.monsanto 04-04-07


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.monsanto 04-04-07

  1. 1. SECOND-QUARTER 2007 FINANCIAL RESULTS April 4, 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. 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 Second-Quarter Financial Summary Second Second First First Half Change Change Quarter Quarter Half 2006 2007 2006 2007 NET SALES $2,616M $2,200M 19% $4,155 $3,605M 15% GROSS $1,450M $1,240M 17% $2,130 $1,874M 14% PROFIT NET INCOME $543M $440M 23% $633 $499M 27% DILUTED EPS ON AS- $0.98 $0.80 23% $1.14 $0.91 25% REPORTED BASIS FREE CASH $290M $(135)M NM FLOW Note: EPS figures reflect the stock split effective July 28, 2006 4
  5. 5. U.S. CORN GROWTH U.S. Corn Seed Business Has Progressed Through Three Distinct Phases, Expanding Its Customer Base PROGRESSION OF DEKALB CUSTOMER STATUS: 1997-2007F 2000-2001 2007 1998 2002 2005 Establishment and DEKALB share Monsanto First year of DEKALB First triple-stack ramp up of expected to increase completes share gains trait introduced molecular breeding 3 or more points; acquisition of platform in corn Sixth consecutive DEKALB year of growth 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 CUSTOMER CUSTOMER CUSTOMER RETENTION INTENSIFICATION EXPANSION DEKALB’s First hybrids developed using intra- Monsanto completed acquisition of continued strong company crosses begin to enter DEKALB and other international seed yield portfolio; Molecular breeding becomes companies performance is new standard for Monsanto breeders earning Initial priorities revolved around Reflecting the improved yield potential increasing trial integrating breeding and commercial from breeding, DEKALB seed begins and adoption programs to present a single face to the gaining share from farmers customer who’ve Primary growth initially comes from Significant investment in production historically existing farmers expanding acres assets to maximize quality and yield purchased other planted to DEKALB seed potential of genetic base brands Organizational focus on customer retention 5
  6. 6. U.S. CORN GROWTH By 2006-2007, DEKALB Has Achieved a Tipping Point, Entering a Period of Attracting New Customers 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 CUSTOMER CUSTOMER CUSTOMER RETENTION INTENSIFICATION EXPANSION DEKALB USE PATTERNS 2007 MARKET RESEARCH: More than 43% of DEKALB users have been customers for 4 years or DEKALB USE PATTERNS less, and the average first-time customer is planning on planting 29% of acres to DEKALB seed BASED ON A SAMPLE OF 500 CORN Customers for 4 years or less GROWERS COMPLETED IN MARCH 2007 Key conclusions: 2007 DEKALB 43% CUSTOMER BASE DEKALB is in a period of attracting new customers 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% DEKALB’s intensification DEKALB USE PATTERNS per farm is expanding Only 6% of farmers surveyed indicated they would switch away from Farmers buy performance DEKALB if another seed brand offered the same set of biotech traits and are not willing to Interested in Non-DEKALB seed brands if comparable trait switch away from superior package was available yield potential 2007 DEKALB 6% CUSTOMER BASE 0% 1 0% 2 0% 30 % 40 % 50 % 60 % 70% 80% 90% 100% 6
  7. 7. U.S. CORN GROWTH By Delivering Better Yielding Products, DEKALB on Track to Gain More Than 12 Share Points in Six Years DEKALB SHARE EVOLUTION: 2001-2007F 25% 2005-2007 TOTAL 6+ PTS SHARE GAIN 22+% 20% DURATION 2001-2005 2 YEARS 19% TOTAL 6 PTS SHARE GAIN U.S. SHARE 15% DURATION 4 YEARS 16% 14% 13% 12% 10% 10% 5% 0% 2001 2002 2003 2004 2005 2006 2007F TOTAL U.S. PLANTED TRIPLE-STACK ACRES -- -- -- -- 1.3 6.0 16.0 (ACRES IN MILLIONS) TRIPLE-STACK TRAIT PENETRATION IN -- -- -- -- 8% 20% 40% DEKALB PORTFOLIO 7
  8. 8. U.S. CORN GROWTH 2007 Trait Demand Has Been Even Stronger Than Anticipated, Accelerating Adoption Rates for All Corn Traits 160 2007 FRONTLINE 140 UPDATE: 120 TRAIT ACRES IN MILLIONS With triple-stacks in strong demand, 100 trait sales have exceeded early- 80 season estimates 60 40 20 0 2005 2006 2007F 2010F 2007 FORECAST END-OF-DECADE U.S. CORN TRAIT ACRES1 2005 ACTUAL 2006 ACTUAL MARKET INITIAL (IN MILLIONS) Q2 UPDATE OPPORTUNITY ESTIMATE U.S. YIELDGARD 4.1 10 >15 ~19 25-30 ROOTWORM ACRES U.S.YIELDGARD CORN 32.1 32.3 >32 ~40 50-60 BORER ACRES U.S. ROUNDUP READY 24.8 32.7 >40 ~50 60 CORN ACRES 1.3 6.0 >10 ~16 25-30 U.S. TRIPLE-STACK ACRES 1. 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. 8
  9. 9. FINANCIAL UPDATE Increased EPS Guidance Reflects Strong Start to U.S. Season, Solid Performance Across Seed-and-Trait Business EARNINGS PER SHARE GROWTH PROGRESSION OF ONGOING EPS (2003-2007F) $1.80 2007 EPS GUIDANCE: FY2007 22-26% GROWTH GUIDANCE $1.60 $1.60 - $1.65 $1.60-$1.65 $1.40 Earnings Per Updated from Share1 $1.50-$1.57 range $1.31 $1.20 $875M-$950M Free Cash Flow $1.00 $1.04 $450-$500M Capital Updated from $0.80 Expenditures $350-$400M range $0.80 $0.71 $0.60 2003 2004 2005 2006 2007F 13% GROWTH 30% GROWTH 26% GROWTH 22-26% GROWTH 1. EPS figures reflect the stock split effective July 28, 2006 9
  10. 10. Reconciliation of Non-GAAP Financial Measures Reconciliation of Free Cash Flow Fiscal Year Six Months Six Months 2007 Ended Ended Feb. $ Millions Target Feb. 28, 2007 28, 2006 Net Cash Provided (Required) by Operations $1,425 - $1,500 $520 $331 Net Cash Provided (Required) by Investing Activities (550) (230) (466) $(135) Free Cash Flow $875 - $950 $290 191 Net Cash Provided (Required) by Financing Activities N/A (200) Effect of Exchange Rate Changes on Cash and Cash Equivalents N/A 15 -- $56 Net Increase (Decrease) in Cash and Cash Equivalents N/A $105 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) -- $0.03 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 $0.71 10