monsanto 01-24-05_low

1

SEMINISACQUISITIONINVESTOR CONFERENCE CALL

Jan. 24, 2005

2

Forward-Looking Statements

Certain statements contained in this presentation, such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, currency impact, business and financial plans and other non-historical facts are "forward-looking statements." These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company’s actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: the company's exposure to various contingencies, including those related to Solutia Inc., litigation, intellectual property, regulatory compliance (including seed quality), environmental contamination and antitrust; successful completion and operation of recent and proposed acquisitions; fluctuations in exchange rates and other developments related to foreign currencies and economies; increased generic and branded competition for the company's Roundup herbicide; the accuracy of the company’s estimates and projections, for example, those with respect to product returns and grower use of our products and related distribution inventory levels; the effect of weather conditions and commodity markets on the agriculture business; the success of the company’s research and development activities and the speed with which regulatory authorizations and product launches may be achieved; domestic and foreign social, legal and political developments, especially those relating to agricultural products developed through biotechnology; the company’s ability to successfully market new and existing products in new and existing domestic and international markets; the company’s ability to obtain payment for the products that it sells; the company's ability to achieve and maintain protection for its intellectual property; the effects of the company's accounting policies and changes in generally accepted accounting principles; the company's ability to fund its short-term financing needs; and other risks and factors detailed in the company's filings with the U.S. Securities and Exchange Commission. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention or obligation to revise or update any forward-looking statements or any of the factors that may affect actual results, whether as a result of new information, future events or otherwise.

3

Non-GAAP Financial Information

This presentation uses the non-GAAP financial measures of “free cash flow,” ongoing earnings per share (EPS), and Return on Capital (ROC). We define free cash flow as the total of cash flows from operating activities and cash flows from investing activities. A non-GAAP EPS financial measure, which we refer to as EPS on an ongoing basis, may exclude the impact of restructuring charges, charges associated with the settlement of litigation, gains and losses on the sale of assets, and certain other items. The specific items that are excluded from, and result in, our non-GAAP EPS financial measure are clearly identified as such in this presentation. ROC means net income exclusive of after-tax interest expenses, divided by the average of the beginning year and ending year net capital employed, as defined in the reconciliation at the end of this presentation. The presentation of free cash flow, ongoing EPS and ROC is intended to supplement investors’ understanding of our operating performance. These non-GAAP financial measures may not be comparable to similar measures used by other companies. Furthermore, these non-GAAP financial measures are not intended to replace net income (loss), cash flows, financial position, or comprehensive income (loss), as determined in accordance with accounting principles generally accepted in the United States. The non-GAAP financial measures used in this presentation are reconciled to the most directly comparable financial measures calculated and presented in accordance with GAAP, which can be found at the end of this presentation.

Fiscal Year

In this presentation, unless otherwise specified:

References to years, or to fiscal years, 2001 through 2006 are on a fiscal year basis and refer to the 12-month period ending August 31.

4

Seminis Acquisition Completes Monsanto’s Transformation as a Leader in Seeds and Traits

Definitive agreement to acquire SeminisLeading global vegetable and fruit seed company

Acquisition price of $1.4 billion Plus performance-based payment of up to $125 million payable by end of FY 2007Financed with cash and some incremental debt

Expected to be accretive earnings and free cash flow in FY 2006

Transaction expected to close in FY 2005 Q3, pending regulatoryapprovals

5

Value Shift from Crop Chemicals to Seeds and Traits Already Under Way

Sources: U.S. 1996-2003 Doane Agrotrak & Seed Studies; 2008 Monsanto estimatesCalendar years

CROP CHEMICALS GERMPLASM BIOTECH TRAITS

1996 $7.6 BILLION

2003$8.4 BILLION

2008F $9.1 BILLION

$3.0

$0.1

$4.5$3.5

$1.3

$3.6

$3.8

$2.7

$2.6

GLOBAL AGRICULTURAL INDUSTRY REVENUE

6

Vegetable Seed Is Next Logical Strategic Move – High Value, High Growth Segment in Agriculture

VEGETABLE AND FRUIT…… Consumption grew at a 4.2% CAGR

from 1980 to 20011

… Production grew 3.3 times the rate of global population expansion from 1990 to 20002

… Harvested acres increased 3.2% annually from 1990 to 2000, compared with 0.3% for overall agricultural harvested acres3

… Seed revenue projected to grow at 4% CAGR globally from 2000 through 20064

KEY TRENDS

TO

TA

L M

ET

RIC

TO

NS

(IN

MIL

LIO

NS

)

GLOBAL VEGETABLE CONSUMPTION

0

200

400

600800

1000

1200

1400

1600

1998 2002 2006 2010

NORTH AMERICA

REST OF WORLDEUROPE

ASIA

Source: DatamonitorCalendar years

Sources: 1Seminis estimate 2004 10K; 2United Nations Food and Agriculture Organization; 3Ibid.; 4Seminis estimate

