very similar, indicating consistent asset utilization efficiency and minimal distortion caused by LIFO adjustments.

Financial Leverage

There is a notable increase in financial leverage over the observed period. Reported leverage rises from 1.71 in 2012 to a high of 4.35 in 2016, before decreasing to 3.31 in 2017. Adjusted leverage values follow the same trajectory with marginally lower figures. This upward trend indicates increased use of debt or other liabilities relative to equity, potentially amplifying financial risk during these years.

Return on Equity (ROE)

The ROE shows a strong upward trend, moving from 17.28% in 2012 to a peak of 35.1% in 2017, despite a dip around 2016. Adjusted ROE closely aligns with reported values, suggesting that the net income and equity effects of inventory adjustments do not materially alter this key profitability indicator.

Return on Assets (ROA)

ROA follows a similar pattern to ROE and net profit margin, improving from 10.11% in 2012 to around 12.5% between 2013 and 2014, then declining sharply to under 7% in 2016 before partially recovering to about 10.6% in 2017. Adjusted ROA is consistently slightly lower but exhibits the same general trends, indicating that asset earnings relative to total assets experienced fluctuations that coincided with changes in profitability and asset base.

Current Assets

The reported current assets exhibit a fluctuating pattern over the period from 2012 to 2017. There is an initial increase from approximately 9,658 million USD in 2012 to a peak of 10,625 million USD in 2015, followed by a notable decline to 8,157 million USD in 2016, and a slight recovery to 8,651 million USD in 2017. The adjusted current assets, which incorporate LIFO reserve adjustments, follow a similar trajectory but are consistently higher than the reported values. Adjusted current assets peak at 10,779 million USD in 2015, decline sharply in 2016 to 8,307 million USD, and then slightly increase to 8,795 million USD in 2017.

Current Ratio

The reported current ratio shows relative stability between 2012 and 2013 with values around 2.29 and 2.32, respectively. There is a decrease in 2014 to 1.89 and a modest improvement to 2.05 in 2015. A significant decline is observed in 2016, where the current ratio falls to 1.21, before a slight increase to 1.35 in 2017. The adjusted current ratio reflects a similar trend to the reported ratio but is marginally higher throughout all periods, with values starting at 2.32 in 2012 and dropping to 1.37 in 2017.

Overall Trends and Insights

Both reported and LIFO reserve adjusted current assets and current ratios indicate a peak in liquidity position around 2015, followed by a sharp reduction in liquidity in 2016. Although there is some recovery in 2017, neither reported nor adjusted metrics return to the earlier peak levels. The LIFO reserve adjustment consistently improves the current asset and current ratio figures slightly, suggesting that inventory valuation adjustments have a positive, albeit modest, effect on perceived liquidity. The downward trend in current ratios in the latter years signals tightening liquidity, which may warrant further examination into working capital management or operational efficiency during this period.

Net Income Trends

The reported net income attributable to the company rose steadily from 2045 million US dollars in 2012 to a peak of 2740 million in 2014. This was followed by a decline to 2314 million in 2015, with a significant drop to 1336 million in 2016. A pronounced recovery occurred in 2017, bringing net income back up to 2260 million. Adjusted net income showed a very similar pattern, starting slightly lower at 2002 million in 2012 and peaking near 2731 million in 2014 before also decreasing notably in 2016 and recovering partially in 2017.

Net Profit Margin Trends

Reported net profit margin increased from 15.14% in 2012 to a high of 17.28% in 2014, indicating improving profitability relative to revenue during this period. This margin then declined to 15.43% in 2015 and sharply to 9.89% in 2016, mirroring the income drop, before rebounding to 15.44% in 2017. The adjusted net profit margin closely follows this trajectory with slightly different values, consistently marginally lower or higher by fractions of a percent across years.

Comparison of Reported and Adjusted Figures

The adjusted financial data, which accounts for inventory valuation adjustments, closely tracks the reported figures across all years, with minor differences that suggest the inventory LIFO reserve adjustment had a consistent but limited effect on reported profitability and income. The similarity in trends between reported and adjusted data implies that underlying business performance drove the observed financial results more prominently than inventory accounting methods.

