.monsanto 01-03-08
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.monsanto 01-03-08 .monsanto 01-03-08 Presentation Transcript

  • FIRST-QUARTER 2008 FINANCIAL RESULTS Jan. 3, 2008 1
  • 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 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. © 2008 Monsanto Company 2
  • 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 Return on Capital (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 ongoing 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, not replace net income (loss), cash flows, financial position, or comprehensive income (loss), as determined in accordance with GAAP. 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. Monsanto is unable to provide a reconciliation of the 2008 ROC goal to projected net income and financial position for 2008 without 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 are 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
  • PERFORMANCE SUMMARY First-Quarter Financial Summary First First Change Quarter Quarter 2008 2007 $2,099M $1,539M 36% NET SALES $1,055M $682M 55% GROSS PROFIT $256M $90M 184% NET INCOME DILUTED EPS ON $0.46 $0.16 188% AS-REPORTED BASIS FREE CASH $740M $533M 39% FLOW 4
  • STRATEGIC REVIEW Early-Season Orders Signal Strong Start to Achieve 2010 Trait Opportunity U.S. CORN TRAIT OPPORTUNITY: 2005-2010F 220 60 U.S. TRIPLE-STACK ACRES 200 U.S. TRAIT ACRES 50 180 (IN MILLIONS) (IN MILLIONS) 160 40 140 120 30 100 80 20 60 40 10 20 CATALYSTS OF 0 0 2010 TRIPLE STACK 2007 2008F 2005 2006 2007 2008 2010F Opportunity GROWTH Rootworm Control 45-55M 20.8M 26-28M Channel Triple Corn Borer Control Penetration 60-70M 42.4M 40-42M Glyphosate Tolerance DEKALB Supply 80M 57.9M 63-65M Guarantee Triple Stack 17.6M 25-27M 45-55M Yield Insurance Trait acres reflect the total acres planted with each individual trait. In the case of stacked traits, each absolute acre will be reflected by two or more trait acres. Program Source: “Monsanto Biotechnology Trait Acreage” available through: monsanto.com/investors/ 5
  • GUIDANCE UPDATE 2008 Again Projects Double-Digit Earnings Growth, Strong Cash Generation and Improved Margins 2007 2008F EARNINGS $2.00 $2.50-$2.60 ONGOING EARNINGS PER SHARE 54% GROWTH 25-30% 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 Greater than $1B Herbicides Gross Profit All Other Ag Productivity Gross Profit $418M ~$350M CASH MANAGEMENT AND SPENDING FREE CASH FLOW $(57)M $900M-$1B Return on Capital 14.8% Consistent with 2007 levels Capital Expenditures $509M Greater than $800M 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 6
  • Reconciliation of Non-GAAP Financial Measures Reconciliation of Free Cash Flow Fiscal Year Three Months Three Months 2008 Fiscal Year Ended Ended $ Millions Target Nov. 30, 2007 2007 Nov. 30, 2006 Net Cash Provided (Required) by Operations $1,950 - $2,050 $1,854 $996 $600 Net Cash Provided (Required) by Investing Activities (1,050) (1,911) (256) (67) $533 Free Cash Flow $900 - $1,000 $(57) $740 (156) Net Cash Provided (Required) by Financing Activities N/A (583) (47) Effect of Exchange Rate Changes on Cash and Cash Equivalents N/A 46 58 5 $382 Net Increase (Decrease) in Cash and Cash Equivalents N/A $(594) $751 Reconciliation of Non-GAAP EPS Three Months Ended $ per share Nov. 30, 2007 Fiscal Year 2007 Diluted Earnings per Share $0.46 $1.79 Loss (Income) on Discontinued Operations -- $(0.13) In-Process R&D Write-Off Related to the Delta & Pine Land (D&PL) -- $0.34 Acquisition Tax Charge on Repatriated Earnings -- -- Cumulative Effect of Change in Accounting Principle -- -- Diluted Earnings (Loss) per Share from Ongoing Business $0.46 $2.00 7
