1. Hugh Grant
Chairman, President and CEO
Lehman Brothers 2004 Materials Select Conference
November 11, 2004
1
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 agricultural herbicide; the accuracy of the company’s estimates and projections, for example, those
company’
with respect to product returns and grower use of our products and related distribution inventory levels; the effect of
and
weather conditions and commodity markets on the agriculture business; the success of the company’s research and
business; 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 successfully market new and existing products in new and new
’
company
existing domestic and international markets; the company’s ability to obtain payment for the products that it sells; the
company’
company's ability to achieve and maintain protection for its intellectual property; the effects of the company's accounting
intellectual
policies and changes in generally accepted accounting principles; the company's ability to fund its short-term financing
principles; short-
needs; general economic and business conditions; political and economic conditions due to threat of future terrorist
economic
activity and related military action; and other risks and factors detailed in the company's filings with the U.S. Securities
factors
and Exchange Commission. Undue reliance should not be placed on these forward-looking statements, which are current
forward-
only as of the date of this release. The company disclaims any current intention to revise or update any forward-looking
forward-
statements or any of the factors that may affect actual results, whether as a result of new information, future events or
otherwise.
2
4. Overview
One Year After Investor Day, Momentum Builds From
Higher Base
Free Cash Flow
EPS
Diluted Earnings per Share on an Ongoing Basis
$ millions
Nov-11-2004 Guidance
Nov- 11-
Nov-11-2004 Guidance
Nov- 11-
Nov-11-2003 Guidance
Nov- 11- $1,000
$2.20 Nov-11-2003 Guidance
Nov- 11-
$2.00 $800
$1.80
$600
$1.60
$400
$1.40
$200
$1.20
$0
$1.00
2003 2004 2005F 2006F
2003 2004 2005F 2006F
4
5. Overview
Seeds and Traits Continue to Accelerate
Gross Profit
Roundup and Other Glyphosate-Based Herbicides
All Other
$ millions
Seeds and Traits
$2,700
$2,400
$2,100
$1,800
$1,500
$1,200
$900
$600
$300
$0
2003 2004 2005F
5
6. Overview
Momentum in Field Propels Earnings Growth
Earnings per Share
$1.95
to
Diluted EPS on an Ongoing Basis
$2.09
$1.77
to
$2.00
$1.90
$1.80
$1.61 10%
growth
$1.60
$1.42 10% - 18%
growth
$1.40
13%
growth
$1.20
$1.00
†
2003 2004 2005F 2006F
†2006F is GAAP basis (i.e. ongoing basis is expected to equal GAAP basis)
GAAP
6
7. Overview
Earnings Growth Expected to to Contribute to Free
Cash Flow Generation
Free Cash Flow
$ millions
$1,200
$1,000
$800
$600
$999M
$400
$646M $600M
$581M $500M to
$500M to
$75M
$200 $600M
$600M
$0
2001 2002 2003 2004 2005F 2006F
7
8. Overview
Return on Capital Goals Reflect Continued Improvement
in Working Capital
Return on Capital
ROC Percentage
12%
p*
100 b ent
10% vem
impro
bp*
130 ment
ove
impr 10%
10%
p*
8% 60 b ent 9%
9%
1
em
prov
im
7.7%
7.7%
6%
6.1%
6.1%
4%
2%
0%
2003 2004 2005 Goal 2006 Goal
* basis points
8
9. Momentum and Acceleration
Biotechnology Is Most Rapidly Adopted Technology in
History of Agriculture
Global Monsanto Planted Biotech Acres
Acres in millions
180
Canola
160
Cotton
140
Corn
120
Soybeans
100
80
60
40
20
0
1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: Monsanto estimates
9
10. Momentum and Acceleration
Value Shift from Chemicals to Seeds and Traits in
Motion
Industry Sales Estimates
1996 2003 2008F
$7.5 Billion $8.4 Billion $9.2 Billion
$3.6 $2.6
$4.4
$0.1 $3.8
$1.3
$3.5
$3.0 $2.7
Crop Chemicals Germplasm Biotech Traits
Source: U.S. 1996-2003 Doane AgroTrak & Seed Studies; 2008 Monsanto Estimate
1996-
10
11. Momentum and Acceleration
Value Shift Is Starting to Take Place from Other
Industries
Water and
