Citigroup Investment Conference Speech on Monsanto's Growth Strategy
1. BRETT BEGEMANN
EXECUTIVE VICE PRESIDENT,
INTERNATIONAL COMMERCIAL
Citigroup Investment Research
16th Annual Investment Conference
Dec. 7, 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, the outcome of contingencies and other non-historical facts are quot;forward-looking statements.quot;
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 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 may use the non-GAAP financial measures of “free cash flow,” earnings per share (EPS) on an
ongoing basis, and Return on Capital (ROC). 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.
Fiscal Year
In this presentation, unless otherwise specified, references to Monsanto’s fiscal years refer to the 12-month period
ending August 31.
Trademarks
Roundup, Roundup Ready, Roundup RReady2Yield, Bollgard, Bollgard II, YieldGard, Monsanto Imagine, Vine
Design, Asgrow, DEKALB, Monsanto Choice Genetics, Posilac, Processor Preferred, Vistive and Seminis, Seminis
Vegetable Seeds, Royal Sluis, Petoseed, and Bruinsma are trademarks owned by Monsanto Company and its
wholly-owned subsidiaries and are italicized the first time they appear in this presentation.
4. OVERVIEW
Two-Step, Two-Horizon Strategy Creates a Line of Sight
for Success through 2010
2006 2007 2008 2009 2010
GROW
Grow Current Portfolio
Grow Globally
LEAD
Grow the Pipeline
Translate Growth to Value
Lead through Innovation
Lead in an Increasingly Competitive Market
Lead in New Market Opportunities
Translate Leadership to Value
5. OVERVIEW
U.S., Argentina and Brazil Supply World’s
Corn and Soy Needs
WORLD AREA GRAIN PRODUCTION
EUROPE ASIA
UNITED STATES
2005 2010 2005 2010
2005 2010
Corn 52M MT 55M MT Corn 122M MT 132M MT
Corn 278M MT 297M MT
Soy 1M MT 3M MT
Soy 86M MT 81M MT Soy 22M MT 23 MT
ARGENTINA BRAZIL
2005 2010 2005 2010
Corn 44M MT 53M MT
Corn 23M MT 27M MT
Soy 60M MT 81M MT
Soy 38M MT 40M MT
Production = Consumption
Net Importer
Net Exporter
Source: U.S.D.A. Foreign Agricultural Service, ABIOVE, Independent Economists & Monsanto Estimates
6. OVERVIEW
Acceleration In Seeds and Traits Drives Commercial
Gross Profit Evolution
MONSANTO GROSS PROFIT GROWTH
2003 2005 2007F
TOTAL GROSS TOTAL GROSS TOTAL GROSS
PROFIT = $2.3M PROFIT = $3.0M PROFIT = $3.6M
ALL OTHER AGRICULTURAL
SEEDS & GENOMICS ROUNDUP AND OTHER
PRODUCTIVITY
GLYPHOSATE-BASED HERBICIDES
7. OVERVIEW
Breeding and Biotech Provide Parallel R&D Paths to
Commercial Products
BREEDING and BIOTECHNOLOGY form two R&D pathways
Separate, but parallel, the BREEDING and BIOTECHNOLOGY pathways are linked
by shared tools.
DISCOVERY PHASE I PHASE II
R&D PHASE: PHASE III PHASE IV LAUNCH
BREEDING
COMMERCIAL
IT PLATFORM
GERMPLASM
ANALYTICS
MARKERS
GENOMICS
SEED
ELITE
Germplasm SOLD TO
FARMERS
R
BIOTECHNOLOGY
8. GROW
Breeding Platform Powers Corn Franchise to Strong
Growth
SCORECARD
U.S. MARKETS 2005 COMPETITIVE BRANDED MARKET SHARE GROWTH WORLDWIDE
2004 TO 20051
CORN YIELD COMPARISON
+2.9%
ALL WORLD AREAS
+2.2%
200 NORTH AMERICAN REGION
+2.0%
UNITED STATES
190
+2.2%
EUROPE-AFRICA REGION
BUSHELS/ACRE
+2.5%
FRANCE
180
+1.7%
ITALY
+1.2%
HUNGARY
170
+5.2%
TURKEY
160 +5.7%
SOUTH AFRICA
+1.9%
ASIA PACIFIC REGION
150
+5.1%
INDIA
95 100 105 110 115
FLAT
LATIN AMERICA REGION
RELATIVE MATURITIES (DAYS)
+1%
MEXICO
COMPETITORS
MONSANTO BRANDS
FLAT
BRAZIL
FLAT
ARGENTINA
1 - Market share is for hybrid corn seed market only
9. GROW
Global Breeding Capabilities Create Full Product
Pipeline for Three Channels in U.S.