  • 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 8
  • ANNUAL R&D PIPELINE REVIEW ROBB FRALEY, PH.D. CHIEF TECHNOLOGY OFFICER FIRST-QUARTER 2008 Jan. 3, 2008 9
  • OVERVIEW Monsanto’s Biotech Pipeline Is Accelerating, With Progress in More Projects and on Highest-Value Platforms MILESTONES: Biotech pipeline progress is accelerating 10 projects either advanced from one phase to another or were added to the pipeline – among the most in any annual Q1 Q4 update First time ever transitioned 4 projects from Q2 Q3 Phase 2 to Phase 3 Accelerated progress is on the most meaningful platforms and products Advanced phases on 2 of 3 HIT projects First simultaneous, multi-generational advancement as 2 generations of corn ANNUAL R&D CYCLE: SEEDS & TRAITS drought family advance WHAT CHANGED 2007-2008? Vistive III supplants Vistive II – the first ever trait to “leapfrog” another in • 5 projects advanced phases development • 5 products added • Vistive II removed in favor of Vistive III SmartStax enters the pipeline as the • “Water-use efficiency” soybeans reclassified as platform for corn, complementing “2nd-Gen Higher-Yielding soybeans” Roundup RReady2Yield as the soybean • Two former Renessen projects rolled into the Monsanto platform pipeline 10
  • OVERVIEW Phase Advancements For Key Projects Reflect Progress and Strength Throughout Monsanto’s Industry-Leading Pipeline BIOTECH TRAIT PIPELINE: JANUARY 2008 UPDATE PHASE PHASE PHASE PHASE PHASE PHASE PHASE PHASE D D 1 2 3 4 1 2 3 4 AGRONOMIC TRAITS YIELD AND STRESS PIPELINE ROUNDUP RREADY2YIELD SOYBEANS DROUGHT-TOLERANT CORN FAMILY YIELDGARD VT PRO 2ND-GEN YIELDGARD CORN BORER DROUGHT-TOLERANT CORN SMARTSTAX CORN 2ND-GEN DROUGHT-TOLERANT CORN DICAMBA-TOLERANT SOYBEANS NITROGEN-UTILIZATION CORN FAMILY INSECT-PROTECTED + ROUNDUP RREADY2YIELD SOYBEANS NITROGEN-UTILIZATION CORN BOLLGARD III BROAD-ACRE HIGHER-YIELDING CORN FAMILY SOYBEAN NEMATODE-RESISTANCE HIGHER-YIELDING CORN SOYBEAN DISEASE BROAD-ACRE HIGHER-YIELDING DICAMBA-TOLERANT COTTON SOYBEAN FAMILY COTTON LYGUS CONTROL HIGHER-YIELDING SOYBEANS YIELDGARD ROOTWORM III 2ND-GEN HIGHER-YIELDING SOYBEANS VALUE-ADDED TRAITS DROUGHT-TOLERANT COTTON FAMILY DROUGHT-TOLERANT COTTON EXTRAX™ CORN PROCESSING SYSTEM + MAVERA™ HIGH-VALUE CORN WITH LYSINE2 BROAD-ACRE HIGHER-YIELDING CANOLA FAMILY HIGH-OIL SOYBEANS HIGHER-YIELDING + ROUNDUP RREADY2YIELD CANOLA1 2ND-GEN HIGH-OIL SOYBEANS OMEGA-3 ENRICHED SOYBEANS VISTIVE III SOYBEANS High Impact Technologies (HIT) project HIGH-STEARATE SOYBEANS Jan. 3, 2008 Advancements/Additions (VIA BIOTECH) The colored bar associated with each project indicates which phase that project is in. It is HIGH-OIL CORN not intended to represent the relative status of the project within a particular stage. 1. For higher-yielding + Roundup RReady2Yield canola, only the value of the higher-yielding trait is incorporated into the Yield and Stress collaboration with BASF 2. Value of licensing the EXTRAX™ technology is shared with Cargill as a part of Renessen joint venture 11
