New York City, New York
February 24, 2004
Significant growth in
Monsanto’s seeds and
traits business is expected to drive the company’s mid-term
growth, according to Hugh Grant, chairman, president and chief
executive officer. Speaking today at the Eighth Annual
Agricultural Forum sponsored by Goldman Sachs, Grant underscored
the company’s expectation of compounded annual
earnings-per-share (EPS) growth of 10 percent in 2005 and 2006.
He said he believed the growth will be driven by the company’s
corn business and its next generation of biotechnology traits.
As a part
of the business update, Grant confirmed the company’s EPS
guidance for fiscal year 2004, expected in the range of $1.40 to
$1.50 on an ongoing basis. The company now expects to deliver
roughly 45 percent of the fiscal year EPS in the first half of
the year. Grant said favorable timing associated with sales of
Monsanto’s seed and trait products resulted in the decision to
shift the quarterly EPS guidance outlook.
Additionally, Grant confirmed the company’s free cash flow
guidance, with free cash flow generation for fiscal year 2004
expected to be in the range of $350 million to $400 million. The
company expects net cash provided by operations to be in the
range of $540 million to $570 million and net cash required by
investing activities to be in the range of $170 million to $190
million.
Grant
indicated that the company’s 2004 and mid-term growth
expectations were achievable because of the success of the
company’s seeds and traits strategy.
“As our
seeds and traits business increasingly takes the lead in our
portfolio, the growth it delivers will propel the growth for all
of Monsanto,” said Grant. “Success in seeds and traits requires
experience, access and execution, and Monsanto has the base and
the strategy to lead this area of growth for the agricultural
industry.”
Successive Rounds of Growth From Seeds and Traits
In his
presentation, Grant focused on Monsanto’s seeds and traits
strategy, explaining that the company has built its strategy on
three successive rounds of seed and trait innovation. The first
round was dominated by significant advancement in seed breeding
and first-generation biotech products – like Monsanto’s
portfolio of insect-protected and herbicide-tolerant crops.
With growth
continuing in this first round, Monsanto has already seen
initial business growth in the second round – a round of
innovation focused on second-generation biotech offerings and an
increased emphasis on multiple stacked traits.
“Monsanto
is already moving to second-generation products that give us a
tremendous competitive advantage as other companies bring
‘me-too’ products into the market,” said Grant.
Grant cited
an “intensity index” of U.S. biotech traits that shows
significant penetration of multiple Monsanto traits for key
crops on each acre planted with biotech crops. For instance, in
cotton, for the 2004 planting season, Monsanto estimates an
intensity index of approximately 1.5 – meaning Monsanto believes
there are approximately 1.5 Monsanto traits being planted on
every acre growing biotech cotton. Similarly, for 2004, the
projected intensity index for corn is 1.2, with continued growth
in 2005 and 2006 as a result of the introduction of
second-generation traits and increased penetration of stacked
traits.
Building on
the foundation established in the first two rounds, Grant
indicated that Monsanto’s rich product pipeline offers new
traits in the third round that will address new market needs and
fuel longer-term growth for the company.
“Concepts
that were just drawing-board ideas a few years ago are already
being tested in the field,” he said. “For instance, last year,
Monsanto had good early field success with drought-tolerant corn
that could eventually help farmers maintain yields in times of
significant water shortage.”
Update on Monsanto’s Value-Capture System in
Brazil
Grant also
provided an update on Monsanto’s initiatives in Brazil, where
progress is being made on a value-capture system for Roundup
Ready soybeans for the 2004 season.
“We’ve been
able to check off a few of the first key milestones, including
developing a grain-based value-capture concept and signing
contracts with the major global grain handlers,” said Grant.
“But, there are still some important steps – including
completing enrollment of local elevators and processors – before
the system is fully instituted.”
Even if all
of milestones are successfully completed in the Brazil
value-capture system, Grant indicated that the company expects
the initial start-up costs associated with this program to
offset any potential additional earnings for Monsanto in 2004.
Grant will
also speak tomorrow at the Basic Materials Conference sponsored
by Morgan Stanley. For a direct link to a conference-sponsored
webcast of Grant’s Morgan Stanley presentation visit Monsanto’s
web site at www.monsanto.com and click on “Investor
Information.” Links to the replays of the presentations to the
Goldman Sachs and Morgan Stanley conferences are also available
through Monsanto’s web site.
Monsanto
Company (NYSE: MON) is a leading provider of technology-based
solutions and agricultural products that improve farm
productivity.
Roundup
Ready is a trademark owned by Monsanto Company and its wholly
owned subsidiaries. |