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“The 2006 fiscal year was an outstanding year for Monsanto. We realized record sales, expanded growth in our corn seed business and saw continued adoption of our trait technologies. Our results have created a strong foundation for continued earnings growth for the company leading into the next decade.”

Market Conditions

The 2006 harvest season is well under way throughout the Northern Hemisphere. Based on late-season estimates by the U.S. Department of Agriculture (USDA), producers could realize near-record production levels in corn, cotton and soybeans, as late-season rains helped improve crop conditions in parts of the Corn, Cotton and Soybean belts. The USDA currently estimates that this year’s corn crop is 29 percent harvested, the cotton crop is 32 percent harvested, and the soybean crop is 47 percent harvested.

In South America, farmers are gearing up for planting and during the next several months will be seeding their fields with their crops. Early-season estimates suggest that acres planted to corn in Argentina may rise slightly year over year, while acres planted to soybeans in Brazil may be reduced somewhat.

Operations Update

Monsanto reported net sales of $1.4 billion for the fourth quarter of fiscal year 2006, which were 9 percent higher than sales in the same period in fiscal year 2005. The fourth-quarter results were primarily driven by higher sales of Roundup and other glyphosate-based herbicides in the United States as well as higher sales of the company’s corn products. Results in the quarter were partially offset by lower U.S. soybean trait revenues as the company’s seed and trait licensees reported a higher percentage of their annual sales in the first nine months of 2006 compared with sales in the same period in 2005.

The company reported record net sales of $7.3 billion in fiscal year 2006, which were 17 percent higher than sales in fiscal year 2005. Key contributors to the company’s growth in the year included higher U.S. corn seed and traits revenues, and higher sales of Roundup and other glyphosate-based herbicides in the United States. Sales from the Seminis business also contributed to the favorable results for the year, as the company realized the first full year of sales from this business.

Monsanto reported a net loss of $144 million in the fourth quarter of fiscal year 2006, compared with a reported net loss of $125 million in the same period last year. The decrease in the fourth quarter income related primarily to lower sales in the Seeds and Genomics segment. For fiscal year 2006, the company reported net income of $689 million which was significantly higher than net income for fiscal year 2005. The increase in fiscal year 2006 related primarily to higher revenue from the company’s U.S. seeds-and-traits business. In comparison, net income in fiscal year 2005 also had a write-off related to in-process R&D associated with acquired seed companies.

Loss per share for the fourth quarter was $(0.27) on an as-reported basis, and was $(0.21) on an ongoing basis. Earnings per share (EPS) for fiscal year 2006 were $1.25 on an as-reported basis, and $1.31 on an ongoing basis. Monsanto’s EPS data for all periods has been adjusted to reflect the company's two-for-one stock split which was paid on July 28, 2006. (For a reconciliation of ongoing EPS, see page 1. See note 2 for a discussion of ongoing EPS.)

Cash Flow

In fiscal year 2006, Monsanto generated free cash flow which topped $1 billion. During the year, Monsanto’s net cash provided by operating activities decreased 4 percent to $1.7 billion, while the company’s net cash required by investing activities was $625 million for the fiscal year 2006. (For a reconciliation of free cash flow, see note 2.) Free cash flow in fiscal year 2006 reflected higher net income and lower spending on acquisitions when compared with fiscal year 2005. Net cash required by financing activities was $117 million for fiscal year 2006, compared with net cash required of $582 million for fiscal year 2005. The change in net cash required by financing activities is primarily because of higher spending on acquisitions in 2005.
 
Outlook

Monsanto announced that its full-year 2007 EPS guidance, both on a reported and ongoing basis, is expected to be in the range of $1.50 to $1.57. The company’s 2007 EPS guidance reflects a projected growth rate of up to 15 percent to 20 percent from the fiscal year 2006 EPS ongoing base of $1.31 per share. (For a reconciliation of ongoing EPS, see page 1. See note 2 for a discussion of ongoing EPS.)
 
The company also confirmed guidance for free cash flow for fiscal year 2007 will be in the range of $875 million to $950 million. The company expects net cash provided by operating activities to be in the range of $1.3 billion to $1.4 billion, and net cash required by investing activities to be approximately $500 million for fiscal year 2007. (For a reconciliation of free cash flow, see note 2.)
 
Monsanto also noted that it expects that its target for SG&A expense as a percent of sales for fiscal year 2007 will be in the range of 21 to 21.5 percent. The company also confirmed that its R&D expenses as a percent of sales for fiscal year 2007 are expected to be approximately 10 percent.
 
Seeds and Genomics Segment Detail

The Agricultural Productivity segment consists primarily of crop protection products, the lawn-and-garden herbicide business, and the company’s animal agricultural business.
 
Sales for Monsanto’s Agricultural Productivity segment were $859 million for the fourth quarter of fiscal year 2006, or 18 percent higher compared with sales in the same period last year. Higher sales of Roundup and other glyphosate-based herbicides in the United States contributed to the increase in the fourth quarter.
 
Segment sales were $3.3 billion for fiscal year 2006 or 9 percent higher than segment sales compared with sales in fiscal year 2005. Increased volumes and prices of Roundup herbicides in the United States contributed to growth for the full year. Segment sales also benefited from increased sales from the company’s selective chemistry and dairy businesses.
 
Despite higher raw material costs for Roundup and other glyphosate-based herbicides associated with higher energy costs, and increased costs in Brazil as result of a strengthening Real, gross profit for the segment remained in line with the company’s guidance.
 
Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality. For more information on Monsanto, see http://www.monsanto.com/.

Roundup is a registered trademark owned by Monsanto Company and its wholly owned subsidiaries.

References to “Roundup herbicides” in this release mean Roundup branded herbicides, excluding lawn-and-garden herbicide products, and references to “Roundup and other glyphosate-based herbicides” exclude all lawn-and-garden herbicides.

Full results in PDF format
http://www.monsanto.com/monsanto/content/investor/financial/reports/2006/Q42006EarningsRelease.pdf