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1
SEMINISACQUISITIONINVESTOR CONFERENCE CALL
Jan. 24, 2005
2
Forward-Looking Statements
Certain statements contained in this presentation, such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, currency impact, business and financial plans and other non-historical facts are "forward-looking statements." 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: the company's exposure to various contingencies, including those related to Solutia Inc., litigation, intellectual property, regulatory compliance (including seed quality), environmental contamination and antitrust; successful completion and operation of recent and proposed acquisitions; fluctuations in exchange rates and other developments related to foreign currencies and economies; increased generic and branded competition for the company's Roundup herbicide; the accuracy of the company’s estimates and projections, for example, those with respect to product returns and grower use of our products and related distribution inventory levels; the effect of weather conditions and commodity markets on the agriculture business; the success of the company’s research and development activities and the speed with which regulatory authorizations and product launches may be achieved; domestic and foreign social, legal and political developments, especially those relating to agricultural products developed through biotechnology; the company’s ability to successfully market new and existing products in new and existing domestic and international markets; the company’s ability to obtain payment for the products that it sells; the company's ability to achieve and maintain protection for its intellectual property; the effects of the company's accounting policies and changes in generally accepted accounting principles; the company's ability to fund its short-term financing needs; and other risks and factors detailed in the company's filings with the U.S. Securities and Exchange Commission. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention or obligation to revise or update any forward-looking statements or any of the factors that may affect actual results, whether as a result of new information, future events or otherwise.
3
Non-GAAP Financial Information
This presentation uses the non-GAAP financial measures of “free cash flow,” ongoing earnings per share (EPS), and Return on Capital (ROC). We define free cash flow as the total of cash flows from operating activities and cash flows from investing activities. A non-GAAP EPS financial measure, which we refer to as EPS on an ongoing basis, 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 in this presentation. ROC means net income 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 at the end of this presentation. The presentation of free cash flow, ongoing EPS and ROC is intended to supplement investors’ understanding of our operating performance. These non-GAAP financial measures may not be comparable to similar measures used by other companies. Furthermore, 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. 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
In this presentation, unless otherwise specified:
References to years, or to fiscal years, 2001 through 2006 are on a fiscal year basis and refer to the 12-month period ending August 31.
4
Seminis Acquisition Completes Monsanto’s Transformation as a Leader in Seeds and Traits
Definitive agreement to acquire SeminisLeading global vegetable and fruit seed company
Acquisition price of $1.4 billion Plus performance-based payment of up to $125 million payable by end of FY 2007Financed with cash and some incremental debt
Expected to be accretive earnings and free cash flow in FY 2006
Transaction expected to close in FY 2005 Q3, pending regulatoryapprovals
5
Value Shift from Crop Chemicals to Seeds and Traits Already Under Way
Sources: U.S. 1996-2003 Doane Agrotrak & Seed Studies; 2008 Monsanto estimatesCalendar years
CROP CHEMICALS GERMPLASM BIOTECH TRAITS
1996 $7.6 BILLION
2003$8.4 BILLION
2008F $9.1 BILLION
$3.0
$0.1
$4.5$3.5
$1.3
$3.6
$3.8
$2.7
$2.6
GLOBAL AGRICULTURAL INDUSTRY REVENUE
6
Vegetable Seed Is Next Logical Strategic Move – High Value, High Growth Segment in Agriculture
VEGETABLE AND FRUIT…… Consumption grew at a 4.2% CAGR
from 1980 to 20011
