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.monsanto 06_25_08

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  • 1. THIRD-QUARTER 2008 FINANCIAL RESULTS June 25, 2008
  • 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; 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 reports on forms 10-Q and 10-K. 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
  • 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. 3
  • 4. PERFORMANCE SUMMARY Ongoing and As-Reported Earnings Third Quarter Third Nine Months Nine Months 2008 Quarter 2007 2008 2007 Diluted Earnings $1.45 $1.03 $3.93 $2.17 Per Share Solutia Claim - - ($0.23) - Settlement Loss (Income) From - - $(0.01) $0.01 Discontinued Operations Diluted Earnings $1.45 $1.02 $3.70 $2.18 Per Share on an Ongoing Basis 4
  • 5. PERFORMANCE SUMMARY Third-Quarter Financial Summary Third Third Nine Nine Quarter Quarter Change Months Months Change 2008 2007 2008 2007 $3,588M $2,842M 26% $9,466M $6,990M 35% NET SALES GROSS $1,969M $1,503M 31% $5,253M $3,633M 45% PROFIT $811M $570M 42% $2,196M $1,203M 83% NET INCOME DILUTED EPS ON AS- $1.45 $1.03 41% $3.93 $2.17 81% REPORTED BASIS FREE CASH $675M $(321)M NM FLOW 5
  • 6. FINANCIAL REVIEW Earnings Growth of Approximately 70 Percent and Increased Cash from Operations Reflect Strong Growth Drivers EARNINGS PER SHARE GROWTH CASH FLOW PROJECTIONS PROGRESSION OF ONGOING EPS (2004-2008F) 2007-2008F 2008F ONGOING EPS GUIDANCE: 2007 2008F ~70% GROWTH  ~$3.40 $3.50 $3,000 $3.25 $2,600 $2,500 $3.00 $1,854 $2,000 $2.75 $2.50 $1,500 (in $ millions) $2.25 $1,000 $2.00 $500 $1.75 $2.00 $0 $1.50 ($500) $1.25 ($509) ($1,000) $1.30 ($950) $1.00 ($1,100) ($1,500) $1.04 ($1,402) $0.75 ($2,000) $0.80 $0.50 Cash Flows from Operations 2004 2005 2006 2007 2008F 30% 25% 54% ~70% Cash Used in Investing, Excluding Capital Expenditures Capital Expenditures Guidance previously set as $3.15 to $3.25 per share Note: EPS figures reflect the stock split effective July 28, 2006 6
  • 7. U.S. AND INTERNATIONAL CORN Plan to Continue to Target 1-2 Share Point Gains in Key Countries in 2009; U.S. Targets 2+ Share Gain INTERNATIONAL CORN BRAND PERFORMANCE: LEADING MARKET INDICATORS OF MONSANTO BRAND SHARE PERFORMANCE – 2008 EU27 U.S. 2007 BRAND 2007 NATIONAL 13% 23% SHARE: BRAND SHARE: PRE-SEASON PRE-SEASON 1-2 share 1-2 share SHARE SHARE ESTIMATE: ESTIMATE: CURRENT CURRENT 0.5 share 2-3 share SHARE SHARE ESTIMATE: ESTIMATE: FY09 TARGET: FY09 TARGET: 1-2 share 2+ share INDIA ARGENTINA 2007 BRAND 39% SHARE: 2007 TOTAL 40% PRE-SEASON BRAND SHARE: 1-2 share SHARE BRAZIL ESTIMATE: PRE-SEASON 1-2 share SHARE 2007 TOTAL CURRENT 40% ESTIMATE: BRAND SHARE: Flat SHARE ESTIMATE: CURRENT PRE-SEASON 5 share SHARE Flat SHARE FY09 TARGET: 1-2 share ESTIMATE: ESTIMATE: FY09 TARGET: 1-2 share CURRENT Held SHARE Share ESTIMATE: FY09 TARGET: 1-2 share 7
  • 8. U.S. CORN Triple-Stack Ramp Up Continues for 2009, With Leading Brands Targeting 65% in Portfolio Mix 2009 U.S. CORN TRIPLE-TRAIT FORECAST 2009 OUTLOOK 70% PRODUCTION PLAN BY STRATEGIC CHANNEL • All three of Monsanto’s 65% 65%+ 60% channels 62% should have 57% triple 50% penetration TRIPLE STACK AS PERCENT OF 50%+ above 50% in PORTFOLIO VOLUME seed 40% 43% portfolios for 2009 • DEKALB and 30% ASI should be in the range of 65% 20% triple availability in 2009 10% • Monsanto targeting to capture 0% 2008 2009F 2008 2009F 2008 2009F 100% of its share of 45- 55M acre triple-stack opportunity DEKALB Brand ASI Brands All Licensees in 2009 8
