monsanto 02-13-07

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monsanto 02-13-07

  1. 1. HUGH GRANT CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER GOLDMAN SACHS AGRICULTURAL BIOTECH FORUM Feb. 13, 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 and proposed acquisitions, including Delta and Pine Land Company; 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. Mavera™ is a trademark of Renessen. 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,” and earnings per share (EPS) on an ongoing basis. 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. 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. OVERVIEW Monsanto’s Success Is Rooted in Seeds and Traits, Creating Platform for Future Growth FOCUS: SEEDS & GENOMICS GROSS PROFIT FOCUS: ONGOING EPS PERFORMANCE The EPS performance of the overall business reflects Higher margins in the seed-and-trait business focus the growth trajectory of the seeds-and-traits Monsanto’s opportunity on accelerating gross profit business, Monsanto’s leadership in the industry, and growth the commercial potential of our proven R&D pipeline $3,000 2007 ONGOING EPS GUIDANCE: $1.60 15-20% GROWTH SEEDS & GENOMICS ANNUAL GROSS PROFIT $2,500 CAGR 2003-2006: 32% $1.50-$1.57 $1.40 ($ IN MILLIONS) $2,000 $1.31 $1.20 $1,500 $1.00 $1.04 $1,000 AGRICULTURAL PRODUCTIVITY $0.80 CAGR 2003-2006: $500 $0.80 (3)% $0.72 $0.60 $0 20031 2004 2005 2006 2007F 2003 2004 2005 2006 2007F 11% GROWTH 30% GROWTH 26% GROWTH 4
  5. 5. OVERVIEW Six Building Blocks Extend Leadership and Elevate Gross Margin Opportunity Through 2010 MONSANTO’S OPPORTUNITY GROSS MARGIN OPPORTUNITY Delta between 2006 gross margin and GROSS PROFIT AS A PERCENT OF SALES a 51-53% trajectory reflects continued 54% growth opportunity for seeds and traits FACTOR VALUE1 GROSS MARGIN ‘PULL’ 52% HIGH U.S. corn International MEDIUM 50% corn Global biotech MEDIUM traits 48% LOW CURRENT LEVEL Cotton platform MEDIUM Seminis 46% HIGH R&D pipeline 44% 2003 2004 2005 2006 2007F 2008F 2009F 2010F 1. Increment to total gross profit in the period 2006-2010; Some growth factors will overlap. MEDIUM LOW HIGH >$250M $100M - $250M <$100M 5
  6. 6. OVERVIEW “Rising Tide Lifts All Boats” Across Corn Industry, But Performance Will Still Determine Long-Term Winners GROWTH AVENUES IN A STRONG CORN MARKET FOCUS: HISTORICAL U.S. PLANTED CORN ACRES Growth from additional acres Additional acres provide a “rising tide” that PLANTED ACRES (IN MILLIONS) 90 benefits most ag companies Depending on source of incremental acre, there can be a trade-off in profit opportunity. For 80 example, within Monsanto that trade-off is: Favors corn, but a trade-off because of SOYBEANS 70 high Roundup Ready penetration Essentially indifferent as both crops are COTTON highly penetrated with higher-priced 60 stacked traits WHEAT OR Additive 50 OTHER 81 83 85 87 89 91 93 95 97 99 01 03 05 Growth from performance 19 19 19 19 19 19 19 19 19 19 20 20 20 Farmers want to maximize productivity in high- return environment – creating opportunity for seed companies who deliver total performance Average swing of corn acres over the last decade is Key Factors: roughly 1 percent; Last significant acre swing GERMPLASM Ultimate yield potential is reflected occurred in mid-1980s PERFORMANCE in the core seed 2007 could represent the largest acreage swing in With yield focus, stacks – and TRAIT decades because of the new dynamic of ethanol on triples especially – are the trait AVAILABILITY package of choice top of the established export demand 6
