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FOURTH-QUARTER AND
FISCAL-YEAR 2007
FINANCIAL RESULTS



October 10, 2007


                     1
Forward-Looking Statements

Certain statements contained in this presentation are quot;forward-looking statements,quot; su...
Non-GAAP Financial Information

This presentation may use the non-GAAP financial measures of “free cash flow,” earnings pe...
PERFORMANCE SUMMARY


 Financial Summary



                                Fourth                   Fourth              F...
PERFORMANCE SUMMARY



 Ongoing and As-Reported Earnings


                                          Fourth               ...
STRATEGIC REVIEW

Monsanto Extended Seeds and Traits Leadership in 2007

                                            2007:...
STRATEGIC REVIEW

 Consistent Share Gains in Global Corn Markets Contributes
 Solid Growth

            Corn
             ...
STRATEGIC REVIEW

 With Increased Ramp Up of Triple Stacks, Trait Opportunity in
 U.S. Has Expanded

                     ...
STRATEGIC REVIEW

 Significant Growth Opportunity Lies in Expansion of Existing
 Commercial Biotech Traits Globally

     ...
STRATEGIC REVIEW

Pipeline Has Some Likely Blockbusters and Some
Hidden Gems
                                    BIOTECH T...
FINANCIAL REVIEW


 2007 Performance Reflects Extraordinary Performance
 in Extraordinary Year for Agriculture

          ...
FINANCIAL REVIEW


 2008 Again Projects Double-Digit Earnings Growth,
 Strong Cash Generation and Improved Margins

      ...
FINANCIAL REVIEW


 Earnings Growth and Margin Expansion Reflect Strong
 Growth Opportunities Through End of Decade


    ...
Reconciliation of Non-GAAP Financial Measures
    Reconciliation of Free Cash Flow
                                       ...
Reconciliation of Non-GAAP Financial Measures




   Reconciliation of Non-GAAP EPS
                                      ...
Reconciliation of Non-GAAP Financial Measures

    Reconciliation of Return on Capital
 $ Millions
                       ...
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Monsanto Q4 2007 Financial Results

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Monsanto Q4 2007 Financial Results

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Transcript of "Monsanto Q4 2007 Financial Results"

