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monsanto 2004 08a


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monsanto 2004 08a

  1. 1. Investor Presentation August 2004 1
  2. 2. Forward-Looking Statements Forward-Looking Statements Forward- Certain statements contained in this presentation, such as statements concerning the company's anticipated financial statements results, current and future product performance, regulatory approvals, currency impact, business and financial plans and approvals, other non-historical facts are quot;forward-looking statements.quot; These statements are based on current expectations and non- quot;forward- expectations 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 those company’ such forward-looking statements. Factors that could cause or contribute to such differences include, among others: the forward- such company’s exposure to various contingencies, including those related to Solutia, Inc., litigation, intellectual property, company’ regulatory compliance (including seed quality), environmental contamination and antitrust; fluctuations in exchange rates contamination and other developments related to foreign currencies and economies; increased generic and branded competition for the economies; company's Roundup herbicide; the accuracy of the company’s estimates and projections, for example, those with respect company’ to product returns and grower use of our products and related distribution inventory levels; the effect of weather distribution conditions and commodity markets on the agriculture business; the success of the company’s research and the company’ development activities and the speed with which regulatory authorizations and product launches may be achieved; rizations autho domestic and foreign social, legal and political developments, especially those relating to agricultural products especially developed through biotechnology; the company's ability to continue to manage its costs; the company’s ability to continue company’ successfully market new and existing products in new and existing domestic and international markets; the company’s existing company’ ability to obtain payment for the products that it sells; the company's ability to achieve and maintain protection for its company's intellectual property; the effects of the company's accounting policies and changes in generally accepted accounting policies principles; the company's ability to fund its short-term financing needs; general economic and business conditions; short- political and economic conditions due to threat of future terrorist activity and related military action; and other risks and terrorist factors detailed in the company's filings with the U.S. Securities and Exchange Commission. Undue reliance should not Securities be placed on these forward-looking statements, which are current only as of the date of this release. The company forward- this disclaims any current intention to revise or update any forward-looking statements or any of the factors that may affect forward- actual results, whether as a result of new information, future events or otherwise. events 2
  3. 3. Non-GAAP Financial Information Non-GAAP Financial Information This presentation uses the non-GAAP financial measures of “free cash flow” and earnings per share (“EPS”) non- flow” (“ EPS” excluding the effect of certain items. We define “free cash flow” as the total of cash flows from operating flow” activities and cash flows from investing activities. A non-GAAP EPS financial measure (which we sometimes non- refer to as EPS from ongoing business) 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 non- in this presentation. The presentation of free cash flow and EPS excluding the effect of certain items is EPS intended to supplement investors’ understanding of our operating performance. These non-GAAP financial non- investors’ measures may not be comparable to similar measures used by other companies. Furthermore, these non- non- GAAP financial measures are not intended to replace net income (loss), cash flows, financial position, or (loss), comprehensive income (loss), as determined in accordance with accounting principles generally accepted in accounting the United States. The non-GAAP financial measures used in this presentation are reconciled to the most non- directly comparable financial measure calculated and presented in accordance with GAAP and can be found at in the end of this presentation. Fiscal Year In this presentation, unless otherwise specified references to years, or to fiscal years, 2001 through 2006 references are on a fiscal year basis and refer to the 12-month period ending August 31. 12- Trademarks Roundup, Roundup Ready, Bollgard, Bollgard II, YieldGard, Harness, Posilac and the Monsanto, Imagine and YieldGard, vine logo are trademarks owned by Monsanto Company and its wholly owned subsidiaries. All other wholly trademarks are the property of their respective owners. © 2004. Monsanto Company. All Rights Reserved. 3
  4. 4. Monsanto’s Business Focuses on Agriculture Globally 2003 Sales $4.9B Sales by Business Segment Sales by Geographic Region Biotechnology Trait Acreage by Crop 150M Acres Worldwide North America Latin America Seeds and Genomics Europe-Africa Europe- Asia-Pacific Asia- Agricultural Productivity Soybean traits Corn traits Cotton traits Canola traits Source: 2003 Earnings Data 4
  5. 5. Agricultural Productivity Continues To Generate Significant Cash Key Market Positions No. 1 Selling Selective Herbicides Hold Herbicide the No. 2 U.S. Position Largest-Selling Dairy-Related Animal Health Product 5