  7. 7. U.S. CORN GROWTH Pre-Planting Indicators Continue to Suggest Performance Sets Monsanto Seed and Traits Apart from the Pack in 2007 2007 MONSANTO FORECAST U.S. Corn FARMER’S DECISION EQUATION INITIAL PROJECTIONS STATUS UPDATE SEED SITUATION: • Farmers buy “yield” – a 60% of farmers indicate Grow national Asgrow and function of the genetic germplasm selection is brand market share DEKALB brands potential of seed and the first priority 1-2 points expected to gain at the upper end of 1 - 2 percent of that potential + share points protected by technology ASI companies • Across three commercial expected to gain up channels, Monsanto is to 0.5 share points uniquely positioned to through organic deliver “yield” to farmers growth OUTLOOK: TECHNOLOGY • A pre-planting view shows + 62% of farmers prefer 35% triple stacks in Monsanto’s seed and access to a full line of national brands Triple-stack traits are technology performance biotech traits over a sold out in Asgrow 30% triple stacks in is translating to favorite seed brand and DEKALB brands ASI brands commercial opportunity MAXIMUM YIELD POTENTIAL 38% of farmers’ acres Seeds & Genomics are planted to “home- Gross Profit = EPS guidance raised run” hybrids, 54% are expected to to upper end of planted to “proven” increase to $2.8B $1.50-$1.57 range at hybrids from $2.4B in 2006, Q1 earnings report in part reflecting the strength of U.S. Corn 7
  8. 8. U.S. CORN GROWTH Breeding Strength Translates to Commercial Growth Opportunity 2006 TESTING: YIELD DIFFERENCE VERSUS COMPETITIVE CHECKS BY CHANNEL1 U.S. Corn 12.00 SITUATION: 10.00 • In 2006, yield data across all BUSHELS PER ACRE three channels and essentially 8.00 across all maturity zones indicates a yield advantage 6.00 over best-in-class competitors1 4.00 OUTLOOK: 2.00 • Gains in the 110-day market are most significant, both 0.00 from a breeding perspective 110 2 and a sales growth 95 100 105 110 115 perspective RELATIVE MATURITIES (DAYS) 2006-TO-2007 CHANGE IN ORDERS BY MATURITY ZONE IN EACH CHANNEL LICENSED BRANDS 1. For purposes of this testing, the competitive REGIONAL BRANDS checks excluded any Monsanto or Monsanto licensed germplasm NATIONAL BRANDS 2. In the 100 day maturity zone, ASI’s bushels per acre are statistically indifferent when compared to best Increased orders Flat orders Decreased orders competitive checks 8
  9. 9. U.S. CORN GROWTH With Higher Demand for Stacks, the “Average” DEKALB Acre Now Contains More Than Two Traits TRAIT PENETRATION TRENDS U.S. Corn ACROSS KEY COMMERCIAL CHANNELS SITUATION: DEKALB/ASGROW 2.5 2007F TRAIT • With increased stacking, (AVERAGE NUMBER OF TRAITS PER INTENSITY: > 2.0 TRAIT INTESITY INDEX there is a positive mix effect 2 across the portfolio TRAIT ACRE) 2007F TOTAL 1.5 OUTLOOK: MARKET TRAIT INTENSITY LESS • In 2007, the trait intensity for BRANDED: 1.7 1 DEKALB and Asgrow will surpass 2.0 for the first time 0.5 – reflecting that the average corn acre now contains more 0 than 2 biotech traits 2003 2004 2005 2006 2007F • With an infusion of technology, ASI’s trait TRIPLE STACKED TRAIT PENETRATION STACKED PENETRATION PENETRATION penetration levels are closing in on DEKALB and Asgrow 2006 2007F 2006 2007F 2006 2007F LICENSED BRANDS 55% 60 - 65% 43% 55 - 60% 7% 10 - 15% REGIONAL BRANDS 75% 80 - 85% 55% 65 - 70% 15% >30% NATIONAL BRANDS 90% 90 - 95% 69% 70 - 75% 20% >35% 9
