.monsanto 01-04-06a
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.monsanto 01-04-06a

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.monsanto 01-04-06a .monsanto 01-04-06a Presentation Transcript

  • FIRST-QUARTER 2006 FINANCIAL RESULTS Jan. 4, 2006 1
  • Forward-Looking Statements Certain statements contained in this release 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 and proposed 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 filings with the SEC. 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 update any forward-looking statements or any of the factors that may affect actual results. 2
  • Non-GAAP Financial Information This presentation uses the non-GAAP financial measures of “free cash flow,” and ongoing earnings per share (EPS). 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. The presentation of free cash flow and ongoing EPS 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 year, or to fiscal year, are on a fiscal year basis and refer to the 12-month period ending August 31. References to the first quarters of 2005 and 2006 refer to three-month periods ending November 30. 3
  • FINANCIAL RESULTS First-Quarter Financial Summary FIRST FIRST QUARTER QUARTER CHANGE 2006 2005 NET SALES $1,405M $1,072M 31% GROSS PROFIT $634M $491M 29% NET INCOME (LOSS) $59M $(40)M NM DILUTED EARNINGS $0.22 $(0.15) NM (LOSS) PER SHARE NM: Not Meaningful 4
  • FINANCIAL RESULTS Items Included in Reported Earnings First Quarter 2005: $0.40 per share tax benefit as a result of the loss incurred on the global wheat and barley business $(0.68) per share charge associated with certain liabilities in connection with the Solutia bankruptcy 5
  • FINANCIAL RESULTS Fiscal Year 2006 Guidance Reflects Continued Momentum in Seeds and Traits FY2006 TARGETS GUIDANCE $2.35-$2.50 EARNINGS PER SHARE TOWARD THE UPPER END OF (ONGOING) THE RANGE Q2 and Q3 will be the primary drivers for full- FREE CASH FLOW $825M - $900M year EPS performance Q4 will be a loss but not SG&A AS A % OF SALES ~22% RANGE as large as in the prior year R&D AS A % OF SALES ~10% RANGE CAPITAL EXPENDITURES ~$350M 6
  • FINANCIAL RESULTS Brazil Can Accelerate Growth Potential for Roundup Ready Soybeans MARKET UPDATE: ROUNDUP READY SOYBEANS IN BRAZIL CURRENT MARKET CONDITIONS Planted soybean acres down roughly 5 percent for 2006 season VALUE CAPTURE NORTH: PRIMARY New seed sales at mid to upper AREA FOR SALE OF end of 4 – 5M acre range 40 NEW SEED NEW ROUNDUP READY MILLION SALES Value: ~$9/acre retail value SOYBEAN SEED PLANTED shared significantly with VARIETIES BUT SAVED SOYBEAN partners SEED VARIETIES EXIST ACRES Saved seed estimated at ~15M acres SAVED SEED Value: ~$4.50/acre retail value SOUTH: PRIMARY AREA shared significantly with FOR SAVED ROUNDUP partners READY SEED VARIETIES EARNINGS BUT NEW ROUNDUP READY SEED SALES EXIST 10 MILLION Expected 5-10 cents per share contribution for PLANTED FY2006 SOYBEAN ACRES Revenue recognized primarily in Q3 and Q4 7
  • FINANCIAL RESULTS Success in Variable-Based Pricing in Cotton Is Bellwether for Zone-Based Royalties in Corn STEP 1 Driving Trait Penetration in Marginal to Modest COTTON EXAMPLE Insect-Infestation Zones Differential pricing allowed 51% U.S. BOLLGARD TRAIT ACRES Monsanto to earn an acre that 3 .5 penetrated MARGINAL – TO – MODEST INFESTATION ZONES ACRES (MILLIONS) otherwise would not have used 3 Bollgard technology, driving 2 .5 trait penetration on marginally- 2 to modestly-infested acres 11% 1 .5 STEP 2 penetrated 1 Experience shows the farmer 0 .5 recognizes the value and 0 convenience of the trait 1998 2005 package and embraces more value-added technology, largely Increasing Monsanto’s Value per acre in Marginal COTTON EXAMPLE through stacked traits to Modest Insect-Infestation Zones STEP 3 5.6 X GP RETAIL PRICE (INDEXED 1998 = 1) WEIGHTED AVERAGE PER ACRE FROM 1998 6 2 .0 0 1 .7 5 Because of the increased 5 (INDEXED 1998 = 1) 1 .5 0 penetration and movement GROSS PROFIT 4 1 .2 5 toward stacked-traits, the total 3 1 .0 0 value per acre captured by 0 .7 5 Monsanto increases 2 0 .5 0 With more trait acres and more 1 0 .2 5 value generated per acre, 0 0 .0 0 overall gross profit increases 1998 2005 AVERAGE PER ACRE RETAIL PRICE 8
  • Reconciliation of Non-GAAP Financial Measures Reconciliation of Free Cash Flow Fiscal Year Three Months Three Months 2006 Ended Ended $ Millions Target Nov. 30, 2005 Nov. 30, 2004 Net Cash Provided by Operations $1,300 - $1,375 $773 $769 Net Cash Provided (Required) by Investing Activities $(475) $(135) $1 $770 Free Cash Flow $825 - $900 $638 $(254) Net Cash Provided (Required) by Financing Activities N/A $(157) $516 Net Increase in Cash and Cash Equivalents N/A $481 Reconciliation of Non-GAAP EPS Fiscal Year Three Months Three Months 2006 Ended Ended $ per share Target Nov. 30, 2005 Nov. 30, 2004 Diluted Earnings (Loss) per Share $2.35 - $2.50 $0.22 $(0.15) Solutia-Related Charge — $0.68 — Tax Benefit on Loss from European Wheat and Barley Business $(0.40) — — $2.35 - $2.50 $ 0.22 $ 0.13 Diluted Earnings per Share from Ongoing Business 9