  • OVERVIEW Phase Advancements For Key Projects Reflect Progress and Strength Throughout Monsanto’s Industry-Leading Pipeline BIOTECH TRAIT PIPELINE: JANUARY 2008 UPDATE PHASE PHASE PHASE PHASE PHASE PHASE PHASE PHASE D D 1 2 3 4 1 2 3 4 AGRONOMIC TRAITS YIELD AND STRESS PIPELINE ROUNDUP RREADY2YIELD SOYBEANS DROUGHT-TOLERANT CORN FAMILY YIELDGARD VT PRO 2ND-GEN YIELDGARD CORN BORER DROUGHT-TOLERANT CORN SMARTSTAX CORN 2ND-GEN DROUGHT-TOLERANT CORN DICAMBA-TOLERANT SOYBEANS NITROGEN-UTILIZATION CORN FAMILY INSECT-PROTECTED + ROUNDUP RREADY2YIELD SOYBEANS NITROGEN-UTILIZATION CORN BOLLGARD III BROAD-ACRE HIGHER-YIELDING CORN FAMILY SOYBEAN NEMATODE-RESISTANCE HIGHER-YIELDING CORN SOYBEAN DISEASE BROAD-ACRE HIGHER-YIELDING DICAMBA-TOLERANT COTTON SOYBEAN FAMILY COTTON LYGUS CONTROL HIGHER-YIELDING SOYBEANS YIELDGARD ROOTWORM III 2ND-GEN HIGHER-YIELDING SOYBEANS VALUE-ADDED TRAITS DROUGHT-TOLERANT COTTON FAMILY DROUGHT-TOLERANT COTTON EXTRAX™ CORN PROCESSING SYSTEM + MAVERA™ HIGH-VALUE CORN WITH LYSINE2 BROAD-ACRE HIGHER-YIELDING CANOLA FAMILY HIGH-OIL SOYBEANS HIGHER-YIELDING + ROUNDUP RREADY2YIELD CANOLA1 2ND-GEN HIGH-OIL SOYBEANS OMEGA-3 ENRICHED SOYBEANS VISTIVE III SOYBEANS High Impact Technologies (HIT) project HIGH-STEARATE SOYBEANS Jan. 3, 2008 Advancements/Additions (VIA BIOTECH) The colored bar associated with each project indicates which phase that project is in. It is HIGH-OIL CORN not intended to represent the relative status of the project within a particular stage. 1. For higher-yielding + Roundup RReady2Yield canola, only the value of the higher-yielding trait is incorporated into the Yield and Stress collaboration with BASF 2. Value of licensing the EXTRAX™ technology is shared with Cargill as a part of Renessen joint venture 12
  • R&D PIPELINE UPDATE Roundup RReady2Yield Soybean Approaching Commercialization; Will Serve As Platform for Soybean Trait Pipeline FOUR YEARS OF DATA CONTINUE TO NEW: R&D Pipeline VALIDATE 7-11% YIELD ADVANTAGE Roundup RReady2Yield Soybeans Near-Isoline Comparisons: HIT Project Phase 4 Roundup RReady2Yield vs. Roundup Ready % Yield Increase over Roundup Ready 12% PROJECT CONCEPT: Roundup RReady2Yield provides 11% 10% enhanced yield, with a target of 7- 9% 11% yield increase compared with Roundup Ready soybeans 9% 8% VALUE: 7% 7% LAUNCH-COUNTRY 6% 45M ACRES1: $300-$500M 2020 VALUE2: 4% SOURCES OF VALUE: 2% Improved yield 1 Targeting 7-11% yield increase 0% 4 YEAR 1. Acre opportunity reflects acres where technology fits at 2004 2005 2006 2007 Monsanto's current 2007 market share in respective AVERAGE crops 2. 2020 value reflects gross sales opportunity in launch Roundup RReady2Yield soybeans yield 7 to 11 percent higher country in year 2020 than Roundup Ready soybeans based on 73 Monsanto field trials from 2004-2007 13
  • R&D PIPELINE UPDATE Insect-Protected Soybeans Are First-Ever Monsanto Trait Developed Exclusively for Non-U.S. Opportunity FIELD PERFORMANCE OF BT SOYBEANS NEW: R&D Pipeline Insect-Protected Soybeans with 2007 Insect Efficacy Trials - 4 Locations Roundup RReady2Yield 50 (season cumulative) ± standard error ADVANCED: 45 STATUS: Phase 3 Mean Larvae Per Meter Row 40 PROJECT CONCEPT: 35 Insect-protected soybeans use Bt 30 technology widely adopted in corn 25 and cotton to control insect pests, 20 especially economically important 15 pests for Brazilian farmers. The Bt trait is combined with Roundup 10 RReady2Yield 5 VALUE: 0 UNSPRAYED SPRAYED UNSPRAYED SPRAYED LAUNCH-COUNTRY: Brazil Bt Non-Bt LAUNCH-COUNTRY non-Bt 50M ACRE OPPORTUNITY1: Maturity Group V 2020 COMMERCIAL $150-$300M VALUE2: Tifton, GA Loxley, AL St. Gabriel, LA Alexandria, LA SOURCES OF VALUE: Insect-protected soybeans with Roundup RReady2Yield technology provides effective protection against key Insecticide substitution lepidopteran pests, better than chemical insecticides 1 Based on 2 current sprays costing almost $6/acre total • Also exhibits the glyphosate tolerance of Roundup Improved yield RReady2Yield soybean varieties Early indications of 4+% 2 1. Acre opportunity reflects acres where trait could have technological fit. Opportunity does not reflect acres that may be increase over chemical planted to a competitive trait or acres required for insect-resistance management (IRM) set-aside refuges insecticides 2. 2020 value reflects gross sales opportunity in launch country in year 2020 14