TARGET: GROW
U.S. Corn Monsanto’s global “genetic footprint”
Channel Strategy has expanded
U.S. CORN MARKET SHARE
1 Channel: Owned
Outlet: Retail
Monsanto branded seed gained 6 share
Target reach: National
points in the last 4 years
60%
50%
40%
2
Channel: Owned
SUSTAINABLE
1-2 POINT
30% Outlet: Regional, high-touch
SHARE GAINS
Target reach: Local
20%
10%
0%
2001 2002 2003 2004 2005 2006 2007
HOLDENS/ AMERICAN SEEDS, DEKALB AND
LICENSEES INC. BRANDS ASGROW BRANDS
3 Channel: Licensed, non-exclusive
Outlet: Regional, high-touch
Target reach: Local
11. GROW
Cotton States Will Launch New Source
of Cotton Seed
KEY MARKET AREAS U.S.
TARGET MARKET 7M-8M
Cotton States
CREATING VALUE
PERCENT PENETRATED 0%
Germplasm licensed from third parties and developed through molecular
• Licensing fee
breeding by Monsanto
reflects value of top
quality germplasm,
Taking preliminary orders from licensees; Enough seed for approximately
separate from value
1 million acres available for licensing in 2006
of trait
All varieties offered in 2006 will be on a second-generation trait platform
• Cotton seed
currently sells for
2005 UNIVERSITY COTTON VARIETY TESTS
average of $20 per
1,350
acre retail
1,200
1,050
UP NEXT
900
LBS LINT/ACRE
750
• 4+ licensees will
sell seed sourced 600
from Cotton States
450
in 2006, located
300
broadly throughout
150
Cotton Belt
0
COTTON STATES COMPETITIVE
VARIETIES VARIETIES
DISCOVERY PHASE I PHASE III
PHASE II PHASE IV LAUNCH
Proof of Concept Adv. Development
Early Development Pre-Launch
12. GROW
Conversion from Open-Pollinated to Hybrid Offers
Opportunity in Mexican Market KEY
CROP PENETRATION
MARKET
(Acres)
SQUASH
Mexican OP Conversion
100K 5%
CREATING VALUE
CARROTS 67K 10%
ONIONS
2005 FIELD REPORT
76K 40%
HOT PEPPERS 298K 40%
Mexican OP Conversion
MULTI-STAGE: PHASE II THROUGH LAUNCH
NEW MARKET OPPORTUNITY
$70 CURRENT MARKET
Not as well as Better than
As expected
$60
expected expected POTENTIAL MARKET
$50
$ MILLIONS
Quality
$40
$30
Horticultural Performance
$20
$10
New Hybrids
$0
HOT SQUASH ONION CA RROT
OBSERVATIONS
PEPPER
• Able to achieve increased uniformity, earlier maturity,
higher produce quality
• Higher market yield and profitability
• Better disease resistance
• Value of hybrids already being recognized in the market
DISCOVERY PHASE I PHASE III
PHASE II PHASE IV LAUNCH
Proof of Concept Adv. Development
Early Development Pre-Launch
15. GROW
Market Potential for Biotech Traits Highlights Continued
Growth Opportunity
TARGET: GROW
Market Opportunity Monsanto’s combination of germplasm
and stacked traits is platform of choice
SOYBEANS COTTON CORN
Roundup Roundup Bollgard I Roundup YieldGard YieldGard
KEY Ready Ready and II Ready Corn Borer Rootworm
MARKETS
Flex
UNITED
70M 10 – 15M 6 – 8M 60M 50-60M 25-30M
STATES
50M 3M 2M 20M 15M 5M
BRAZIL
35M - - 5M 4M 1M
ARGENTINA
- 10-15M 10-15M - - -
INDIA
1M - - 24M 8M 5M
EUROPE
0.2M 11M 10M 6M 4M -
AFRICA
- 0.5-0.8M 0.5-0.8M - - -
AUSTRALIA
28.5 -
34.5 -
TOTAL KEY
156.2M 115M 81 - 91M 36-41M
44.8M
MARKETS 35.8M
16. GROW
Market Opportunity for Roundup Ready Corn on Track
for 60M Acres Longer Term
TARGET: GROW
Roundup Ready Grow the value of the corn franchise
Corn
Early order
patterns for seeds
INFLECTION
and traits indicate
POINT: EU
IMPORT
30 a strong season
APPROVALS
INFLECTION
ahead in the U.S.