  1. 1. FOURTH-QUARTER AND FISCAL-YEAR 2007 FINANCIAL RESULTS October 10, 2007 1
  2. 2. Forward-Looking Statements Certain statements contained in this presentation are quot;forward-looking statements,quot; such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. 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: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits, including proceedings related to Solutia Inc.; developments related to foreign currencies and economies; successful completion and operation of recent acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's most recent periodic report to the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this presentation. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results. Trademarks Trademarks owned by Monsanto Company and its wholly-owned subsidiaries are italicized in this presentation. All other trademarks are the property of their respective owners. © 2007 Monsanto Company 2
  3. 3. Non-GAAP Financial Information This presentation may use the non-GAAP financial measures of “free cash flow,” earnings per share (EPS) on an ongoing basis and ROC. We define free cash flow as the total of cash flows from operating activities and investing activities. A non-GAAP EPS financial measure, which we refer to as on-going EPS, excludes certain after-tax items that we do not consider part of ongoing operations, which are identified in the reconciliation. ROC means net income (without the effect of certain items) 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. Our presentation of non- GAAP financial measures is intended to supplement investors’ understanding of our operating performance. 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. Furthermore, these non-GAAP financial measures may not be comparable to similar measures used by other companies. 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. Monsanto is unable to provide a reconciliation of the 2008 ROC goal to projected net income and financial position for 2008 with out unreasonable effort. As shown in the ROC reconciliation for the previous year, the calculation of ROC is complex, and Monsanto does not have sufficient information at this point in the fiscal year to reasonably estimate its operating profit after-tax and average capital for 2008 due to market and other conditions that our outside of Monsanto’s control. With respect to the time period prior to Sept. 1, 2000, references to Monsanto in this presentation also refer to the agricultural business of Pharmacia. FISCAL YEAR: References to year, or to fiscal year, are on a fiscal year basis and refer to the 12-month period ending August 31. 3
  4. 4. PERFORMANCE SUMMARY Financial Summary Fourth Fourth Fiscal Fiscal Change Change Quarter Quarter Year Year 2007 2006 2007 2006 NET SALES $1,573M $1,390M 13% $8,563M $7,294M 17% GROSS $653M $480M 36% $4,286M $3,519M 22% PROFIT NET INCOME $(210)M $(144)M (46)% $993M $689M 44% (LOSS) DILUTED EPS ON AS- $(0.39) $(0.27) (44)% $1.79 $1.25 43% REPORTED BASIS FREE CASH $(57)M $1,049M NM FLOW Note: EPS figures reflect the stock split effective July 28, 2006 4
  5. 5. PERFORMANCE SUMMARY Ongoing and As-Reported Earnings Fourth Fourth Fiscal Year Fiscal Year Quarter 2007 Quarter 2006 2007 2006 Diluted Earnings $(0.39) $(0.27) $1.79 $1.25 Per Share Loss (Income) on $(0.13) $0.01 $(0.13) -- Discontinued Operations In-Process R&D Write-Off Related to $0.34 $0.34 -- Delta & Pine Land Acquisition Tax Charge on -- $0.04 -- $0.04 Repatriated Earnings Cumulative Effect of -- $0.01 -- $0.01 Change in Accounting Principle Diluted Earnings $(0.18) $(0.21) $2.00 $1.30 Per Share from Ongoing Basis Note: EPS figures reflect the stock split effective July 28, 2006 5
  6. 6. STRATEGIC REVIEW Monsanto Extended Seeds and Traits Leadership in 2007 2007: LEADERSHIP INITIATIVES U.S. Corn Cotton Platform DEKALB grew 4 share points to 23 percent, ASI grew 1 point Completed acquisition of Delta and Pine Land organically to 9 percent Triple penetration was >40% for DEKALB; Should be >50% Started Delta and Pine Land integration, with emphasis for DEKALB, ASI and leading licensees in 2008 on breeding and accelerated trait penetration after Delta Expanded trait penetration, increased end-of-decade targets and Pine Land lost share in 2007 by >35% Signed SmartStax collaboration with Dow for first-ever 8- Bollgard and Bollgard II total penetration grew from 8M way gene stack expected to be available in 2010 to 14M acres in India International Corn Seminis EU27 grew 1 share point to 14 percent Total revenues grew 8% to >$600M South Africa grew 2 share points totaling 12 in 3 years Portfolio-wide price increases of 3-4% Argentina grew 5 points Completed trimming product portfolio Brazil lost 4 share points Strong progress on marker development, with >1,000 markers in development for 9 crops Recently acquired Agroeste in Brazil, adding 10 share points and new germplasm library for breeding Global Biotech Traits R&D Pipeline Roundup Ready soybean penetration in Brazil was 50%, Signed yield-and-stress R&D collaboration with BASF to against target of 45% increase volume and speed of research Argentina approved YieldGard Corn Borer with Roundup Advanced 70% of pipeline projects in 2 years Ready Corn 2 stack CTN BIO in Brazil completed first major approval for Roundup RReady2Yield first second-generation soybean YieldGard Corn Borer trait to earn U.S. and Canadian regulatory approval, placing it on track for commercial introduction Eight countries in Europe planted more than 200,000 acres of YieldGard Corn Borer 6