7

MARKET LEADERSHIP

Seminis Provides Ready-Made, Leading Position in Untapped Seed Segment for Monsanto

PROJECTED VEGETABLE SEED INDUSTRY GROWTH SEMINIS 2004 SALES BY MARKET POSITION

MORE THAN 65% OF REVENUE DERIVED FROM PRODUCTS WITH #1 MARKET POSITION

MORE THAN 20% OF REVENUE DERIVED FROM PRODUCTS WITH #2 MARKET POSITION

1500

1700

1900

2100

2300

2500

2700

2900

2000 2001 2002 2003 2004 2005F 2006F

GLO

BA

L S

EE

D S

ALE

S (

$ M

ILLI

ON

S)

Source: Seminis estimatesCalendar years

4% CAGR

8

0

300

600

900

1200

1500

1800

MONSANTODUPONT/PIO

NEER

SYNGENTALIM

AGRAIN KWSADVANTA

BAYER

0

100

200

300

400

500

SEMINIS

SYNGENTA

LIMAGRAIN

SAKATA

TAKIINUNZA

BEJORIJ

K ZWANN

Source: Seminis estimatesCalendar year

MARKET LEADERSHIP

Seminis and Monsanto Hold Leading Seed Market Positions

2003 VEGETABLE SEED SALES

$ M

ILLI

ON

S

Sources: Phillips McDougall; Monsanto estimatesCalendar year for all companies but MonsantoAdvanta now part of Syngenta

2003 CORN & SOYBEAN SEED & TRAIT SALES

$ M

ILLI

ON

S

CORN

SOYBEANS

9

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Sources: Phillips McDougall, Monsanto reportsCalendar year for all companies but MonsantoSyngenta pro forma for acquisition of Advanta and Golden Harvest (Sources: Phillips McDougall and news releases)

MARKET LEADERSHIP

Combined Companies Raise the Bar for Leadership in Global Seeds

2003 SEED AND TRAIT REVENUE

$ M

ILLI

ON

S

DUPONT SYNGENTA KWS TAKII DELTA & PINE LAND

DOW

MONSANTO PRO FORMA

MONSANTO LIMAGRAIN SEMINIS BAYER SAKATA

10

0

20

40

60

80

100

MARKET LEADERSHIP

Monsanto Becomes the Leader in Fastest Growing Ag Market Segments

2003 GLOBAL MARKET SHARE IN MAJOR AGRICULTURAL SEGMENTS

TO

TA

L M

AR

KE

T S

HA

RE

(P

ER

CE

NT

)

MONSANTO FIRST LEADING COMPETITOR SECOND LEADING COMPETITOR

INSECTICIDES HERBICIDES CORNSEED

SOYBEANSEED

TRAITSVEGETABLESEEDS

MAJOR MARKET SEGMENTS

Source: Insecticides, Herbicides: Phillips McDougall for calendar year 2003Source: Corn, Soybeans: Monsanto estimates for fiscal year 2004; includes Monsanto branded and licensed shareSource: Vegetables: Pro forma for acquisition of Seminis

11

MARKET LEADERSHIP

Together, Monsanto and Seminis Are New Standard for Leadership in Large- and Small- Acre Crops

GLOBAL SEED MARKET SHARE

GLOBAL SEED MARKET

POSITION

SEED & TRAIT GROSS

PROFIT AS % OF SALES

CORN1, 2 41% 1 57%SOYBEANS1, 2 25% 1 63%

VEGETABLES3 64%

Beans 31% 1

Cucumber 38% 1

Hot Pepper 34% 1

Sweet Pepper 29% 1

Tomato 23% 1

Onions 25% 2

LAR

GE

-A

CR

ES

MA

LL-A

CR

E

1 Monsanto branded and licensed market share2 Source: Monsanto reports and estimates for Monsanto fiscal year 20043 Source: Seminis reports and estimates for Seminis fiscal year 2004

12

FINANCIAL GROWTH

Geographic Presence Further Diversifies withAddition of Seminis

SEMINIS1 MONSANTO2 MONSANTO PRO FORMA3

38%EUROPE/AFRICA

24%NORTH

AMERICA

15%LATIN

AMERICA

23%ASIA

PACIFIC

14%EUROPE/AFRICA57%

NORTHAMERICA

20%LATIN

AMERICA

9%ASIA

PACIFIC

16%EUROPE-AFRICA

54%NORTH

AMERICA

20%LATIN

AMERICA

10%ASIA

PACIFIC

1 Source: Seminis reports for Seminis fiscal year 20042 Source: Monsanto reports for Monsanto fiscal year 20043 Source: Pro forma for acquisition of Seminis

GLOBAL SALES BY WORLD AREA

13

TECHNOLOGY INNOVATION

Technological Capabilities Are Complementary; Monsanto’s Research Now Leveraged More Broadly

GENOMICS Mapping of plant genes to understand their structure and role inplant functions

Cross-pollination of plants with desirable qualities to develop improved plants in successive generations

Use of DNA markers for genes with physical measurement of traits to manage plant breeding programs. Significantly accelerates the efficiency of bringing new varieties to market.