… Production grew 3.3 times the rate of global population expansion from 1990 to 20002
… Harvested acres increased 3.2% annually from 1990 to 2000, compared with 0.3% for overall agricultural harvested acres3
… Seed revenue projected to grow at 4% CAGR globally from 2000 through 20064
KEY TRENDS
TO
TA
L M
ET
RIC
TO
NS
(IN
MIL
LIO
NS
)
GLOBAL VEGETABLE CONSUMPTION
0
200
400
600800
1000
1200
1400
1600
1998 2002 2006 2010
NORTH AMERICA
REST OF WORLDEUROPE
ASIA
Source: DatamonitorCalendar years
Sources: 1Seminis estimate 2004 10K; 2United Nations Food and Agriculture Organization; 3Ibid.; 4Seminis estimate
7
MARKET LEADERSHIP
Seminis Provides Ready-Made, Leading Position in Untapped Seed Segment for Monsanto
PROJECTED VEGETABLE SEED INDUSTRY GROWTH SEMINIS 2004 SALES BY MARKET POSITION
MORE THAN 65% OF REVENUE DERIVED FROM PRODUCTS WITH #1 MARKET POSITION
MORE THAN 20% OF REVENUE DERIVED FROM PRODUCTS WITH #2 MARKET POSITION
1500
1700
1900
2100
2300
2500
2700
2900
2000 2001 2002 2003 2004 2005F 2006F
GLO
BA
L S
EE
D S
ALE
S (
$ M
ILLI
ON
S)
Source: Seminis estimatesCalendar years
4% CAGR
8
0
300
600
900
1200
1500
1800
MONSANTODUPONT/PIO
NEER
SYNGENTALIM
AGRAIN KWSADVANTA
BAYER
0
100
200
300
400
500
SEMINIS
SYNGENTA
LIMAGRAIN
SAKATA
TAKIINUNZA
BEJORIJ
K ZWANN
Source: Seminis estimatesCalendar year
MARKET LEADERSHIP
Seminis and Monsanto Hold Leading Seed Market Positions
2003 VEGETABLE SEED SALES
$ M
ILLI
ON
S
Sources: Phillips McDougall; Monsanto estimatesCalendar year for all companies but MonsantoAdvanta now part of Syngenta
2003 CORN & SOYBEAN SEED & TRAIT SALES
$ M
ILLI
ON
S
CORN
SOYBEANS
9
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Sources: Phillips McDougall, Monsanto reportsCalendar year for all companies but MonsantoSyngenta pro forma for acquisition of Advanta and Golden Harvest (Sources: Phillips McDougall and news releases)
MARKET LEADERSHIP
Combined Companies Raise the Bar for Leadership in Global Seeds
2003 SEED AND TRAIT REVENUE
$ M
ILLI
ON
S
DUPONT SYNGENTA KWS TAKII DELTA & PINE LAND
DOW
MONSANTO PRO FORMA
MONSANTO LIMAGRAIN SEMINIS BAYER SAKATA
10
0
20
40
60
80
100
MARKET LEADERSHIP
Monsanto Becomes the Leader in Fastest Growing Ag Market Segments
2003 GLOBAL MARKET SHARE IN MAJOR AGRICULTURAL SEGMENTS
TO
TA
L M
AR
KE
T S
HA
RE
(P
ER
CE
NT
)
MONSANTO FIRST LEADING COMPETITOR SECOND LEADING COMPETITOR
INSECTICIDES HERBICIDES CORNSEED
SOYBEANSEED
TRAITSVEGETABLESEEDS
MAJOR MARKET SEGMENTS
Source: Insecticides, Herbicides: Phillips McDougall for calendar year 2003Source: Corn, Soybeans: Monsanto estimates for fiscal year 2004; includes Monsanto branded and licensed shareSource: Vegetables: Pro forma for acquisition of Seminis
11
MARKET LEADERSHIP
Together, Monsanto and Seminis Are New Standard for Leadership in Large- and Small- Acre Crops
GLOBAL SEED MARKET SHARE
GLOBAL SEED MARKET
POSITION
SEED & TRAIT GROSS
PROFIT AS % OF SALES
CORN1, 2 41% 1 57%SOYBEANS1, 2 25% 1 63%
VEGETABLES3 64%
Beans 31% 1
Cucumber 38% 1
Hot Pepper 34% 1
Sweet Pepper 29% 1
Tomato 23% 1
Onions 25% 2
LAR
GE
-A
CR
ES
MA
LL-A
CR
E
1 Monsanto branded and licensed market share2 Source: Monsanto reports and estimates for Monsanto fiscal year 20043 Source: Seminis reports and estimates for Seminis fiscal year 2004
12
FINANCIAL GROWTH
Geographic Presence Further Diversifies withAddition of Seminis
SEMINIS1 MONSANTO2 MONSANTO PRO FORMA3
38%EUROPE/AFRICA
24%NORTH
AMERICA
15%LATIN
AMERICA
23%ASIA
PACIFIC
14%EUROPE/AFRICA57%
NORTHAMERICA
20%LATIN
AMERICA
9%ASIA
PACIFIC
16%EUROPE-AFRICA
54%NORTH
AMERICA
20%LATIN
AMERICA
10%ASIA
PACIFIC
1 Source: Seminis reports for Seminis fiscal year 20042 Source: Monsanto reports for Monsanto fiscal year 20043 Source: Pro forma for acquisition of Seminis
GLOBAL SALES BY WORLD AREA
13
TECHNOLOGY INNOVATION
Technological Capabilities Are Complementary; Monsanto’s Research Now Leveraged More Broadly
GENOMICS Mapping of plant genes to understand their structure and role inplant functions
Cross-pollination of plants with desirable qualities to develop improved plants in successive generations
Use of DNA markers for genes with physical measurement of traits to manage plant breeding programs. Significantly accelerates the efficiency of bringing new varieties to market.
Application of advanced analytical methods and technologies to identify composition of food and feed traits.