Soil Value Shift
Value Shift
Nutrients
Human
Value Shift
Value Shift
Health
Animal
Value Shift
Value Shift
Nutrition
Crop
Value Shift
Value Shift
Chemicals
Seed
11
12. Momentum and Acceleration
Now Commercializing Inter-Company Corn Hybrids
from Industry’s Most Diverse Genetic Pool
6-to-8 year process
6-to-8 year
Late 1990s Early 2000s Today
Acquired 36 major corn Crossed genetic lines Launching new hybrids
breeding programs across acquired from inter-company
(12 countries x average of 3 companies crosses
companies per country)
Temperate
Temperate
Sub-Tropical
Sub-
Sub-Tropical
Monsanto
corn Tropical
Tropical
germplasm
flows
globally Sub-Tropical
Sub-
Sub-Tropical
Temperate
Temperate
12
13. Momentum and Acceleration
Early, Major Investment In Seeds Captured Value Shift
Monsanto Brand Share
Monsanto Licensed Share
Monsanto Genetic Market Share in U.S. Corn Seed
60% 49%
48%
45%
43%
50%
40%
30%
20%
10%
0%
2001 2002 2003 2004
Source: Monsanto Estimates
13
14. Momentum and Acceleration
Market Potential for Biotech Traits Highlights Continued
Growth Opportunity
Total Available Market in Acres
Soybeans Cotton Corn
Key Markets Roundup Roundup Bollgard I Roundup YieldGard YieldGard
Ready Ready and II Ready Corn Root-
Borer worm
United States 70M 10-15M 6-8M 50M 30M-40M 15-20M
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
Remaining
71% 66% 35% 22% 57% 7%
71%
Available 66% 35% 22% 57% 7%
Market
14
15. Market Expansion
Available Market for Roundup Ready Corn Is Growing
Key Market Acres U.S. Brazil Argentina
Key Market Acres U.S. Brazil Argentina
Contributing Platforms
20M
Available Market 50M 5M
20M
Available Market 50M 5M
Genomics
Percent Penetrated (2004) 33% 0% 0%
Percent Penetrated (2004) 33% 0% 0%
1 Regulatory Processes
Conventional
Breeding
European Union
Molecular
22 products in regulatory queue
Breeding
under Directive 2001/18; 11 from
Monsanto
Crop Analytics
Roundup Ready corn (NK603)
Biotechnology
approved for importation and whole
corn feed in July 2004
NK603 Novel Food approval in
October 2004
Argentina
NK603 approved for planting in
Argentina in July 2004
Application for stacks in queue
Discovery Phase 1 Phase 3 Phase 4
Phase 2 Launch
Proof of Concept Adv. Development Pre-Launch
Pre-
Early Development
15
16. Market Expansion
EU Approvals Will Continue to Expand Global Market
Potential
2 Monsanto Has 11 out of 22 Applications in EU Queue
Application Import Cultivation Food and Feed
1. Yieldgard Rootworm X X**
2. Roundup Ready Canola X X*
3. YieldGard Plus X X
4. Roundup Ready Corn/ YieldGard
X X
Corn Borer Stack (NK603/MON810)
5. Roundup Ready Corn (NK603) X
6. Roundup Ready Corn/ YieldGard
X
Corn Borer Stack (NK603/MON810)
7. Roundup Ready Cotton X X X*
8. Bollgard Cotton X X X*
9. Roundup Ready Fodder Beet X
10. Roundup Ready Sugarbeet X
11. Roundup Ready Corn/ YieldGard
X X
Rootworm Stack (NK603/MON863)
X –Indicates application in queue *Approved under Novel Food Regulation
Regulation
**Pending under Novel Food Regulation
16
17. Market Expansion
Grain Channeling Offers Farmers Market Options
3 Grain Channeling in the 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
spring
2004 in Eastern Iowa/Northern Illinois region
www.866sellcorn.com
17
18. Second-Generation Traits
Upgrades in Technology Raise the Bar -- Roundup
Ready Flex Cotton
Key Market Acres U.S. Australia
Key Market Acres U.S. Australia
Contributing Platforms
0.5M – 0.8M
Available Market 10M-15M
10M- 0.5M – 0.8M
Available Market 10M-15M
Genomics
0%
Percent Penetrated 0% 0%
Percent Penetrated 0%
1 Expanded Window of Application
Conventional
Breeding
Molecular
Expanded window of over-the-top application
Breeding
- Increased margin of crop safety
Crop Analytics
- More “flexible” weed control
Increased grower convenience
Biotechnology
Reduced need for specialized spray equipment
Over-the-top window of application
Roundup Ready® Flex Cotton
Roundup Ready®
Cotton
(< 4 lf.)