POINT:
25 DOMESTIC
CHANNELING
PROGRAM
U.S. ACRES
20
Roundup Ready
15 corn is on pace for
SUSTAINABLE
50M acres in 2008
ACREAGE
10 GROWTH
in the U.S.
5
Longer term
0
market potential of
1998 1999 2000 2001 2002 2003 2004 2005 2006F 2007F
60M acres
17. GROW
Zone-Based Royalties Leverage Roundup Ready Corn Base
and Expand Market for YieldGard Family
TARGET: GROW
Zone-Based Grow the value of the corn franchise
Royalty System
SEGMENTED
VALUE
OPPORTUNITY
STATES WITH WEED
CONTROL NEEDS
STATES WITH
CONSISTENT NEED
FOR WEED CONTROL,
CORN-BORER
CONTROL AND
ROOTWORM CONTROL
STATES WITH
CONSISTENT NEED
FOR WEED CONTROL,
CORN-BORER
CONTROL AND
SPORADIC ROOTWORM
CONTROL
Source: 2004 Farm Progress Grower Survey and Monsanto Estimates
18. LEAD
Drought-Tolerant Corn Is Lead Crop of Yield Family of
Traits
KEY MARKET ACRES U.S. BRAZIL ARGENTINA
80M 30M 6M
AVAILABLE MARKET
Drought-Tolerant Corn
CREATING VALUE
0% 0% 0%
PERCENT PENETRATED
CONSISTENT RESULTS FROM EARLY
2005 FIELD REPORT
LEADS AND MORE LEADS EMERGING
FROM PIPELINE
Drought-Tolerant Corn
PHASE II WITH TRAIT WITHOUT TRAIT WITH TRAIT WITHOUT TRAIT
Early Development
Not as well as Better than
As expected
expected expected
Trait Performance
Agronomic Performance o
C 32 34 40
LEAD GENE: COMPLETED
Lead Selection LEAD EVENT: IN PROGRESS
OBSERVATIONS
• Lead genes show consistent drought stress performance
across years
• Mid-season drought performance results in more,
bigger ears
• Up Next: Advance into early development
WITHOUT TRAIT
WITH TRAIT
DISCOVERY PHASE I PHASE III
PHASE II PHASE IV LAUNCH
Proof of Concept Adv. Development
Early Development Pre-Launch
19. LEAD
Roundup RReady2Yield Soybeans Expand Weed
Control Window
KEY MARKET ACRES U.S. BRAZIL ARGENTINA
Roundup RReady2Yield 50M 35M
70M
AVAILABLE MARKET
Soybeans
CREATING VALUE
0% 0% 0%
PERCENT PENETRATED
US HISTORICAL SOY YIELD GAINS
Return value to farmer by bringing
new technology
45
y = 0.4246x - 811.11
BUSHELS/ACRE
40 Yield improvement of 3 - 4+
35
bushels per acre in 2004 field
30
trials
25
Flexibility by providing wider
20
1970 1980 1990 2000
window of application
BRAZILIAN HISTORICAL SOY YIELD
Research under way on
45 GAINS
y = 0.9043x - 1772.2
potential for additional
BUSHELS/ACRE
40
insurance for Asian soybean
35
rust
30
25
Provides the platform for future
20
soy technologies
1991 1996 2001 2006
DISCOVERY PHASE I PHASE III
PHASE II PHASE IV LAUNCH
Proof of Concept Adv. Development
Early Development Pre-Launch
20. GROW
Brazil Offers Largest Global Opportunity to Create Value
From New Trait Penetration
TARGET: GROW
Brazilian Value Drive additional trait penetration
•
Capture System globally
Situation Update:
Seed
Monsanto Planted soybean
Multiplier
acres: 50M
Dual value-capture
4-5M acres for sale systems