Application of scientific knowledge to transfer beneficial genetic traits to enhance plants’ growth or to provide nutritional or other benefits to farmers, food and feed processors, or consumers.
SM
ALL
-AC
RE
CR
OP
S
CONVENTIONAL BREEDING
CROP ANALYTICS
BIOTECHNOLOGY
MOLECULAR BREEDING
LAR
GE
-AC
RE
CR
OP
S
14
KEY MARKET ACRES
AVAILABLE MARKET
PERCENT PENETRATED
ASI BRAZIL ARGENTINA
80M 30M 6M
2% 35% 49%
LICENSEDBRANDU.S.
33%14%
TECHNOLOGY INNOVATION
Diversity of Corn Seed Breeding Is Driving Market Share Growth; Poised to Expand
Corn Breeding
6-to-8 year process undertaken to accelerate breeding:
Late 1990s: Acquired 36 major corn breeding programs (12 countries X average of 3 companies per country)
Early 2000s: Crossed genetic lines across acquired companies
Today: Launching new hybrids from inter-company crosses
DISCOVERY PHASE IProof of Concept
PHASE IIEarly Development
PHASE IIIAdv. Development
PHASE IVPre-Launch
LAUNCH
GENOMICS
CONVENTIONAL BREEDING
MOLECULAR BREEDING
CROP ANALYTICS
CONTRIBUTING PLATFORMS
WHAT IS IT?
THE MOST ADVANCED
GERMPLASM CREATES THE
BEST-YIELDING NEW CORN
HYBRIDS FOR FARMERS
15
TECHNOLOGY INNOVATION
Seminis Has Largest, Most Diverse Germplasm Pool in Vegetable Industry
Vegetable Breeding
Germplasm investment is nearly double that of closest competitor
75% of R&D devoted to breeding
Vegetable seed germplasm is proprietary, scarce and expensive
Breeding strongly linked to market opportunities and refined forspecific markets
Focus on quality, taste, disease control and health benefits
DISCOVERY PHASE IProof of Concept
PHASE IIEarly Development
PHASE IIIAdv. Development
PHASE IVPre-Launch
LAUNCH
GENOMICS
CONVENTIONAL BREEDING
MOLECULAR BREEDING
CROP ANALYTICS
CONTRIBUTING PLATFORMS
WHAT IS IT?
LARGEST AND MOST DIVERSE
GERMPLASM RESOURCE WITH
1.5 MILLION BREEDING LINES
KEY MARKET POSITION
MARKET POSITION
NAFTALATIN
AMERICAEUROPE-AFRICA
1 1 1
ASIA PACIFIC
1
KEY BRANDS
16
TECHNOLOGY INNOVATION
Seed Breeding Research Continually Refreshes Portfolio in Both Large and Small Acre Crops
0%
5%
10%
15%
20%
25%
2002 2003 2004 2005F
SEMINIS FRESHNESS INDEX: PERCENT OF SALES FROM NEW BREEDING PRODUCTS1
MONSANTO FRESHNESS INDEX: PERCENT OF CORN HYBRIDS WITHIN PRODUCT MIX IN 3-YEAR PERIOD2
0%
30%
60%
90%
2002 2003 2004 2005F
1 Source: Seminis estimates for Seminis fiscal years2 Source: Monsanto estimates for Monsanto fiscal years
17
FINANCIAL GROWTH
Seminis Brings Historically High-Margin Businesses to Monsanto
2002 2003 2004
NET SALES $453M $477M $526M
GROSS PROFIT AS % OF SALES1
62% 62% 64%
SEMINIS KEY FINANCIAL DATA
Source: Seminis reports for Seminis fiscal years1Source: Seminis gross profit in 2004 excludes effect of one-time adjustment for removal of inventory step-up premium costs
18
FINANCIAL GROWTH
Gross Profit Growth Accelerates with Addition of Seminis to Monsanto Businesses
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2004 2005F 2006F
SEEDS AND TRAITS ALL OTHER ROUNDUP AND OTHER GLYPHOSATE-BASED HERBICIDES
4% CAGR
GROSS PROFIT
$ M
ILLI
ON
S
$ M
ILLI
ON
S
MONSANTO MONSANTO PRO FORMA1
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2004 2005F 2006F
7% CAGR
1 Pro forma for acquisition of Seminis
19
0
5
10
15
20
25
30
2004 2005F 2006F
FINANCIAL GROWTH
R&D, SG&A as a Percent of Sales in Range with Monsanto’s Prior Goals
MONSANTO PRO FORMA1:SG&A AS PERCENT OF SALES
MONSANTO PRO FORMA1:R&D AS PERCENT OF SALES
1 Pro forma for acquisition of Seminis
0
3
6
9
12
2004 2005F 2006F
20
FINANCIAL GROWTH
Guidance for Ongoing EPS Reflects Addition ofSeminis Earnings
BASE MONSANTO GUIDANCE
UPSIDE MONSANTO GUIDANCE