  10. 10. U.S. CORN GROWTH Projected Demand From Ethanol in U.S. Provides Positive Pull for Monsanto Corn Technology U.S. ETHANOL AND CORN TRAITS CORRELATION OF ETHANOL SITES AND TRAIT PENETRATION U.S. Corn SITUATION: • Assumption that by 2010, ethanol is MTBE replacement – NON- representing 10% of U.S. fuel DRAW AREA ETHANOL supply DRAW AREA • Ethanol demand could require equivalent of up to 25M U.S. acres by 2010 OUTLOOK: • Ethanol demand creates pull on corn that favors technologies that enhance yield, such as molecular breeding and biotech • The average trait penetration is 2.5 X greater in areas of ethanol facilities ETHANOL PLANTS IN Average trait penetration was 2.5 X greater PRODUCTION in areas with a high concentration of ETHANOL PLANTS UNDER CONSTRUCTION ethanol facilities compared with areas without or having low concentrations of ethanol facilities 10
  11. 11. INTERNATIONAL CORN GROWTH Gross Profit Value of Seed Internationally Varies, Yet Still Solid Contributor to Growth, Commercial Platform TOTAL HYBRID SHARE GROSS MONSANTO MARKET MARKET POINT PROFIT BRAND OUTLOOK SIZE SIZE CHANGE VALUE PER SHARE (ACRES) (ACRES) (’04-’06) ACRE1 International Corn EUROPE-AFRICA SITUATION: HIGH • Molecular France 7.5M 7.5M 15% +5 • Primary value in breeding HIGH Italy 3.2M 3.2M 21% +7 application is international corn markets roughly 2 years today is in the seed MEDIUM Hungary 2.7M 2.7M 32% +6 behind U.S. • Breeding gains that have • Corn Borer- HIGH Turkey 0.8M 0.7M 21% +4 Roundup Ready 2 been made in the U.S. set stack approved in pace for market share LOW January in South South Africa 6.0M 6.0M 50% +12 growth in other Africa international markets LATIN AMERICA OUTLOOK: MEDIUM • Argentina is only Mexico 17.3M 3.9M 61% +3 • Monsanto is targeting to country in region LOW Brazil 30.8M 20.6M 34% -1 with biotech traits grow share in each of the • Next priority for most valuable corn-growing accelerated LOW Argentina 7.3M 7.0M 35% FLAT countries molecular breeding ASIA-PACIFIC • India is primary market of longer- LOW India 15.6M 5.9M 35% +6 term value in region 1. Average incremental value in gross profit opportunity for the seed value (excluding traits) of the addition of an acre in a Monsanto brand: MEDIUM HIGH LOW >$20 $10 - $20 <$10 11
  12. 12. INTERNATIONAL CORN GROWTH Breeding Capability Is Creating Business Opportunities in International Temperate Seed Markets INTERNATIONAL OPPORTUNITY: TEMPERATE GERMPLASM DEKALB STATUS AND OPPORTUNITY International Corn EUROPE SITUATION: TARGET HYBRID ACRES 27M • Key to growth in STATUS international corn seed • Largest temperate breeding program markets is leveraging the outside U.S., using international tools and knowledge crosses and molecular breeding developed for the U.S. in • Two-year trends have shown share TEMPERATE gains in key European markets other markets SUB-TROPICAL • Temperate germplasm can be moved across countries TROPICAL to improve breeding programs OUTLOOK: SUB-TROPICAL • Very strong international TEMPERATE corn seed performance over last two years is in SOUTH AFRICA ARGENTINA Europe, where germplasm with U.S. can be readily TARGET HYBRID ACRES TARGET HYBRID ACRES 6M 7.5M exchanged STATUS STATUS • With strong germplasm and • Established breeding program with strong • Breeders have historically brought in breeding programs, other genetics for local market germplasm from other temperate regions, including U.S. • In 2007 season, acres are increasing temperate markets are also because of an overall market recovery, and • Projected market share gains of 2-3 on positive upswings DEKALB seed is poised to gain market share points in 2006-2007 12