  • R&D PIPELINE UPDATE Insect-Protected Soybeans Are First-Ever Monsanto Trait Developed Exclusively for Non-U.S. Opportunity 2007 FIELD TESTING SHOWS VISUAL R&D Pipeline NEW: PROOF OF CONTROL Insect-Protected Soybeans with TIPTON, GA – FIELD EFFICACY TRIAL – 2007 Roundup RReady2Yield ADVANCED: STATUS: Phase 3 PROJECT CONCEPT: Insect-protected soybeans use Bt technology widely adopted in corn and cotton to control insect pests, especially economically important pests for Brazilian farmers. The Bt trait is combined with Roundup RReady2Yield VALUE: LAUNCH-COUNTRY: Brazil LAUNCH-COUNTRY 50M ACRE OPPORTUNITY1: CONTROL WITH GENE 2020 COMMERCIAL $150-$300M VALUE2: (NO INSECTICIDE) (NO INSECTICIDE) SOURCES OF VALUE: Insecticide substitution Insect-protected soybeans with RoundupRReady2Yield 1 Based on 2 current sprays technology demonstrated significant protection from key costing almost $6/acre total lepidopteran pests, including soybean looper, in 2007 tests Improved yield 2 4+% increase over chemical 1. Acre opportunity reflects acres where trait could have technological fit. Opportunity does not reflect acres that may be planted to a competitive trait or acres required for insect-resistance management (IRM) set-aside refuges insecticides 2. 2020 value reflects gross sales opportunity in launch country in year 2020 15
  • R&D PIPELINE UPDATE Dicamba-Tolerant Soybeans Advance to Phase 3 With Excellent Tolerance and Yield Data From 2007 Field Trials FIELD PERFORMANCE DEMONSTRATES NEW: R&D Pipeline EXCELLENT DICAMBA TOLERANCE Dicamba-Tolerant Soybeans 2007 Efficacy Yield ADVANCED: 80 STATUS: Phase 3 PROJECT CONCEPT: 60 Provide new, unique mode of Yield (bu/ac) action, designed to provide Untreated soybean growers with most 40 effective weed management system 1x1 lb/ac, 2x available when stacked with 2x2 lb/ac, 4x Roundup RReady2Yield 1x1x1 lb/ac, 3x 20 VALUE: LAUNCH-COUNTRY 45M ACRE OPPORTUNITY1: 0 2020 COMMERCIAL <$150M VALUE2: EVENT 1 EVENT 2 EVENT 3 SOURCES OF VALUE: Increased Flexibility Agronomic trials in 28 locations showed comparable yields 1 Improved weed control options between dicamba treated plots and untreated controls, even at with two modes of action application 3X approved rates – indicating commercial 1. Acre opportunity reflects acres where technology tolerance and yield performance fits at Monsanto's current 2007 market share in respective crops 2. 2020 value reflects gross sales opportunity in launch country in year 2020 16
  • R&D PIPELINE UPDATE Vistive III Advanced to Phase 3 After Meeting Compositional and Yield Targets VISTIVE III COMPOSITION TARGETS NEW: R&D Pipeline Vistive III Soybeans 77% Mid Oleic – Low Sat Trait 84% Alone 77% ADVANCED: Fatty Acid (%) Vistive III Low Lin – Mid STATUS: Phase 3 70% Oleic – Low Sat 63% Vistive Low Lin Alone PROJECT CONCEPT: 56% Vistive III trait is designed, by 49% combining breeding and 42% biotechnology, to lower linolenic 35% 14% and saturate content while boosting 28% 6% oleic content to produce an oil with 3% 21% the same preferable mono- 14% unsaturated fat content as olive oil 7% and the low saturated fat content found in canola oil 18:0 + 16:0 18:1 18:2 18:3 CATEGORY► VALUE: SATURATES OLEIC LINOLEIC LINOLENIC COMMODITY 15% 20% 56% 8% LAUNCH-COUNTRY SOYBEANS 15 - 20M ACRES1: VISTIVE III <7% 55-80% 12-25% ≤ 3% TARGETS <$150M 2020 VALUE2: SOURCES OF VALUE: When breeding (green bar) and biotech (yellow bar) are combined, Vistive III (red bar) meets all product concept Oil replacement value compositional targets For frying applications and oil 1 blends for baking, roughly 15 - • Additionally, 3 years of biotech trait field data in the U.S. and 20M acres planted for oil used Argentina indicate that yield is not statistically different from for food control 1. Acre opportunity reflects acres where technology fits at Monsanto's current 2007 market share in respective crops 2. 