PRO FORMA FOR ACQUISITION OF SEMINIS
EPS ON AN ONGOING BASIS
$1.00
$1.25
$1.50
$1.75
$2.00
$2.25
$2.50
2004A 2005F 2006F
21
FINANCIAL GROWTH
Acquisition Also Contributes to Free Cash Generation Near-Term
FREE CASH FLOWCurrent $500M Share Repurchase Program Will Continue; Scheduled Completion In July 2006
Dividends Will Continue To Be Considered To Return Additional Value To Shareowners
-$800
-$550
-$300
-$50
$200
$450
$700
$950
PRO FORMA FOR ACQUISITION OF SEMINIS
2004 2005F 2006F
GUIDANCE PRE-ACQUISITION
GUIDANCE POST-ACQUISITION
22
FINANCIAL GROWTH
Return on Capital Targets in Line with Previously Stated Goals
RETURN ON CAPITAL TARGETS
0
2
4
6
8
10
12
2003 2004 2005F 2006F
PE
RC
EN
T
BASE TARGET UPSIDE TARGET
23
Seminis Acquisition Leverages Market and Research Leadership to Generate Greater Near- and Long-Term Growth
Market LeadershipReady made, global reach into high-value segments of agriculture
Technological InnovationLeading, high-margin business with common technologies and opportunities to share breeding know-how
Financial GrowthCreates new growth proactivelyBuilds on current commitments
SUMMARY
24
Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP EPS
Reconciliation of Free Cash Flow
$ Millions Fiscal Year 2005 Target
12 Months Ended Aug. 31, 2004
12 Months Ended Aug. 31, 2003
Net Cash Provided (Required) by Operations $1,050 $1,261 $1,128
Net Cash Provided (Required) by Investing Activities $(1,800) $(262)
Free Cash Flow $(750) $999 $646
Net Cash Provided (Required) by Financing Activities N/A $(243) $(502)
Net Increase (Decrease) in Cash and Cash Equivalents N/A $756 $144
Fiscal Year 2006 Target
$975
$(300)
$675
N/A
N/A
12 Months Ended Aug. 31, 2002
$855
$(274)
$581
$(711)
$(130)
12 Months Ended Aug. 31, 2001
$740
$(665)
$75
$123
$198
$(482)
12 Months Ended Aug. 31, 2005
12 Months Ended Aug. 31, 2006
Net Income (Loss) $0.86-$1.06 $2.04 - $2.22
Estimated Purchase Accounting Adjustments $0.65 - $0.70Tax Benefit on Loss from Sale of European Wheat andBarley Business
Net Income (Loss) from Ongoing Business $1.85 - $2.00 $2.04 - $2.22
$ per share
Solutia-Related Charge $0.68
12 Months Ended Aug. 31, 2004
$0.99
$0.36
--
$1.61
--
Restructuring Charges -- Net --$0.022004 Discontinued Operations and Related
Restructurings-- Net
--
--
--
--
$0.24Goodwill Impairment Charge for Global Wheat Business
-- --
-- --
--
--
$(0.39)
25
Reconciliation of Non-GAAP Financial Measures
Reconciliation of Return on Capital
$ MillionsTotal Monsanto Company and Subsidiaries:
Operating Profit After-tax (excluding certain items)Average CapitalReturn on Capital
Operating Profit After-tax (excluding certain items):Net IncomeAdjustments for certain items, after-tax:
Restructuring Charges – NetDiscontinued Operations and Related Restructuring Adjustment of GoodwillCumulative Effect of a Change in Accounting PrinciplePCB Litigation Settlement Expense – Net
Interest Expense -- NetTax on Interest Expense -- Net (at 38% tax rate)(1)
Operating Profit After-tax (excluding certain items)
Average Capital:Short-Term and Long-Term DebtShareowners’ EquityCash and Cash EquivalentsCash for OperationsTotal CapitalPrior Period CapitalAverage Capital
12 Months Ended
Aug. 31, 2004
12 Months Ended
Aug. 31, 2003$ 475 $ 417
6,191 6,8467.7% 6.1%
$ 267 $ 68
98 264 15
64 —— 12— 25267 69
(25) (25)$ 475 $ 417
As of Aug. 31,2004 2003 2002
$1,508 $1,527 $1,9195,258 5,156 5,258
(1,037) (281) (137)125 125
5,854 6,527 7,1656,527 7,165
$6,191 $6,846
125
(1) Represents estimated combined federal and state statutory tax rates for the United States.
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