Application of advanced analytical methods and technologies to identify composition of food and feed traits.

Application of scientific knowledge to transfer beneficial genetic traits to enhance plants’ growth or to provide nutritional or other benefits to farmers, food and feed processors, or consumers.

SM

ALL

-AC

RE

CR

OP

S

CONVENTIONAL BREEDING

CROP ANALYTICS

BIOTECHNOLOGY

MOLECULAR BREEDING

LAR

GE

-AC

RE

CR

OP

S

14

KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED

ASI BRAZIL ARGENTINA

80M 30M 6M

2% 35% 49%

LICENSEDBRANDU.S.

33%14%


Diversity of Corn Seed Breeding Is Driving Market Share Growth; Poised to Expand

Corn Breeding

6-to-8 year process undertaken to accelerate breeding:

Late 1990s: Acquired 36 major corn breeding programs (12 countries X average of 3 companies per country)

Early 2000s: Crossed genetic lines across acquired companies

Today: Launching new hybrids from inter-company crosses

DISCOVERY PHASE IProof of Concept

PHASE IIEarly Development

PHASE IIIAdv. Development

PHASE IVPre-Launch

LAUNCH

GENOMICS


MOLECULAR BREEDING

CROP ANALYTICS

CONTRIBUTING PLATFORMS

WHAT IS IT?

THE MOST ADVANCED

GERMPLASM CREATES THE

BEST-YIELDING NEW CORN

HYBRIDS FOR FARMERS

15


Seminis Has Largest, Most Diverse Germplasm Pool in Vegetable Industry

Vegetable Breeding

Germplasm investment is nearly double that of closest competitor

75% of R&D devoted to breeding

Vegetable seed germplasm is proprietary, scarce and expensive

Breeding strongly linked to market opportunities and refined forspecific markets

Focus on quality, taste, disease control and health benefits

DISCOVERY PHASE IProof of Concept

PHASE IIEarly Development

PHASE IIIAdv. Development

PHASE IVPre-Launch

LAUNCH

GENOMICS


MOLECULAR BREEDING

CROP ANALYTICS

CONTRIBUTING PLATFORMS

WHAT IS IT?

LARGEST AND MOST DIVERSE

GERMPLASM RESOURCE WITH

1.5 MILLION BREEDING LINES

KEY MARKET POSITION

MARKET POSITION

NAFTALATIN

AMERICAEUROPE-AFRICA

1 1 1

ASIA PACIFIC

1

KEY BRANDS

16


Seed Breeding Research Continually Refreshes Portfolio in Both Large and Small Acre Crops

0%

5%

10%

15%

20%

25%

2002 2003 2004 2005F

SEMINIS FRESHNESS INDEX: PERCENT OF SALES FROM NEW BREEDING PRODUCTS1

MONSANTO FRESHNESS INDEX: PERCENT OF CORN HYBRIDS WITHIN PRODUCT MIX IN 3-YEAR PERIOD2

0%

30%

60%

90%

2002 2003 2004 2005F

1 Source: Seminis estimates for Seminis fiscal years2 Source: Monsanto estimates for Monsanto fiscal years

17

FINANCIAL GROWTH

Seminis Brings Historically High-Margin Businesses to Monsanto

2002 2003 2004

NET SALES $453M $477M $526M

GROSS PROFIT AS % OF SALES1

62% 62% 64%

SEMINIS KEY FINANCIAL DATA

Source: Seminis reports for Seminis fiscal years1Source: Seminis gross profit in 2004 excludes effect of one-time adjustment for removal of inventory step-up premium costs