Overall Analysis

The data reflect a period of growth and strong profitability up to 2014, followed by a significant downturn in 2016, and a recovery phase in 2017. Both income and margin trends show this cycle clearly, suggesting possible external or internal factors impacting the business in 2015-2016. The recovery in 2017 indicates improved operational or market conditions. The close alignment between reported and adjusted metrics indicates inventory accounting changes had relatively minor influence on understanding the company's core financial performance during these years.

Total Assets

The reported total assets show a general increase from 20,224 million USD in 2012 to a peak of 21,981 million USD in 2014, followed by a slight decline to 19,736 million USD in 2016. In 2017, the assets rebounded to 21,333 million USD. The adjusted total assets, accounting for the inventory LIFO reserve, follow a similar trend—rising from 20,367 million USD in 2012 to 22,141 million USD in 2014, then dipping to 19,886 million USD in 2016 before increasing again to 21,477 million USD in 2017.

Total Asset Turnover

The reported total asset turnover ratio exhibited improvement from 0.67 in 2012 to 0.72 in 2013 and 2014, indicating improved efficiency in utilizing assets to generate sales during this period. However, from 2015 to 2017, the ratio declined slightly and stabilized around 0.68-0.69. The adjusted total asset turnover ratio mirrors this pattern, starting at 0.66 in 2012, peaking at 0.72 in 2014, then decreasing to approximately 0.68 in the final years measured.

Overall Observations

The analysis reveals that total assets grew steadily in the early years, both reported and adjusted, before experiencing a reduction around 2015-2016, with a modest recovery thereafter. Asset turnover improved in the earlier years, reaching its highest levels in 2013-2014, then slightly declined and remained relatively stable. The close alignment of reported and adjusted figures suggests that the LIFO reserve adjustment did not materially affect the overall trends in assets and efficiency ratios during this period.

The data reveals several notable trends in the financial position over the reported years.

Total Assets

Total assets, both reported and adjusted for the LIFO reserve, show a general upward trend from 2012 through 2014, increasing from approximately 20,224 million USD in 2012 to around 22,141 million USD in 2014. This growth plateaus in 2015 with assets holding steady near 22,000 million USD. However, in 2016, there is a marked decrease in total assets down to about 19,736 million USD reported and 19,886 million USD adjusted. The following year, 2017, sees a recovery with total assets rising again above 21,000 million USD.

Shareowners’ Equity

A contrasting trend is observed in shareowners’ equity. Both reported and adjusted equity start at around 11,833 million USD and 11,976 million USD respectively in 2012, rising slightly in 2013. Post-2013, equity declines sharply, dropping to 7,875 million USD reported and 8,035 million USD adjusted in 2014. The downward trajectory continues through 2016, reaching a low near 4,534 million USD reported and 4,684 million USD adjusted, suggesting significant erosion of equity. In 2017, equity shows some recovery but remains substantially lower than the earlier years.

Financial Leverage

Financial leverage, defined as the ratio of total assets to equity, rises steadily from 2012 through 2016, indicating increased use of debt or other liabilities relative to equity. Reported leverage moves from about 1.71x in 2012 to a peak of 4.35x in 2016, while adjusted leverage follows a similar pattern. This increase in leverage reflects the declining equity base combined with relatively less volatile total assets. In 2017, financial leverage decreases to approximately 3.31x reported and 3.26x adjusted, indicating some deleveraging following the peak leverage year.

Adjustment Impact

The adjustments for the LIFO reserve produce small but consistent increases in total assets and equity across all years, with adjusted figures marginally higher than reported values. The adjusted financial leverage ratios are generally slightly lower than the reported ratios, reflecting the impact of increased equity and assets due to inventory adjustments.

Overall, the data depicts a period characterized by asset growth in the early years, followed by contraction and significant reductions in shareholder equity, driving up leverage ratios which peak in 2016 before beginning to moderate. The LIFO reserve adjustment modestly inflates asset and equity values, slightly tempering leverage measures but not altering the fundamental trends.