  7. 7. STRATEGIC REVIEW Consistent Share Gains in Global Corn Markets Contributes Solid Growth Corn 2007 PERFORMANCE1 MARKET FUNDAMENTALS SITUATION • In U.S., DEKALB earned 4 2007 HYBRID 3-YEAR TREND: 2007 MARKET SIZE SHARE POINT SHARE POINT CHANGE points in 2007 for total (ACRES) CHANGE (’04-’07) share of 23%, doubling its BRAND SHARE share in 5 years NORTH AMERICA • Early focus on high-value +4 temperate hybrids has led U.S. 91M 23% +9 to consistent share gains EUROPE-AFRICA in key countries OUTLOOK +1 Europe (EU 27) 27M 13% +3 • Continued targeting of 1 +2 South Africa 6M 51% +13 to 2 share point gains in LATIN AMERICA all regions except Brazil, where plan is to stabilize -4 30%2 Brazil 23M -5 share • Increased emphasis on +5 Argentina 8M 40% +5 breeding in tropical ASIA-PACIFIC hybrids planned to stop share loss in Brazil +4 India 7M 39% +10 1. Reflects expectations for share performance for 2007 planting season; For Brazil and Argentina reflects the 2006-2007 planting season 2. With the acquisition of Agroeste in Brazil in September 2007, this share increases another 10 points 7
  8. 8. STRATEGIC REVIEW With Increased Ramp Up of Triple Stacks, Trait Opportunity in U.S. Has Expanded ORIGINAL UPDATED AVERAGE Global Biotech Traits 2010 ACRE 2010 ACRE REMAINING TRAIT CATEGORY OPPORTUNITY OPPORTUNITY OPPORTUNITY SITUATION CIRCA 2005 CIRCA 2007 (BASED ON 2007 PENETRATION) (IN MILLIONS OF ACRES) (IN MILLIONS OF ACRES) • Trait acre opportunities GLYPHOSATE- 60M 80M 27% increased, reflecting the TOLERANT CORN expansion of acres, CORN-BORER 50-60M 60-70M 35% greater demand for triple CONTROL stacks and prevalence of ROOTWORM insect pressure 25-30 45-55M 58% CONTROL OUTLOOK 135-150M 185-205M 38% • With current traits, there’s headroom for 35+% INCREASE growth of more than 35% through 2010 TRIPLE-STACK PENETRATION DEKALB Brand ASI Brands Leading Licensees All Licensees 2007 2008F 2007 2008F 2007 2008F 2007 2008F 42% 50%+ 34% 50%+ 29% 50%+ 24% 35%+ 8
  9. 9. STRATEGIC REVIEW Significant Growth Opportunity Lies in Expansion of Existing Commercial Biotech Traits Globally GLOBAL MARKET OPPORTUNITY Global Biotech Traits MARKET OPPORTUNITY FOR BIOTECH TRAITS THROUGH 20101 SITUATION SOYBEANS COTTON CORN • Biotech traits are now BOLLGARD ROUNDUP ROUNDUP YIELDGARD approved for planting in ROUNDUP AND YIELDGARD READY READY CORN READY BOLLGARD ROOTWORM CORN 2 BORER all major agricultural (FLEX) II regions U.S. 70M 10-15M 6-8M 80M 60-70M 45-55M OUTLOOK Brazil 50-60M 3M 2M 15-20M 15-20M 5M • As is the case in the Argentina 39M - - 9M 7M 5M U.S., largest category of opportunity India - 15-20M 15-20M 6M 6M - internationally is corn Europe(EU27) 1M - - 24M 8M 5M trait adoption • With current traits, South Africa 0.2M 0.15M 0.15M 6M 4M - international opportunity 0.5M- 0.5M- still exists to nearly Australia - - - - 0.8M 0.8M triple to approximately 270M acres from 2007 160.2- 28.7- 23.7- 140- 100- 60-70M Total Markets penetration of 170.2M 39M 31M 145M 115M approximately 100M acres 2007 23-33%2 69-91%3 79-84% 41-43% 43-49% 30-35% Penetration 80M Targets marked in yellow represent FY2007 updates 1. Market Opportunity reflects total acres where technology is applicable, not necessarily acres projected for penetration by 2010. 2. U.S. penetration is split between Roundup Ready and Roundup Ready Flex in 2007. 3. Primarily Bollgard penetration; opportunity to expand to second generation technology. 9
  10. 10. STRATEGIC REVIEW Pipeline Has Some Likely Blockbusters and Some Hidden Gems BIOTECH TRAIT PIPELINE ANNUAL R&D CYCLE: SEEDS & TRAITS Yield and stress potential exploding Drought tolerance in corn expected to be first of a rapid series of blockbuster traits coming from new collaboration with BASF Soybeans are emerging from corn’s shadow Roundup RReady2Yield is first second-generation soybean trait to earn U.S. approval, and will become new platform for stacked offerings in soy First product developed exclusively for an ex-US Q1 Q4 market will be in soybeans Soybeans could be a 3+ stack by middle of next decade Q2 Q3 Cotton potential to be unlocked Second-generation stacked products to accelerate globally Cotton could be a 3+ stack by middle of next decade with drought tolerance and lygus control BREEDING PIPELINE Breeding engine firing on all cylinders At a greater pace than ever before, new breeding tools are being applied across all platforms and resulting in breakthrough products 10