  13. 13. GLOBAL BIOTECH TRAIT GROWTH Roundup Ready Soybean Strategy in Brazil Emphasizes Acreage Penetration ROUNDUP READY SOYBEANS IN BRAZIL PROJECTED EPS CONTRIBUTIONS (2007 VS 2010) Global Biotech Traits SITUATION: $0.12 $0.09-$0.11 • Largest soybean market $0.10 outside U.S. is Brazil • Recent pricing action taken CONTRIBUTION TO EPS there to promote penetration $0.08 of new seed ($ PER SHARE) OUTLOOK: $0.06 $0.025-$0.05 ON PENETRATION ALONE EPS CONTRIBUTION • In a total Brazilian market of COULD MORE THAN $0.04 ~50M acres, 2006 penetration DOUBLE 2007-2010 was almost 20M acres – reflecting a remaining 30M- $0.02 acre upside • Penetration target of 45% for $0.00 2007 is on track 2007F 2010F 2007 2008F 2009F 2010 ASSUMPTIONS ASSUMPTIONS PRICING PRICING $2.50-$3.00/acre $2.50-$3.00/acre MARKET SIZE MARKET SIZE 50M 50M PENETRATION PENETRATION 45% 90% 13
  14. 14. COTTON GROWTH Upgrade to Second-Generation Cotton Traits Flourishes, Highlighted by 2007 Roundup Ready Flex Growth PENETRATION RATE OF SECOND-GENERATION TRAITS PENETRATION TREND OF COTTON TRAITS AS A PERCENT OF ANNUAL PLANTED ACRES1 Cotton Platform 2006 RESULTS SITUATION: • Cotton trait platform is the first 17% Bollgard II to move forward on complete replacement of first-generation 14% Roundup traits with second-generation Ready Flex upgrades • Roundup Ready Flex cotton 2007 FORECAST launched in the U.S. in 2006; 25-30% Launched in Australia for Bollgard II FY2007 planting 25-30% Roundup OUTLOOK: Ready Flex • Transition to second- generation traits continues in 2007 0% 5% 10% 15% 20% 25% 30% • Roundup Ready Flex was planted on ~14% of planted ROUNDUP READY FLEX acres in 2005 – that should double in 2007 Even on potentially lower total planted acres, Roundup Ready Flex penetration rate should double in 2007 to >25% of total cotton crop 1. Percent of annual planted acres reflects the ratio of number of actual trait acres planted to total planted acres in the identified year for the specified geography 14
  15. 15. SEMINIS GROWTH Seminis To Leverage Portfolio, Pricing and Molecular Breeding To Create New Growth SEMINIS VALUE CREATION STAGED OPPORTUNITIES FOR INCREASING BUSINESS VALUE Seminis SITUATION: Significant use of molecular markers • In 2006, narrowed commercial VALUE CREATION OPPORTUNITY and research focus to 25 crops Aggressively make hybrid that generate the most profit conversions in strategic crops • Began application of breeding technology, with a target of Identify and implement opportunities 1,000+ markers each for 9 to price products to value crops by 2009 OUTLOOK: Assemble genetic maps for key crops • Seminis is targeted to contribute $0.10 - $0.125 to EPS in FY2007 now that Focus on 25 most-profitable key crops inventory step-up charge is complete 2005 2006 2007 2008 2009 2010 PIPELINE OPERATIONAL EXCELLENCE NEW VALUE CREATION ADVANCEMENT Monsanto Seminis Seminis Commercialize acquires modestly accretive to first hybrids Seminis accretive FY2007 EPS developed by to FY2006 in range of molecular EPS $0.10-$0.125 breeding 15