  • 9. SOYBEANS Soybean Value Upgraded as Stacks of Roundup Ready 2 Yield, Modified Oil Traits and Insect Protection Emerge MULTIPLE STACKS IN SOYBEANS BY 2012 Soybeans CROP: Growth via MODIFIED OIL OBJECTIVE: COMPETITIVE U.S. SOYBEAN VALUE new traits TRAITS MARKET PLATFORM 2008 STATUS • Roundup Ready • $17-19/acre 2 Yield in for Roundup • Roundup Ready market for 2+ tolerance ROUNDUP soybeans at 96% years plus 7-11% READY 2 YIELD penetration in U.S., yield • Vistive III and 55% in Brazil other modified • Oil premium • Roundup Ready 2 Yield oil traits being U.S. SOYBEANS: approved in U.S., launched 60-70M ACRES Canada and Japan; key export approvals ROUNDUP READY 2 YIELD AND INSECT BRAZIL SOYBEAN VALUE pending from China, MARKET PROTECTED Mexico and Europe • Insect-protected •$2.50-$3.00+ 2012 OUTLOOK Roundup Ready per acre for • Five trait stacks in 2 Yield being Roundup prepared for tolerance plus ROUNDUP READY soybeans feasible, with launch 7-11% yield Roundup Ready 2 Yield •Insecticide as base trait for all replacement BRAZIL SOYBEANS: 50- 60M ACRES 9
  • 10. USES OF CASH Leadership and Innovation Underscored by Strong Cash Generation for Investment in Next Wave of Growth USES OF CASH FY08F ESTIMATED USES OF CASH CUMULATIVE: FY2005-FY2007 ESTIMATED $2.6B CASH GENERATED BY OPERATIONS American Seeds, Inc. (FY2005-FY2007) FY2007 Seminis (FY2005) FY2008 Dividend $433M of increased Delta & Pine Land $3,000 $2,600 dividends & 38% to 55 (net of Stoneville and share $2,500 cents/share Nexgen divestitures) repurchases $545 (FY2007) ($100) $2,000 through Q3 $1,500 $639 (in $ millions) ($950) $1,000 $3,161 $266 $500 ($433) ($1000) $0 ($500) $1,160 FY2008F ($1,000) Estimated $2.6B FY2008F FY2008F ($1,500) of Operating CAPEX: ACQUISITIONS: Cash Flows Year two of generated Acquisitions • De Ruiter Seeds $610M corn seed • Cristiani FY2007 Capital Spending expansion Capital spending • Agroeste project; year FY2008F focused on corn Technology Investments one of $196M Other seed production glyphosate Investments expansion Dividends expansion Share Repurchases FY2008F FREE CASH FLOW = $550M 10
  • 11. U.S. CORN TRAIT PRICING Monsanto’s Pricing Model Aimed at Total Value Created; Shared with Farmer YieldGard VT Triple  Improved Yield PRICING TO VALUE EXAMPLE: 2009 UPDATE: Yield-advantage value at 3 year Improved Yield1  average commodity price IMPROVED YIELD • One year back, current year and forward year 15-20 (BU/AC): • Value shared with farmers UPDATE: 3 YEAR COMMODITY PRICE: $4.00  Indirect Benefits $60-$80 Quantified benefits, such as convenience and Indirect Benefits2  peace of mind INDIRECT BENEFITS: $5 • Value shared with farmers Incremental Value Created $65-$85  Replacement Value ( + ) Factors costs farmers would have incurred for substitute insect and weed control • 100% of replacement value is captured PRICING APPROACH UPDATE: Per-Acre Trait Cost3: $29-$49 UPDATE: Replacement PRICING APPROACH  ($11-$19) Value4 Percentage of incremental value shared Incremental Farmer Cost: $18-$30 ultimately determined by market research, pricing simulations and focus groups to assess: Incremental Value Shared: 65-70% • Market Share Implications • Trait Penetration Effect 1. Monsanto estimates, based on better insect and weed control over conventional options • Competitive Reaction 2. Monsanto estimates, based on farmer surveys quantifying benefits such as convenience and peace of mind 3. Retail price range for YieldGard VT Triple in 2009, at seeding rate of 2.7 acres per unit 4. Subtracts costs farmers would have spent had they not used a trait package 11
  • 12. SOYBEANS Roundup Ready 2 Yield Soybeans Have Potential to Deliver Up to 10 Years of Breeding Gains Through One Trait ROUNDUP READY 2 YIELD SOYBEANS: SECOND-GENERATION WEED CONTROL OPPORTUNITY U.S. SOYBEANS Near-Isoline Comparisons: Roundup Ready 2 Yield vs. Roundup Ready 2007 U.S. AVERAGE 41.6 bu YIELD PER ACRE: % Yield Increase over Roundup Ready 12% AVERAGE ANNUAL 0.5 bu/ac GAIN OVER 30 YEARS: 11% 10% 9% ROUNDUP READY 2 YIELD TARGETED YIELD 7-11% 9% 8% IMPROVEMENT: 7% 7% 6% 4% YIELD 2% Roundup Ready 2 Yield has potential to deliver up to 10 years 0% of breeding gains with a single 4 YEAR 2004 2005 2006 2007 trait AVERAGE  Roundup Ready 2 Yield soybeans yield 7 to 11 percent higher than Roundup Ready soybeans based on 73 Monsanto field trials from 2004-2007 12