2020 value reflects gross sales opportunity in launch country in year 2020 17
  • R&D PIPELINE UPDATE Higher-Yielding Soybeans Continue to Demonstrate Improved Yield Over Conventional Controls 2007 HIGHER-YIELDING SOYBEAN NEW: R&D Pipeline AGRONOMIC TESTING VERSUS CONTROLS Higher-Yielding Soybeans Family: Percent yield difference vs. control Lead Project 6.0 (Bu/ac Increase Over Control) 7.1% Phase 2 6.2% 6.2% 6.2% 6.1% LEAD STATUS: Average Yield Advantage 5.0 PROJECT CONCEPT: PRODUCT CONCEPT 4.0 Higher-yielding soybeans aimed at TARGET RANGE boosting intrinsic yield potential of 3.0 soybeans through insertion of key genes 2.0 VALUE: LAUNCH-COUNTRY 1.0 45M ACRES1: 0.0 $300-$500M 2020 VALUE2: EVENT 1 EVENT 2 EVENT 3 EVENT 4 EVENT 5 SOURCES OF VALUE: 18 Locations Improved yield More than 60 events were tested at 18 locations, with lead 1 Targeting additive yield to U.S. events showing strong yield advantages over conventional average of 42 bu/ac controls • Higher-yielding trait will be stacked on top of Roundup RReady2Yield and other soybean-pipeline traits with an 1. Acre opportunity reflects acres where technology additive yield boost fits at Monsanto's current 2007 market share in respective crops 2. 2020 value reflects gross sales opportunity in launch country in year 2020 18
  • R&D PIPELINE UPDATE Lead Drought-Tolerant Corn Project Advances to Phase 3 With Fourth Year of Strong Field Results FOURTH SEASON OF YIELD R&D Pipeline NEW: IMPROVEMENT UNDER DROUGHT STRESS Drought-Tolerant Corn Family: Average Yield Improvement of Lead Event Lead Project ADVANCED: HIT Project 16 Phase 3 Percentage yield difference vs. control 13.4% 6.7% 10.6% 11.3% 14 PROJECT CONCEPT: Yield Difference (bu/acre) 12 Drought-tolerance family aimed at providing consistent yield and 10 buffering against effects of water PRODUCT limitations CONCEPT 8 TARGET VALUE: RANGE 6 LAUNCH-COUNTRY 55M ACRES1: 4 $300-$500M 2020 VALUE2: 2 SOURCES OF VALUE: 0 Improved yield a b b b 2004 2005 2006 2007 Targeting 8-10% yield 8 TOTAL 15 TOTAL 9 TOTAL 11 TOTAL 1 improvement in water-stress LOCATIONS LOCATIONS LOCATIONS LOCATIONS environments a: data from two hybrids 1. Acre opportunity reflects acres where technology fits at b: data from three hybrids Monsanto's current 2007 market share in respective crops 2. 2020 value reflects gross sales opportunity in launch country Drought-tolerant corn lead consistently delivering yield in year 2020 improvements under drought conditions in U.S. for fourth year in a row 19
  • R&D PIPELINE UPDATE In Dryland-Specific Testing, Lead Drought Gene Showed Significant Yield Improvement Over Conventional Checks 2007 DRYLAND TESTING OF LEAD EVENT NEW: R&D Pipeline Drought-Tolerant Corn Family: Yield Improvement of Lead Event in Dryland Conditions Lead Project 100 ADVANCED: HIT Project Phase 3 Percentage yield difference vs. control 13.0% 15.1% 14.2% Yield (bu/acre) PROJECT CONCEPT: 90 Drought-tolerance family aimed at providing consistent yield and buffering against effects of water 80 limitations VALUE: 70 LAUNCH-COUNTRY 55M ACRES1: $300-$500M 2020 VALUE2: 60 SOURCES OF VALUE: HYBRID 1 HYBRID 2 HYBRID 3 Improved yield 6-11 locations tested Hybrids with lead drought gene Targeting 8-10% yield 1 improvement in water-stress Conventional checks environments 1. Acre opportunity reflects acres where technology fits at In tests in natural dryland environments from South Dakota Monsanto's current 2007 market share in respective crops to northern Texas, the lead drought-tolerant event 2. 