  16. 16. SEMINIS GROWTH Development of Fungal-Resistant Peppers For North America Provides New Pricing Opportunity for Seminis KEY MARKET ACRES NORTH AMERICA AVAILABLE MARKET 200K Fungal-Resistant Peppers PERCENT PENETRATED 0% VALUE OPPORTUNITY: FUNGAL RESISTANCE Seminis EXAMPLE: NORTH AMERICAN PEPPERS Fungal-Resistant Peppers 2.00 INDEXED RETAIL SEED PROJECT CONCEPT: 49% VALUE PER ACRE Fungal disease pressure affects almost 60 1.50 percent of North American pepper acres, diminishing yield and increasing input 1.00 expenses for growers. Using molecular markers, Seminis is creating hybrid peppers that exhibit fungal resistance. 0.50 2006 PERFORMANCE UPDATE: • Seminis is mapping molecular 0.00 markers for 9 key crops, which is CONVENTIONAL FUNGAL-RESISTANT helping better locate genetic sites for PEPPERS PEPPERS factors like fungal resistant and disease, allowing breeders to apply Fungal disease affects 60% of the 200K+ acres of peppers grown that information to upgrade product in the U.S., Canada and Mexico, requiring intensive chemical offerings faster spraying for control • Ultimately fungal-resistance could be Using molecular-breeding tools, Seminis scientists are working combined with other or additional on developing hybrid peppers that are resistant to fungal disease disease-resistance characteristics for The enhanced value of fungal resistance is projected to increase commercial launch the per-acre retail price by almost half 16
  17. 17. PIPELINE UPDATE Pipeline Demonstrates Increased Breadth and Depth; Key Projects on Track for Commercial Launch R&D PIPELINE: JANUARY 2007 PHASE PHASE PHASE PHASE PHASE PHASE PHASE PHASE D D 1 2 3 4 1 2 3 4 PROCESSOR BENEFITS FARMER BENEFITS MAVERA™ HIGH-VALUE CORN ROUNDUP READY FLEX COTTON WITH LYSINE1 ROUNDUP RREADY2YIELD SOYBEANS MAVERA™ I HIGH-VALUE SOYBEANS1 ROUNDUP RREADY2YIELD CANOLA MAVERA™ II HIGH-VALUE SOYBEANS1 DICAMBA-TOLERANT SOYBEANS 2nd-GEN HIGH-VALUE CORN WITH LYSINE1 DICAMBA-TOLERANT COTTON FEED CORN WITH BALANCED PROTEINS1 YIELDGARD VT ROOTWORM/RR2 2ND-GEN YIELDGARD ROOTWORM HIGH OIL SOYBEANS FOR PROCESSING1 YIELDGARD VT PRO 2ND-GEN YIELDGARD CORN BORER CONSUMER BENEFITS INSECT-PROTECTED SOYBEANS YIELDGARD ROOTWORM II IMPROVED-PROTEIN SOYBEANS SOYBEAN NEMATODE-RESISTANCE VISTIVE II SOYBEANS BOLLGARD III VISTIVE III SOYBEANS COTTON LYGUS CONTROL OMEGA-3 SOYBEANS HYBRIDIZATION SYSTEM FOR CORN DROUGHT-TOLERANT CORN 2ND-GEN DROUGHT-TOLERANT CORN High Impact Technologies (HIT) project HIGHER-YIELDING CANOLA Jan. 4, 2007 Advancements/Additions WATER-USE EFFICIENCY SOYBEANS Jan. 4, 2006 Advancements/Additions DROUGHT-TOLERANT COTTON 1. These product candidates are in the Renessen pipeline. Renessen is a HIGHER-YIELDING CORN Monsanto/Cargill joint venture. NITROGEN UTILIZATION CORN 2. The colored bar associated with each project indicates which phase that project is HIGHER-YIELDING SOYBEANS in. It is not intended to represent the relative status of the project within a particular stage. 3. Roundup Ready Flex Cotton advanced from Phase 4 to commercialization in 2006. 17
  18. 18. PIPELINE UPDATE Roundup RReady2Yield Soybeans Advance to Phase 4, Beginning Pre-Launch Activities KEY MARKET ACRES U.S. BRAZIL ARGENTINA Roundup RReady2Yield AVAILABLE MARKET 70M 60M 35M Soybeans PERCENT PENETRATED 0% 0% 0% P R O JE CT 2006 TESTING: RELATIVE PERFORMANCE OF ROUNDUP READY AND R&D Pipeline ROUNDUP RREADY2YIELD EXPERIMENTAL LINES Roundup RReady2Yield Soybeans PROJECT CONCEPT: PERCENT OF POPULATION 50 Second-generation of Monsanto’s popular ROUNDUP READY ROUNDUP EXPERIMENTAL herbicide-tolerant platform in soybeans RREADY2YIELD LINES 40 that will provide farmers with soybeans that EXPERIMENTAL LINES have enhanced yield, with