Emergence Layby Preharvest Harvest
Discovery Phase 1 Phase 3 Phase 4
Phase 2 Launch
Proof of Concept Adv. Development Pre-Launch
Pre-
Early Development
18
19. Second-Generation Traits
Broad Licensing Will Accelerate Roundup Ready Flex
Cotton Launch
Key Market Acres U.S. Australia
Key Market Acres U.S. Australia
Contributing Platforms
0.5M – 0.8M
Available Market 10M-15M
10M- 0.5M – 0.8M
Available Market 10M-15M
Genomics
0%
Percent Penetrated 0% 0%
Percent Penetrated 0%
2 Field Trial Update
Conventional
Breeding
Molecular
Over 200 field trials conducted in 2004
Breeding
Crop Analytics
8 cotton seed companies participating in trial
program
Biotechnology
Cotton States launching exclusively on a
second-generation trait platform
Results from the Field
Results from the Field
Coming in January 2005
Coming in January 2005
Discovery Phase 1 Phase 3 Phase 4
Phase 2 Launch
Proof of Concept Adv. Development Pre-Launch
Pre-
Early Development
19
20. Stacking
Stacking Biotech Traits Adds Dimension to Market
Potential
Monsanto U.S. Biotech Intensity Index*
Average number of biotech traits per biotech acre
1.6 Cotton (2 Traits) 1.5
Corn (3 Traits)
1.5
Soybeans (1 Trait)
1.4
1.3
1.2
1.2
1.1
1.0
1
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005F 2006F
U.S. Biotech Margin Opportunities
Corn Cotton
16 million
52 million 10 million
1.2
42 million 1.5
biotech
biotech =
= biotech
intensity
biotech intensity
X
X margin
margin Acres
index
acres index
opportunities
opportunities
20 * Monsanto traits only
21. Pipeline
Pipeline Products Reach New Markets and Expand
Base in Corn, Soybeans and Cotton
Feed Food Yield
• High Lysine Corn • Low Linolenic Soy • Drought Tolerant Corn, Soy,
• Low Linolenic/Mid-Oleic Soy Cotton
• Enhanced High Lysine Corn • Low Linolenic/Mid-Oleic/Low
Saturate Soy • Cold Tolerant Corn
• Improved Protein Soy • Enhanced High Lysine Corn
• Improved Protein Soy • Nitrogen Utilization Corn
(Beta Conglycinin)
• Omega-3 Soy
(Stearidonic acid)
Commercialized Agronomic Traits
YieldGard
Roundup YieldGard
Corn Borer
Ready Corn, Rootworm
Bollgard I & II
Soy, Cotton Corn
Cotton
2nd Generation
Roundup Ready
YGCB II Corn YGRW II Corn
Agronomic Traits Flex Cotton
21
22. Pipeline
2005 Launch of VISTIVE Soybeans Marks First-
Generation Output Trait
Key Market Acres U.S. Brazil Argentina
Key Market Acres U.S. Brazil Argentina
Contributing Platforms
TBD
Available Market 5M TBD
TBD
Available Market 5M TBD
Genomics
Percent Penetrated 0% 0% 0%
Percent Penetrated 0% 0% 0%
1 VISTIVE Low Linolenic Soy
Conventional
Breeding
More stable soy oil
Molecular
requiring less
Breeding
hydrogenation:
reduces/eliminates
Crop Analytics
trans fats
Biotechnology
Yield parity and
stacked with Roundup
Ready trait
Linolenic acid < 3%
Linolenic
18:3 Linoleic Oleic Sats
Std Soybean
VISTIVE
Discovery Phase 1 Phase 3 Phase 4
Phase 2 Launch
Proof of Concept Adv. Development Pre-Launch
Pre-
Early Development
22
23. Food Traits
Preparing for 2005 Launch of First-Generation Output
Trait — VISTIVE Soybeans
Key Market Acres U.S. Brazil Argentina
Key Market Acres U.S. Brazil Argentina
Contributing Platforms
TBD
Available Market 5M TBD
TBD
Available Market 5M TBD
Genomics
Percent Penetrated 0% 0% 0%
Percent Penetrated 0% 0% 0%
2 VISTIVE Product Line – 3 Step Change Improvements
Conventional
Breeding
Low Saturates
Molecular
Breeding
with Mid Oleic
Mid Oleic and Low Lin
Crop Analytics
and
Reduce
Low Lin
Biotechnology
Low Saturated Fat
Linolenic and
Improve
Soy Oil Improve
Flavor & Shelf
Cardiovascular
Life with
Eliminate Health
Oxidative
Trans-fats
Stability Transgenic
Breeding
Breeding
Phase 1
Phase 2
2005
Discovery Phase 1 Phase 3 Phase 4
Phase 2 Launch
Proof of Concept Adv. Development Pre-Launch
Pre-
Early Development
23
24. Pipeline
Drought Stress Tolerance One of Potential New
Agronomic Traits
Key Market Acres U.S. Brazil Argentina
Key Market Acres U.S. Brazil Argentina
Contributing Platforms
TBD
Available Market TBD TBD
TBD
Available Market TBD TBD
Genomics
Percent Penetrated 0% 0% 0%
Percent Penetrated 0% 0% 0%
1 Drought Tolerance
Conventional
Breeding