2020 value reflects gross sales opportunity in launch country in year 2020 outperformed conventional checks in 3 different hybrid backgrounds 20
  • R&D PIPELINE UPDATE 2007 Dryland Field Tests of Lead Drought Event Offers Visual Evidence of Increased Yield In Stressed Conditions 2007 FIELD TESTING SHOWS VISUAL R&D Pipeline NEW: PROOF OF YIELD IMPROVEMENT Drought-Tolerant Corn Family: SUPERIOR, NE – FIELD TRIALS – 2007 Lead Project ADVANCED: HIT Project Phase 3 PROJECT CONCEPT: Drought-tolerance family aimed at providing consistent yield and buffering against effects of water limitations VALUE: LAUNCH-COUNTRY 55M ACRES1: $300-$500M 2020 VALUE2: SOURCES OF VALUE: Improved yield Targeting 8-10% yield CONTROL HYBRID WITH GENE 1 improvement in water-stress (76 BU/AC) (94 BU/AC) environments 1. Acre opportunity reflects acres where technology fits at Water stress exposure during different stages of Monsanto's current 2007 market share in respective crops development can have significant effect on corn yield; 2. 2020 value reflects gross sales opportunity in launch country Monsanto’s lead drought-tolerance trait shows a significant in year 2020 yield advantage compared with controls under drought stress 21
  • R&D PIPELINE UPDATE Second-Generation Drought-Tolerant Corn Advances to Phase 2 With Multi-Year Performance in Field Testing SECOND-GEN DROUGHT CORN EVENTS NEW: R&D Pipeline PROVIDE CONSISTENT YIELD ADVANTAGE Drought-Tolerant Corn Family: Drought Efficacy for Second-Gen Events Yield Difference Over Controls (%) Second-Generation Project 16 ADVANCED: HIT Project 14 Phase 2 12 PROJECT CONCEPT: 10 Drought-tolerance family aimed at PRODUCT providing consistent yield and CONCEPT 8 buffering against effects of water TARGET RANGE limitations 6 VALUE: 4 LAUNCH-COUNTRY 55M 2 ACRES1: 0 $300-$500M 2020 VALUE2: EVENT 1 EVENT 2 EVENT 3 EVENT 1 EVENT 2 EVENT 3 LOWER-YIELDING HIGHER-YIELDING SOURCES OF VALUE: ENVIRONMENT ENVIRONMENT AVERAGE YIELD: 53 BU/AC AVERAGE YIELD: 166 BU/AC Improved yield 2007 2006 Targeting 8-10% yield 1 improvement in water-stress (All three events significant @ p≤0.10); Statistical significance determined by ANOVA (2006) or nonparametric test (2007) environments Consistent drought yield performance of top 3 events over 2 Water substitution years (5 locations/year) 2 Variable costs in pumped irrigation of >$100/ acre • Performance demonstrated in 2 different test hybrids and over 1. Acre opportunity reflects acres where technology fits at a broad range of drought-stress conditions in both lower- Monsanto's current 2007 market share in respective crops yielding and higher-yielding environments (52-188 bu/ac) 2. 2020 value reflects gross sales opportunity in launch country in year 2020 22