a target of up to 30 5 bushel-per-acre yield increase over comparable Roundup Ready soybeans KEY RESULTS 20 2006 PERFORMANCE UPDATE: 10 Phase 4 2006 STATUS: • Performance indicates that the enhanced yields associated with -10 -5 0 5 10 15 Roundup RReady2Yield are YIELD DIFFERENCE (BU/AC) consistent across multiple years and diverse germplasm 2006 breeding trials compared Roundup RReady2Yield experimental lines with Roundup Ready experimental lines that backgrounds were in the same stage of development. The Roundup VALUE CATEGORIES: RReady2Yield lines averaged 3 to 5 bushels per acre higher than TOTAL RETAIL Roundup Ready experimental lines – shifting the entire yield $10 - $30/acre VALUE/ACRE: curve positively and providing further validation for the product concept target of up to a 5 bushel-per-acre yield increase 18
  19. 19. PIPELINE UPDATE Multi-Generational Drought-Tolerant Corn Creates Value Across Multiple Market Segments KEY MARKET ACRES U.S. BRAZIL ARGENTINA AVAILABLE MARKET 80M 30M 6M Drought-Tolerant Corn PERCENT PENETRATED 0% 0% 0% P R O JE CT SEGMENTED VALUE OPPORTUNITY ACROSS MARKETS: R&D Pipeline U.S. EXAMPLE Drought-Tolerant Corn High annual PROJECT CONCEPT: precipitation First-generation drought tolerance is targeted to minimize uncertainty in farming by buffering against the effects of water limitation, primarily in areas of annual water stress 2006 PERFORMANCE UPDATE: Low annual Phase 2 precipitation 2006 STATUS: Source: Spatial Climate Analysis Service, Oregon State University • Yield enhancement demonstrated WESTERN IRRIGATED STABILITY again in 2006 under water-stress DRYLAND conditions in U.S. 8-12M acres 10-12M acres 50-60M acres • Lead gene chosen • 2007 trials expected to demonstrate 14-18” typical 14-18” typical 17-19” typical yield enhancement in multiple precipitation in precipitation in precipitation in hybrids under dryland conditions growing season growing season growing season VALUE CATEGORIES: Irrigated Non-irrigated Non-irrigated TOTAL RETAIL $10 - $30/acre Value is in replacing Value is in improved Value is in improved VALUE/ACRE: irrigation, reducing yields annually, by yields when moisture the variable costs of improving water-use is less than optimal irrigation efficiency 19
  20. 20. PIPELINE UPDATE First of Drought-Tolerant Corn Traits Continues To Deliver Yield Boost in Third-Year Testing KEY MARKET ACRES U.S. BRAZIL ARGENTINA AVAILABLE MARKET 80M 30M 6M Drought-Tolerant Corn PERCENT PENETRATED 0% 0% 0% P R O JE CT 2006 TESTING: YIELD IMPROVEMENT OF LEAD EVENT UNDER DROUGHT STRESS R&D Pipeline Percent yield difference vs. control Drought-Tolerant Corn 14 7.3% 10.5% 10.9% 23.2% 9.0% PROJECT CONCEPT: 12 First-generation drought tolerance is targeted to minimize uncertainty in farming VS. CONTROL (BU/ACRE) 10 YIELD DIFFERENCE by buffering against the effects of water limitation, primarily in areas of annual water 8 stress KEY RESULTS 6 2006 PERFORMANCE UPDATE: NOT TESTED Phase 2 2006 STATUS: 4 • Yield enhancement demonstrated 2 again in 2006 under water-stress 0 conditions in U.S. 2004 2005 2006 • Lead gene chosen • 2007 trials expected to demonstrate Hybrid 1: 2004, 4 locations; 2005 5 locs; 2006, 1 loc (20 reps) Hybrid 2: 2004, not tested; 2005, 5 locs, 2006, 3 locs yield enhancement in multiple hybrids under dryland conditions In third year field testing in U.S., drought-tolerant leads are VALUE CATEGORIES: consistently delivering higher yields compared with controls under drought-stressed conditions TOTAL RETAIL $10 - $30/acre VALUE/ACRE: First leads show primary benefit under water-stress conditions 20