  • 13. FINANCIAL OUTLOOK 2008 Again Projects Double-Digit Earnings Growth, Strong Cash Generation and Improved Margins 2007 2008F EARNINGS $2.00 ~$3.40 ONGOING EARNINGS PER SHARE 54% GROWTH ~70% GROWTH FROM 2006 FROM 2007 54%; two years ahead of Gross Profit as a Percent of Sales 50% 2010 target of 52-54% Seeds & Traits Gross Profit $3.0B $3.7B Roundup and All Other Glyphosate-based $854M $1.9B Herbicides Gross Profit All Other Ag Productivity Gross Profit $418M ~$400M CASH MANAGEMENT AND SPENDING FREE CASH FLOW $(57)M ~$550M Capital Expenditures $509M ~$950M SG&A as a Percent of Sales 22% ~20% R&D as a Percent of Sales 9% ~9% Receivables as a Percent of Sales 18% Mid Teens Inventories as a Percent of Sales 20% ~20% 13
  • 14. FINANCIAL OUTLOOK Roundup Gross Profit Opportunity Moves to $1.9 Billion in FY08 as Demand Remains Strong ROUNDUP ROUNDUP AND OTHER GLYPHOSATE-BASED HERBICIDES: BRANDED AND NON-BRANDED TRENDS – 2004-2008 STATUS 300 • In April, announced 18- Branded month $196M Non-Branded de-bottlenecking plan 250 • Demand-driven Global Volume (in gallons) environment is sustainable, with peaks to come before 200 leveling to a projection of $1.8B in gross profit in 2012 150 • Factors: • $16-$18 branded price band in FY08 100 • Single-digit volume growth • Increased capacity in 50 CY2009-2010 from Monsanto • Branded Roundup quality needed to service Roundup Ready opportunity 0 2004 2005 2006 2007 2008F GLOBAL VOLUME 209M 215M 235M 252M 255M (GALLONS): BRANDED PRICE BAND $11-$13 $11-$13 $11-$13 >$11-$13 >$16-$18 (PER GALLON): TOTAL ROUNDUP AND ALL $703M $637M $648M $854M $1.9B OTHER GLYPHOSATE-BASED HERBICIDES GROSS PROFIT: 14
  • 15. FINANCIAL OUTLOOK Monsanto’s Strategic and Financial Opportunity Lies in Seeds and Traits GROSS PROFIT OUTLOOK BY SEGMENT 2007-2012F Gross Profit 2008 STATUS • New FY2008 targets of $3.7B ALL OTHER AGRICULTURAL PRODUCTIVITY gross profit for Seeds and $10,000 ROUNDUP AND OTHER GLYPHOSATE- Genomics; $1.9B for Roundup BASED HERBICIDES and other glyphosate-based IN MILLIONS herbicides SEEDS & GENOMICS $8,000 2012 OUTLOOK 2012F $6,000 SEEDS & $6.5-7.0B GENOMICS $4,000 ROUNDUP AND OTHER $2,000 GLYPHOSATE- $1.8B BASED $0 HERBICIDES 2007 2008F 2012F ALL OTHER AG $350M PRODUCTIVITY 15
  • 16. Reconciliation of Non-GAAP Financial Measures Reconciliation of Free Cash Flow Fiscal Year 2008 Fiscal Year 9 Months Ended 9 Months Ended $ Millions Forecast 2007 May 31, 2008 May 31, 2007 Net Cash Provided (Required) by Operations $2,600 $1,854 $1,325 $89 Net Cash Provided (Required) by Investing Activities (2,050) (1,911) (650) (410) Free Cash Flow $550 ($57) $675 $(321) Net Cash Provided (Required) by Financing Activities N/A (583) 93 (204) Effect of Exchange Rate Changes on Cash and Cash Equivalents N/A 46 80 59 Net Increase (Decrease) in Cash and Cash Equivalents N/A ($594) $848 ($466) Reconciliation of Non-GAAP EPS Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year $ per share 2008F 2007 2006 2005 2004 Net Income (Loss) per Share ~$3.63 $1.79 $1.25 $0.47 $0.50 Cumulative Effect of Change in Accounting Principle - - $0.01 -- -- Diluted Earnings (Loss) per Share Before Effect of ~$3.63 $1.79 $1.26 $0.47 $0.50 Accounting Change Solutia Claim Settlement ($0.23) 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 Operations 1 Loss (Income) on Discontinued -- ($0.13) -- $0.05 -- Impairment of Goodwill -- -- -- -- $0.12 In-Process R & D Write-Off Related to the Delta & Pine Land -- $0.34 -- -- -- (D&PL) Acquisition Diluted Earnings (Loss) per Share from Ongoing Business ~$3.40 $2.00 $1.30 $1.04 $0.80 Note: EPS figures reflect the stock split effective July 28, 2006 16 1. The operating results of Stoneville and Nexgen have been conformed to discontinued operations for all relevant years presented.

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