18

FINANCIAL GROWTH

Gross Profit Growth Accelerates with Addition of Seminis to Monsanto Businesses

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2004 2005F 2006F

SEEDS AND TRAITS ALL OTHER ROUNDUP AND OTHER GLYPHOSATE-BASED HERBICIDES

4% CAGR

GROSS PROFIT

$ M

ILLI

ON

S

$ M

ILLI

ON

S

MONSANTO MONSANTO PRO FORMA1

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2004 2005F 2006F

7% CAGR

1 Pro forma for acquisition of Seminis

19

0

5

10

15

20

25

30

2004 2005F 2006F

FINANCIAL GROWTH

R&D, SG&A as a Percent of Sales in Range with Monsanto’s Prior Goals

MONSANTO PRO FORMA1:SG&A AS PERCENT OF SALES

MONSANTO PRO FORMA1:R&D AS PERCENT OF SALES

1 Pro forma for acquisition of Seminis

0

3

6

9

12

2004 2005F 2006F

20

FINANCIAL GROWTH

Guidance for Ongoing EPS Reflects Addition ofSeminis Earnings

BASE MONSANTO GUIDANCE

UPSIDE MONSANTO GUIDANCE

PRO FORMA FOR ACQUISITION OF SEMINIS

EPS ON AN ONGOING BASIS

$1.00

$1.25

$1.50

$1.75

$2.00

$2.25

$2.50

2004A 2005F 2006F

21

FINANCIAL GROWTH

Acquisition Also Contributes to Free Cash Generation Near-Term

FREE CASH FLOWCurrent $500M Share Repurchase Program Will Continue; Scheduled Completion In July 2006

Dividends Will Continue To Be Considered To Return Additional Value To Shareowners

-$800

-$550

-$300

-$50

$200

$450

$700

$950

PRO FORMA FOR ACQUISITION OF SEMINIS

2004 2005F 2006F

GUIDANCE PRE-ACQUISITION

GUIDANCE POST-ACQUISITION

22

FINANCIAL GROWTH

Return on Capital Targets in Line with Previously Stated Goals

RETURN ON CAPITAL TARGETS

0

2

4

6

8

10

12

2003 2004 2005F 2006F

PE

RC

EN

T

BASE TARGET UPSIDE TARGET

23

Seminis Acquisition Leverages Market and Research Leadership to Generate Greater Near- and Long-Term Growth

Market LeadershipReady made, global reach into high-value segments of agriculture

Technological InnovationLeading, high-margin business with common technologies and opportunities to share breeding know-how

Financial GrowthCreates new growth proactivelyBuilds on current commitments

SUMMARY

24

Reconciliation of Non-GAAP Financial Measures

Reconciliation of Non-GAAP EPS

Reconciliation of Free Cash Flow

$ Millions Fiscal Year 2005 Target

12 Months Ended Aug. 31, 2004


Net Cash Provided (Required) by Operations $1,050 $1,261 $1,128

Net Cash Provided (Required) by Investing Activities $(1,800) $(262)

Free Cash Flow $(750) $999 $646

Net Cash Provided (Required) by Financing Activities N/A $(243) $(502)

Net Increase (Decrease) in Cash and Cash Equivalents N/A $756 $144

Fiscal Year 2006 Target

$975

$(300)

$675

N/A

N/A


$855

$(274)

$581

$(711)

$(130)


$740

$(665)

$75

$123

$198

$(482)



Net Income (Loss) $0.86-$1.06 $2.04 - $2.22

Estimated Purchase Accounting Adjustments $0.65 - $0.70Tax Benefit on Loss from Sale of European Wheat andBarley Business

Net Income (Loss) from Ongoing Business $1.85 - $2.00 $2.04 - $2.22

$ per share

Solutia-Related Charge $0.68


$0.99

$0.36

--

$1.61

--

Restructuring Charges -- Net --$0.022004 Discontinued Operations and Related

Restructurings-- Net

--

--

--

--

$0.24Goodwill Impairment Charge for Global Wheat Business

-- --

-- --

--

--

$(0.39)

25

Reconciliation of Non-GAAP Financial Measures

Reconciliation of Return on Capital

$ MillionsTotal Monsanto Company and Subsidiaries:

Operating Profit After-tax (excluding certain items)Average CapitalReturn on Capital

Operating Profit After-tax (excluding certain items):Net IncomeAdjustments for certain items, after-tax:

Restructuring Charges – NetDiscontinued Operations and Related Restructuring Adjustment of GoodwillCumulative Effect of a Change in Accounting PrinciplePCB Litigation Settlement Expense – Net

Interest Expense -- NetTax on Interest Expense -- Net (at 38% tax rate)(1)

Operating Profit After-tax (excluding certain items)

Average Capital:Short-Term and Long-Term DebtShareowners’ EquityCash and Cash EquivalentsCash for OperationsTotal CapitalPrior Period CapitalAverage Capital

12 Months Ended

Aug. 31, 2004

12 Months Ended

Aug. 31, 2003$ 475 $ 417

6,191 6,8467.7% 6.1%

$ 267 $ 68

98 264 15

64 —— 12— 25267 69

(25) (25)$ 475 $ 417

As of Aug. 31,2004 2003 2002

$1,508 $1,527 $1,9195,258 5,156 5,258

(1,037) (281) (137)125 125

5,854 6,527 7,1656,527 7,165

$6,191 $6,846

125

(1) Represents estimated combined federal and state statutory tax rates for the United States.

monsanto 01-24-05_low

Economy & Finance

Transcript of monsanto 01-24-05_low