Royalty received
Retail price suggested at
from seed
$9 per acre
Anticipating royalty
Soybean supplier
on 4 - 5M acres of
Farmer
fresh new Roundup
Ready seed
Grain
Monsanto Saved seed paid
Delivery
upon delivery of grain
Grain delivery system
Royalty received
15–20M
to be expanded in
from grain company,
acres saved seed
shared generously Brazil
Fee of $4.50 per acre
21. GROW
Experience Curve Allows Monsanto to Stage Largest
Trait Launch in Biotech History
TARGET: GROW
Roundup Ready Grow the branded & licensed cotton seed
Flex Cotton market share
Value reflects greater
U.S. MONSANTO COTTON TRAIT ACRES
convenience and
STACKED
15
PENETRATION
enhanced weed control;
TREND
12
lifts value of the
9
Roundup Ready trait
6
3 Anticipated largest trait
launch ever with 2-3
0
1998 1999 2000 2001 2002 2003 2004 2005
million acres, pending
BOLLGARD & STACKED
ROUNDUP
final approvals
BOLLGARD IIREADY
MONSANTO COTTON SHARE GROWTH
30%
80-90% of Roundup
25%
Ready Flex to be stacked
20%
SUSTAINABLE
15%
with Bollgard II
1-2 POINT SHARE GAIN WITH
10%
EMERGENT & COTTON
STATES
5% Broad introduction led
0%
by Emergent and Cotton
2004 2005 2006F 2007F
States
EMERGENT
22. LEAD
Momentum in Cotton Trait Adoption Will Accelerate With
Second-Generation Launches in India and Australia
TARGET: LEAD
Second-Generation International markets upgrade to stacked
•
Traits and next-generation trait products
COTTON RETAIL VALUE IN AUSTRALIAN MARKET In India, biotech cotton
adoption reflects
economic and
environmental benefits
150
Yield Increase 58%
125
Pesticide Reduction
(50%)
100
Farmer Net Return 163%
US $/ACRE
75 In India, Bollgard II will
launch on small acres
50 in 2006 and Roundup
Ready Flex in 2010
25 range
In Australia, success of
0 ROUNDUP
ROUNDUP STACK WITH
CONVENTIONAL BOLLGARD II Bollgard II / Roundup
READY
READY BOLLGARD II &
COTTON SEED
FLEX
COTTON ROUNDUP Ready sets stage for
READY FLEX
launch of Bollgard II/
Roundup Ready Flex
starting in 2006
24. GROW
Consistency and Discipline that Typified 2003-2005 Will
Remain Cornerstone of Monsanto’s Strategy
FY2006 TARGETS
2006 GROWTH FACTORS
Toward Upper End
Grow Current Portfolio
of $2.35-$2.50
EARNINGS PER SHARE UP TO 20% Grow Globally
GROWTH FROM
2005 Grow the Pipeline
FREE CASH FLOW $825M - $900M Translate Growth to Value
SG&A AS A % OF SALES ~22%
R&D AS A % OF SALES ~10%
CAPITAL EXPENDITURES ~$350M
ROUNDUP GROSS PROFIT ~$600M
ALL OTHER AG
$400M
PRODUCTIVITY GROSS
PROFIT
SEEDS & TRAITS GROSS
~$2.3B
PROFIT
25. SUMMARY
Two-Step, Two-Horizon Strategy Creates a Line of Sight
for Success through 2010
2006 2007 2008 2009 2010
GROW
Grow Current Portfolio
Grow Globally
LEAD
Grow the Pipeline
Translate Growth to Value
Lead through Innovation
Lead in an Increasingly Competitive Market