  6. 6. Roundup Remains Leading Product in Global Crop Protection Market 2003 sales $ millions $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Fenoxaprop Sulfosate Paraquat Roundup* Glufosinate 2,4-D 2,4- Nicosulfuron Atrazine Pendimethalin Metolachlor Acetochlor * Branded and third party supply revenue Source: Monsanto and Phillips McDougall, 2003 6
  7. 7. Having Managed Post-Patent Decline, Roundup Strategy Shifts Focus to Improving Return on Capital Increase Decrease U.S. branded net average selling price projected in range of $13.50 to $14.50 U.S. per gallon in 2004, sustained in 2005 Number of Brand strength supports 60% U.S. SKUs market share in 2005 On-Farm “Pull” Restructuring actions in place to move Marketing Roundup SG&A to low teens as percent of sales in 2006 Distribution “Push” Reducing number of branded Roundup Marketing SKU’s globally by 45% (20% in 2001-2003 and an additional 25% in 2004-2005) Staffing Working Capital Investment 7
  8. 8. Biotechnology Continues To Grow Globally Global Monsanto Planted Biotech Acres Acres in millions 180 160 Canola Cotton 140 Corn 120 Soybeans 100 80 60 40 20 0 y 96 97 98 99 00 01 02 03 ar 19 19 19 19 20 20 20 20 in im el Pr 04 20 Source: Monsanto estimates 8
  9. 9. Market Potential for Biotech Traits Highlights Continued Growth Opportunity Total Available Market in Acres Key Markets Roundup Roundup YieldGard YieldGard Roundup Bollgard I Ready Ready Corn Root Ready and II Soybeans Corn Borer Worm Cotton Cotton United States 70M 20M-50M 30M-40M 15-20M 10-15M 6-8M Brazil 50M 20M 15M 5M - - Argentina 30M 5M 4M 1M - - India - - - - - 10-15M Australia - - - - 0.5M-0.8M 0.5M-0.8M Biotech Acres Planted 2004 Preliminary Remaining 64% 21% 61% 8% 66% 26% 64% 21% 61% 8% 66% 26% Available Market 9
  10. 10. Seed and Trait Momentum Fuels Mid-Term Earnings Growth Seeds and traits projected to grow significantly Breeding advancements continue to improve seed – performance Second-generation and stacked traits offer unmatched – benefits to growers Roundup shifts focus toward improving return on capital Roundup remains major source of free cash flow – R&D advancements accelerate longer term growth 10% EPS CAGR in 2005 and 2006 from Ongoing Business with Strong Free Cash Flow 10
  11. 11. Round 1: Seed and Single-Trait Positions Firmly Established and Growing • Seed Breeding Advancements • First-Generation Traits • Geographic Expansion • Value Capture Round 1 11
  12. 12. Round 1: Seed Breeding Breeding Advancements Are Critical to Corn Growth to ta eer san ge n 2003 Hybrid Performance Pion Mo n 2003 Global Corn Market Share S yn Yield U.S. North Standability 45 <105 Day RM* 40% Disease Resistance 40 Licensed Yield U.S. Central & 35 South Branded Standability 28% 30 >105 Day RM* Disease Resistance 25 Yield France Standability 20 Disease Resistance 15 Yield 10 7% Brazil Standability 5 Disease Resistance 0 •RM is relative maturity Syngenta Monsanto Pioneer Source: Monsanto Performance Trials Top of the market Average of the market Below average of the market 12
  13. 13. Round 1: First-Generation Traits Monsanto’s Biotech Portfolio Has Established Industry Standard for First-Generation Traits Percentage of 2004 U.S. total planted acres (Preliminary) Monsanto products 100 Competitive products 80 60 40 20 0 n ts ts rn ts rn or i i ai co co tra tra Ic tr k x IM n n n n e to or ea Li ul ld ot C yb c rty e er C rfi So be H a le Li C Source: Monsanto 13
  14. 14. Round 1: First-Generation Traits Roundup Ready Soybeans Deliver Superior Weed Control at Competitive System Cost U.S. Grower System Cost Roundup Ready Soybeans Herbicide and Trait Seed $ per acre Herbicide Cost $48 $40 Trait Cost Unmatched weed control in Roundup Ready Soybeans 2003 1998 Source: Monsanto and Doane Market Research 14
  15. 15. Round 1: Global Expansion & Value Capture EU Import Approvals Pending, but Business Strategy in Process To Expand Market Choices European Union Situation Import approvals needed for free flow of grain Expands market potential in Americas – Near-term, Roundup Ready corn key 2 1 Business Alternative Regulatory Alternative Advance products under new EU Pursue business approach to expand regulations U.S. market – – Monsanto focused on imports New grower initiatives under way to ensure market availability for – 23 products in regulatory queue under biotech grain Directive 2001/18; 12 from Monsanto – “We Buy All Corn, All Year” • Roundup Ready corn (NK603) approved for importation and whole corn feed in July 2004 • NK603 Food application in queue 15
  16. 16. Round 1: Global Expansion & Value Capture Enhanced Channeling Could Expand Market Potential for Roundup Ready Corn in U.S. Business Approach Website indicates to farmers which elevators in their area accept biotech grain not yet approved for import into the European Union Communication and education program under way Percent of growers citing grain marketing concerns has dropped from roughly 60% to nearly 30% in past year* *Based on Roundup Ready corn surveys taken in fall of 2003 and spring of 2004 in Eastern Iowa/Northern Illinois region 16
  17. 17. Round 1: Global Expansion & Value Capture Brazil Value Capture System Operating Smoothly Brazil 2 To Do Complete 1 Grain-based system Monitor and audit progress Sale of Roundup implemented Collect remaining royalty Ready soybean Over 95% of grain originators in payments from partners varieties for this the territory under contract area requires new regulatory 100% of harvest has been approvals delivered Varieties from 40 million planted soybean acres Argentina are adaptable to this area 10 million planted soybean acres 2004 Forecast for Brazil Value Capture System ( ) Soybean Average 2004 Expected harvest in grower price contribution • Grain partner Percent _ territory to earnings share $3.50 US Roundup X = X per share in 6 million dollars • Implementation Ready 2004 metric costs (10 reais) tons Neutral to Slightly Negative 17