Net Income Trends

The reported net income attributable to the company generally increased from 2012 to 2014, rising from 2045 million USD in 2012 to a peak of 2740 million USD in 2014. Following this peak, there was a noticeable decline in 2015 and more markedly in 2016, bottoming out at 1336 million USD. In 2017, net income recovered significantly to 2260 million USD. The adjusted net income figures follow a similar pattern, confirming consistency in the adjustments made for inventory LIFO reserve effects.

Shareholders' Equity Trends

Reported shareholders’ equity declined sharply after 2013, dropping from 12559 million USD in 2013 to 4534 million USD in 2016. Although there was a slight rebound in 2017 to 6438 million USD, the equity level remained substantially lower than the early years. The adjusted shareholders’ equity, which accounts for LIFO reserve effects, displays a similar downward trajectory and slight recovery, indicating that inventory accounting adjustments did not alter the overall trend materially.

Return on Equity (ROE) Trends

Both reported and adjusted ROE metrics show a strong upward trend from 2012 to 2014, with reported ROE increasing from 17.28% to 34.79% and adjusted ROE from 16.72% to 33.99%. From 2014 onwards, ROE declined slightly, though it remained relatively high, with minor fluctuations before ending at 35.1% reported and 34.24% adjusted in 2017. This suggests that despite the reduction in shareholders’ equity, the company maintained strong profitability relative to its equity base.

Impact of LIFO Reserve Adjustments

The adjusted figures consistently show only marginal differences from the reported numbers across net income, equity, and ROE. This indicates that adjusting for inventory LIFO reserves slightly lowers equity and income values but does not significantly impact the overall financial performance trends or the assessment of profitability.

Overall Summary

The company exhibited a growth phase in net income and ROE through 2014, followed by a period of contraction in earnings and equity over the next two years. The rebound in both net income and equity in 2017 signals recovery. Throughout this period, elevated ROE ratios reflect effective utilization of equity, despite the decline in absolute shareholders’ equity. Adjustments for LIFO reserves have a limited effect on these trends, confirming the robustness of the core financial indicators.

Net Income Trends

The reported net income shows an overall upward trend from 2012 to 2014, peaking at 2740 million US dollars in 2014. Following this peak, a notable decline occurs in 2015 and 2016, with the lowest point at 1336 million US dollars in 2016, before rebounding to 2260 million US dollars in 2017. The adjusted net income follows a very similar pattern, with amounts slightly lower than reported figures but reflecting consistent tendencies over the periods.

Total Assets Analysis

The total assets, both reported and adjusted, increase gradually from 2012 to 2014, reaching their highest levels in 2014 and 2015, approximately 21981 and 22074 million US dollars respectively. However, a decline in asset values is observed in 2016, with reported assets dropping to 19736 million and adjusted assets to 19886 million US dollars. In 2017, asset values recover moderately but do not return to the previous peak levels, reflecting potential asset revaluation or disposals during the mid-period.

Return on Assets (ROA) Dynamics

Both reported and adjusted ROA percentages reflect consistent trends, starting at around 10% in 2012 and improving to above 12% in 2013 and 2014, which aligns with peak net income years. Subsequently, a decline in ROA is evident in 2015 and 2016, reaching a low of approximately 6.7% in 2016, mirroring the drop in net income and assets. A recovery is notable in 2017 with ROA values increasing again to around 10.5%. The adjusted ROA closely matches the reported figures, indicating that inventory adjustments have a limited impact on profitability ratios.

Insights and Implications

The data indicates cyclical financial performance with peaks in 2014 followed by a trough in 2016 across key metrics such as net income, total assets, and ROA. The recovery in 2017 suggests that the company managed to stabilize and improve operational efficiency or market conditions after the mid-cycle downturn. The close alignment between reported and adjusted figures signals that LIFO reserve adjustments have minimal effect on the overall financial trends, implying that inventory accounting methods do not significantly distort profitability and asset metrics during this period.