Lead in New Market Opportunities
Translate Leadership to Value
26. Reconciliation of Non-GAAP Financial Measures
Reconciliation of Free Cash Flow
12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
$ Millions Aug. 31, 2007 Aug. 31, 2006 Aug. 31, 2005 Aug. 31, 2004
Net Cash Provided by Operations $1,375 - $1,450 $1,175-$1,250 $1,737 $1,261
Net Cash Provided (Required) by Investing Activities $(500) $(350) $(1,667) $(262)
Free Cash Flow $875-$950 $825 - $900 $70 $999
Net Cash Provided (Required) by Financing Activities N/A N/A $(582) $(243)
Net Increase (Decrease) in Cash and Cash Equivalents N/A N/A $(512) $756
Reconciliation of Non-GAAP EPS
12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
$ per share Aug. 31, 2007 Aug. 31, 2006 Aug. 31, 2005 Aug. 31, 2004
Diluted Earnings per Share $2.82-$3.00 $2.35-$2.50 $0.94 $0.99
In-Process R&D Write-off Related to the Seminis and -- -- $0.91 --
Emergent Acquisitions
Solutia-Related Charge -- -- $0.64 --
Tax Benefit on Loss from European Wheat and -- -- $(0.39) --
Barley Business
Restructuring Charges -- Net -- -- $0.02 $0.36
(Income) Loss on Discontinued Operations and -- -- $(0.04) --
Related Restructuring
Impairment of Goodwill -- -- -- $0.24
Diluted Earnings per Share from Ongoing Business $2.82-$3.00 $2.35-$2.50 $2.08 $1.59
27. Reconciliation of Non-GAAP Financial Measures
Reconciliation of Return on Capital
Total Monsanto Company and Subsidiaries: 12 Months
12 Months 12 Months
Ended
Ended Ended
$ Millions Aug. 31, 2003
Aug. 31, 2005 Aug. 31, 2004
Operating Profit After-tax (excluding certain items) $612 $ 463 $ 413
Average Capital 6,404 6,191 6,846
Return on Capital 9.6% 7.5% 6.0%
Operating Profit After-tax (excluding certain items):
Net Income $255 $267 $68
Adjustment for certain items, after-tax:
In-Process R&D Write-Off Related to the Seminis and 248 — —
Emergent Acquisitions
Solutia-Related Charge 175 — —
Tax Benefit on Loss from European Wheat and Barley (106) — —
Business
Restructuring Charges – Net 6 98 24
(Income) Loss on Discontinued Operations and Related (12) (1) 18
Restructuring
Impairment of Goodwill — 64 —
Interest Expense – Net 75 57 63
Tax on Interest Expense – Net (at 38% tax rate) (29) (22) (24)
Cumulative Effect of a Change in Accounting Principle — — 12
PCB Litigation Settlement Expense - Net — — 252
Operating Profit After-tax (excluding certain items) $612 $ 463 $ 413
As of Aug. 31,
2005 2004 2003 2002
Average Capital:
Short-Term and Long-Term Debt $1,740 $1,508 $1,527 $1,919
Shareowners’ Equity 5,613 5,258 5,156 5,258
Cash and Cash Equivalents (525) (1,037) (281) (137)
Cash for Operations 125 125 125 125
Total Capital 6,953 5,854 6,527 7,165
Prior Period Capital 5,854 6,527 7,165
Average Capital $6,404 $6,191 $6,846