  21. 21. PIPELINE Monsanto’s Pipeline Is Funded for Growth, but Focused on Return on Investment PIPELINE VALUE: TOP-TEN PROJECTS REFLECTING COMMERCIAL VALUE1 SOURCE OF VALUE PER MARKEY CORE PHASE R&D Pipeline VALUE ACRE OPPORTUNITY MARKETS Renessen Corn Processing SITUATION: U.S 4 $10 - $30 20M Brazil System and Mavera™ High- Feed and fuel Europe Value Corn with Lysine2 • In FY2006, three projects were U.S. Roundup RReady2Yield HIT 4 Yield $10 - $30 155M Brazil designated as “HIT” enhancement soybeans Argentina projects reflecting 3 Omega 3 soybeans >$30 5M U.S. Improved health our confidence in their commercial U.S. 4 Insect YieldGard VT PRO $10 - $30 41M Brazil track 2 -GEN YIELDGARD CORN BORER nd protection Europe U.S Water 2 HIT HIT Brazil Drought-tolerant corn $10 - $30 164M replacement Europe and yield 2 Vistive III soybeans $10 - $30 12-15M U.S. Improved health U.S. 2 Yield Higher yielding soybeans $10 - $30 155M Brazil enhancement Argentina 2 Brazil Insect-protected soybeans <$10 95M Yield 1. Top ten not presented in WITH ROUNDUP RREADY2YIELD Argentina ranked order; Commercial U.S. value calculated by Water penetration and retail 1 India Drought-tolerant cotton $10 - $30 36M replacement value during three-year Brazil and yield span at peak. Australia 2. Value and acres are for U.S Nitrogen 1 direct feed piece only and Nitrogen utilization corn $10 - $30 164M Brazil replacement do not include value for Europe and yield Renessen’s corn processing system, which is still to be determined 21
  22. 22. SUMMARY All Six Growth Drivers Are On Track in 2007, Setting Stage for Continued Growth Through End of Decade MONSANTO’S OPPORTUNITY FY2007 PRIORITIES FACTOR FOCUS: GROSS PROFIT AS A PERCENT OF SALES • Drive trait penetration, especially triple-stacks 54% U.S. corn • Seed market share growth in U.S. national and ASI brands GROSS MARGIN ‘PULL’ 52% International • Grow market share in key international market corn • Achieve 2.5-5 cents EPS for 50% Global biotech Roundup Ready soybeans in traits Brazil • Complete Delta and Pine Land 48% acquisition Cotton CURRENT LEVEL platform • Continue penetration of second- generation stacked traits in U.S. 46% • Achieve 10-12.5 cents EPS Seminis contribution 44% 2003 2004 2005 2006 2007F 2008F 2009F 2010F • Emphasis on “HIT” projects R&D pipeline 22
  23. 23. Reconciliation of Non-GAAP Financial Measures Reconciliation of Non-GAAP EPS Fiscal Year Fiscal Year Fiscal Year Fiscal Year $ per share 2006 2005 2004 2003 Net Income (Loss) per Share $1.25 $0.47 $0.50 $0.13 Cumulative Effect of Change in Accounting Principle $0.01 -- -- $0.02 Diluted Earnings (Loss) per Share Before Effect of $1.26 $0.47 $0.50 $0.15 Accounting Change Tax Charge on Repatriated Earnings $0.04 -- -- -- Seminis and Stoneville In-Process R&D -- $0.45 -- -- Solutia-Related Charge -- $0.32 -- -- Tax Benefit on Loss from European Wheat and -- $(0.19) -- -- Barley Business Restructuring Charges -- Net -- $0.01 $0.18 $0.05 Loss (Income) on Discontinued Operations $0.01 $(0.02) -- $0.04 Impairment of Goodwill -- -- $0.12 -- PCB Litigation Settlement Expense – Net -- -- -- $0.48 Diluted Earnings (Loss) per Share from Ongoing Business $1.31 $1.04 $0.80 $0.72 Note: EPS figures reflect the stock split effective July 28, 2006 23

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