  • R&D PIPELINE UPDATE In Continued Field Testing, Nitrogen Utilization Leads Show Yield Improvement Under Normal Nitrogen LEAD PERFORMANCE UNDER NORMAL NEW: R&D Pipeline NITROGEN CONDITIONS Nitrogen-Utilization Corn Family: Yield Increase (bu/ac) Lead Project 12 * ** Phase 1 10 LEAD STATUS: *** * 8 PROJECT CONCEPT: 6 4 Targets ways to use nitrogen more 2 efficiently, exploring potential to 0 boost yield under normal nitrogen -2 conditions or stabilize it in low TRIALS IN MULTIPLE TRIALS IN MULTIPLE nitrogen environments HYBRID BACKGROUNDS HYBRID BACKGROUNDS VALUE: (15 LOC) (16 LOC) LAUNCH-COUNTRY 2005 55M 2006 YIELD TRIALS: ACRES1: 2007 YIELD TRIALS: YIELD SUFFICIENT N LEVELS SUFFICIENT N LEVELS TRIALS: $300-$500M 2020 VALUE2: (37 LOC TOTAL) (20 LOC TOTAL) (23 LOC TOTAL) SOURCES OF VALUE: 2005 2006 2007 Improved yield * Yield improvement in normal 1 Statistically significant @ p≤0.10 nitrogen environments Bar color correlates with the specific hybrid background tested. Same bar color in different tests and different years indicates same hybrid was used. Nitrogen reduction 2 All trials conducted under sufficient nitrogen application levels. Improving yield in low nitrogen environments Under normal nitrogen conditions, lead Nitrogen-Utilization 1. Acre opportunity reflects acres where technology fits at trait has demonstrated yield advantages in multiple Monsanto's current 2007 market share in respective crops backgrounds over multiple years 2. 2020 value reflects gross sales opportunity in launch country in year 2020 23
  • R&D PIPELINE UPDATE Strong Pipeline Reflects Growing Innovation, Opportunity in Latter-Stage Projects and Emerging Value in Yield and Stress 2020 COUNTRY ADDITIONAL PHASE COMMERCIAL OF GEOGRAPHIC SOURCES OF VALUE VALUE LAUNCH OPPORTUNITY • Improved yield BRAZIL HIGH 3 LEAD Drought-Tolerant Corn Family U.S. ARGENTINA YEILD & STRESS • Water replacement EU 27 • Improved yield BRAZIL HIGH 1 LEAD Nitrogen-Utilization Corn Family U.S. ARGENTINA • Nitrogen replacement EU 27 BRAZIL MEGA 2 LEAD Broad-Acre, Higher-Yielding Corn Family U.S. • Improved yield ARGENTINA EU 27 Broad-Acre, Higher-Yielding Soybean HIGH BRAZIL 2 LEAD U.S. • Improved yield ARGENTINA Family HIGH BRAZIL 4 Roundup RReady2Yield Soybeans U.S. • Improved yield ARGENTINA • Improved yield BRAZIL HIGH 4 U.S. ARGENTINA YieldGard VT PRO • Improved insect protection EU 27 LOW 4 Improved-Protein Soybeans U.S. • Food industry functionality N/A LOW BRAZIL 3 High-Oil Soybeans U.S. • Food industry functionality ARGENTINA HIGH 3 Omega-3 Soybeans U.S. • Food industry functionality N/A • Improved yield Insect Protected + Roundup MID 3 Brazil ARGENTINA RReady2Yield Soybeans • Improved insect protection LOW BRAZIL 3 Dicamba-Tolerant Soybeans U.S. • Durable weed control ARGENTINA LOW 3 Vistive III Soybeans U.S. • Food industry functionality N/A INDIA MID 2 Bollgard III Cotton U.S. • Improved insect protection AUSTRALIA BRAZIL LOW U.S. 2 Roundup RReady2Yield Canola Canada • Improved yield EU 27 COMMERCIAL VALUE RANGES AT 2020: LOW <$150M MID $150-$300M HIGH $300-$500M MEGA >$1B 24
  • SUMMARY Monsanto’s Biotech Pipeline Is Accelerating, With Progress in More Projects and on Highest-Value Platforms R&D PIPELINE STATUS: R&D pipeline is humming – both breeding and biotech Achieved more “firsts” in biotech additions and advancements in 2008 update than ever before Q1 Q4 Momentum in breeding continues, as Monsanto outperforms competitors in germplasm and trait performance Q2 Q3 Technology platforms are poised to be reset with Roundup RReady2Yield and SmartStax Roundup RReady2Yield moves into commercial arena in 2009, with 2010 launch; will be platform for rejuvenated soybean portfolio SmartStax is industry’s only planned 8-gene stack, best platform for yield-and-stress traits R&D is reduced to practice and commercially driven Pipeline potential farm-gate value >$5B by 2020 Includes 6 blockbusters and 1 mega-blockbuster Conservatively excludes value for breeding, Seminis and multi-country opportunities 25