Pricing depends on choice
Yield protection
Molecular
of market
on all acres to
Breeding
protect against
Stack with weed and insect
water deficits
Crop Analytics
control traits enhances
margin opportunity
Yield enhancement
Biotechnology
on all acres
through improved
water use
Cost savings
on irrigated acres
Discovery Phase 1 Phase 3 Phase 4
Phase 2 Launch
Proof of Concept Adv. Development Pre-Launch
Pre-
Early Development
24
25. Summary
A Clear Focus To Deliver On Commitments
Forecasted 10 percent to 18 percent EPS growth from ongoing
business in 2005
Seeds and traits growth drivers with products, geographies “in
–
hand”
Free cash flow generation is solid
Cash being returned to shareowners in dividends, share
–
repurchases, investments
Monsanto is unique among technology companies with this
level of leadership
Funding own growth with substantial returns to shareowners
–
Significant first mover advantage commercially
–
Proven, highly productive new product pipeline
–
Management team is dedicated to delivering on commitments
and is building track record
Guidance is commitment, not aspiration
–
25
27. Reconciliation of Non-GAAP Financial Measures
Reconciliation of Free Cash Flow
Fiscal Year 2006 Fiscal Year 2005 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
$ Millions
Aug. 31, 2001
Aug. 31, 2002
Target Target Aug. 31, 2004 Aug. 31, 2003
$740
$855
Net Cash Provided (Required) by Operations $850 – $900 $1,000 $1,261 $1,128
Net Cash Provided (Required) by Investing Activities $(665)
$(482) $(274)
$(350) - $(300) $(400) $(262)
$75
$581
Free Cash Flow $500 - $600 $600 $999 $646
$123
$(711)
Net Cash Provided (Required) by Financing Activities N/A N/A $(243) $(502)
$198
$(130)
Net Increase (Decrease) in Cash and Cash Equivalents N/A N/A $756 $144
Reconciliation of Non-GAAP EPS
Fiscal Year 2005
$ per share 12 Months Ended 12 Months Ended
Target Aug.31, 2004 Aug. 31, 2003
Net Income (Loss) $0.99 $0.26
$2.16 - $2.29
Cumulative Effect of Change in Accounting Principle -- $0.05
--
Income (Loss) Before Cumulative Effect of Accounting Change $0.99 $0.31
$2.16 - $2.29
Restructuring Charges – Net $0.10
$0.36
-
Estimated 2004 Discontinued Operations and Related Restructurings – Net $0.02 $0.05
-
Solutia PCB Litigation Settlement Expense – Net -- $0.96
--
Goodwill Impairment Charge for Global Wheat Business $0.24 --
-
Tax Benefit Related to Loss on Wheat and Barley Business -- --
$(0.39)
Net Income (Loss) from Ongoing Business $1.61 $1.42
$1.77 - $1.90
27
28. Reconciliation of Non-GAAP Financial Measures
Reconciliation of Return on Capital
12 Months 12 Months
$ Millions
Total Monsanto Company and Subsidiaries: Ended Ended
Aug. 31, 2004 Aug. 31, 2003
Operating Profit After-tax (excluding certain items) $ 475 $ 417
Average Capital 6,191 6,846
Return on Capital 7.7% 6.1%
Operating Profit After-tax (excluding certain items):
Net Income $ 267 $ 68
Net Income†
Adjustments for certain items, after-tax:
– [Interest Expense―Net X (1 – 38% Tax††)]
Expense― (1
Restructuring Charges – Net 98 26
Discontinued Operations and Related Restructuring ROC =
4 15
Adjustment of Goodwill 64 —
Average††† [Equity + Short-Term Debt +
Short-
Cumulative Effect of a Change in Accounting Principle — 12
Long-Term Debt - (Cash - $125M)]
Long- $125M)]
PCB Litigation Settlement Expense – Net — 252
Ongoing basis
Interest Expense -- Net 67 69 †
Represents estimated combined federal and state statutory tax
(1) ††
Tax on Interest Expense -- Net (at 38% tax rate) (25) (25)
rates for the United States.
Operating Profit After-tax (excluding certain items) $ 475 $ 417 ††† Average of beginning balances, from September 1, and ending
balances, from August 31, of each fiscal year
As of Aug. 31,
2004 2003 2002
Average Capital:
Short-Term and Long-Term Debt $1,508 $1,527 $1,919
Shareowners’ Equity 5,258 5,156 5,258
Cash and Cash Equivalents (1,037) (281) (137)
Cash for Operations 125
125 125
Total Capital 5,854 6,527 7,165
Prior Period Capital 6,527 7,165
Average Capital $6,191 $6,846
(1) Represents estimated combined federal and state statutory tax rates for the United States.
28