  11. 11. FINANCIAL REVIEW 2007 Performance Reflects Extraordinary Performance in Extraordinary Year for Agriculture 2007 EARNINGS $2.00 ONGOING EARNINGS PER SHARE 54% GROWTH FROM 2006 Gross Profit as a Percent of Sales 50% Seeds & Traits Gross Profit $3.0B Roundup And All Other Glyphosate-based $854M Herbicides Gross Profit All Other Ag Productivity Gross Profit $418M CASH MANAGEMENT AND SPENDING FREE CASH FLOW $(57)M Return on Capital 14.8% Capital Expenditures $509M SG&A as a Percent of Sales 22% R&D as a Percent of Sales 9% Receivables as a Percent of Sales 18% Inventories as a Percent of Sales 20% Note: EPS figures reflect the stock split effective July 28, 2006 11
  12. 12. FINANCIAL REVIEW 2008 Again Projects Double-Digit Earnings Growth, Strong Cash Generation and Improved Margins 2007 2008F EARNINGS $2.20-$2.401 $2.00 ONGOING EARNINGS PER SHARE 54% GROWTH 10-20% GROWTH FROM 2006 FROM 2007 Further progress on Gross Profit as a Percent of Sales 50% trajectory toward 52-54% 2010 target Seeds & Traits Gross Profit $3.0B ~$3.5B Roundup And All Other Glyphosate-based $854M ~$950M Herbicides Gross Profit All Other Ag Productivity Gross Profit $418M ~$350M CASH MANAGEMENT AND SPENDING FREE CASH FLOW $(57)M $800-$900M Return on Capital 14.8% Consistent with 2007 levels Capital Expenditures $509M Range of $700M SG&A as a Percent of Sales 22% 20-21% Range R&D as a Percent of Sales 9% 10% Range Receivables as a Percent of Sales 18% Consistent with 2007 levels Inventories as a Percent of Sales 20% Consistent with 2007 levels Note: EPS figures reflect the stock split effective July 28, 2006 1. As-reported and ongoing EPS currently expected to be the same for FY2008 12
  13. 13. FINANCIAL REVIEW Earnings Growth and Margin Expansion Reflect Strong Growth Opportunities Through End of Decade EARNINGS PER SHARE GROWTH GROSS MARGIN OPPORTUNITY PROGRESSION OF ONGOING EPS (2004-2008F) GROSS PROFIT AS A PERCENT OF SALES (2004-2010F) 2008F ONGOING EPS GUIDANCE: $2.40 2010F OPPORTUNITY: 10-20% GROWTH 54% 52-54% GROSS MARGIN $2.20 53% $2.20-$2.40 $2.00 52% $2.00 51% $1.80 50% $1.60 49% $1.40 48% $1.20 47% $1.30 46% $1.00 $1.04 45% $0.80 $0.80 44% $0.60 2004 2005 2006 2007 2008F 2009F 2010F 2004 2005 2006 2007 2008F 30% 25% 54% 10-20% 2 points of margin growth achieved in 2007 Note: EPS figures reflect the stock split effective July 28, 2006 13
  14. 14. Reconciliation of Non-GAAP Financial Measures Reconciliation of Free Cash Flow Fiscal Year 2008 Fiscal Year Fiscal Year $ Millions Target 2007 2006 $1,854 $1,674 Net Cash Provided (Required) by Operations $1,750 - $1,850 (625) Net Cash Provided (Required) by Investing Activities ($950) (1,911) $1,049 Free Cash Flow $800-$900 $(57) (583) (117) Net Cash Provided (Required) by Financing Activities N/A Effect of Exchange Rate Changes on Cash and Cash Equivalents N/A 46 3 Net Increase (Decrease) in Cash and Cash Equivalents N/A $(594) $935 Reconciliation of Non-GAAP EPS Three Months End Three Months Fiscal Year Aug. 31, End Aug. 31, $ per share 2007 2007 2006 Diluted Earnings per Share $1.79 $(0.39) $(0.27) Loss (Income) on Discontinued Operations $(0.13) $(0.13) $0.01 In-Process R&D Write-Off Related to the Delta & Pine $0.34 $0.34 Land (D&PL) Acquisition Tax Charge on Repatriated Earnings -- -- $0.04 Cumulative Effect of Change in Accounting Principle -- -- $0.01 Diluted Earnings (Loss) per Share from Ongoing $2.00 $(0.18) $(0.21) Business 14
  15. 15. Reconciliation of Non-GAAP Financial Measures Reconciliation of Non-GAAP EPS Fiscal Year Fiscal Year Fiscal Year $ per share 2006 2005 2004 Net Income (Loss) per Share $1.25 $0.47 $0.50 Cumulative Effect of Change in Accounting Principle $0.01 -- -- Diluted Earnings (Loss) per Share Before Effect of $1.26 $0.47 $0.50 Accounting Change Tax Charge on Repatriated Earnings $0.04 -- -- Seminis In-Process R&D -- $0.38 -- Solutia-Related Charge -- $0.32 -- Tax Benefit on Loss from European Wheat and -- $(0.19) -- Barley Business Restructuring Charges -- Net -- $0.01 $0.18 (1) Loss on Discontinued Operations -- $0.05 -- Impairment of Goodwill -- -- $0.12 PCB Litigation Settlement Expense – Net -- -- -- Diluted Earnings (Loss) per Share from Ongoing Business $1.30 $1.04 $0.80 (1) The operating results of Stoneville and NexGen have been conformed to discontinued operations presentation for all relevant years presented. 15
  16. 16. Reconciliation of Non-GAAP Financial Measures Reconciliation of Return on Capital $ Millions 12 Months Total Monsanto Company and Subsidiaries: Ended Aug. 31, 2007 Operating Profit After-tax (excluding certain items) $1,116 Average Capital $7,533 Return on Capital 14.8% Operating Profit After-tax (excluding certain items): Net Income $993 Adjustment for certain items, after-tax: 2007 In-Process R & D Related to the D&PL $186 Acquisition Loss (Income) on Discontinued Operations ($71) Interest Expense – Net of Taxes $8 Operating Profit After-tax (excluding certain items) $1,116 As of Aug. 31, 2007 Average Capital: Short-Term and Long-Term Debt $1,420 Shareowners’ Equity $7,505 Cash and Cash Equivalents $(866) Cash for Operations $150 Total Capital $8,209 Prior Period Capital $6,857 Average Capital $7,533 16

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