Monsanto Repositions Roundup Business to Address Fundamental Market Changes; Adjusts Fiscal Year 2010 Guidance

ST. LOUIS, May 27, 2010 /PRNewswire-FirstCall/ -- Monsanto Company (NYSE: MON) today announced it is repositioning its Roundup® business in the face of fundamental structural changes that have caused upheaval in the glyphosate industry. Focusing its glyphosate products on supporting the core seeds-and-traits business, the company plans to drastically narrow its Roundup® brand portfolio to offer farmers a simple, quality product that meets their needs at a price closer to generics.  

"By reducing the uncertainty associated with Roundup, we free Monsanto to grow on its fundamentals," Chairman and Chief Executive Officer Hugh Grant said. "What matters to our long-term growth is our seeds-and-traits business, which is on track."

Grant indicated that the company has initiated a series of actions that are expected to cumulatively reduce the ongoing earnings per share (EPS) contribution of the Roundup® business in fiscal-year 2010 by $0.50 to $0.70.  These near-term actions include lowering prices on volume for the 2011 season and accelerating payment on certain distributor and retailer incentives to close out multi-tier brand support and speed the transition to the new brand strategy.  The company also stated negotiations to resolve breaches of contractual obligations by two major supply customers have been unsuccessful to date.

The company's ongoing EPS also reflects the acute effect of an abbreviated burn-down season in the United States that limited the opportunity for sales in the third quarter.  The company now expects fiscal-year 2010 earnings per share to be in the range of $2.40 to $2.60 on an ongoing basis and $2.15 to $2.41 on an as-reported basis.  With the changes in guidance, Monsanto now expects ongoing EPS for its upcoming third-quarter to be in the range of $0.75 to $0.80, and $0.65 to $0.72 on an as-reported basis. (For reconciliations of EPS and ongoing EPS, see note 1.)

The company's free cash flow guidance reflects the proportional decrease in contribution from the Roundup® business and is now expected in the range of $400 million to $500 million.  The updated free-cash flow guidance is inclusive of the after-tax cash effect of the company's previously announced restructuring.  (For reconciliations of free cash flow see note 1).

Redefining the Segment

Grant said the company acted once it had confirming data from the early U.S. Roundup® application season that the industry had undergone fundamental structural changes. Among the driving structural changes in the industry Grant noted are systemic margin compression in the distribution channel attributed to sustained oversupply of glyphosate and the reality that Chinese glyphosate capacity is profoundly overbuilt.

To address these issues, Monsanto is revamping its glyphosate business, pricing Roundup® nearer to the level of generics and simplifying its product offerings. In key segments within large markets like the United States, the company will move to a single-brand strategy, using resources to promote a single brand rather than splitting them among multiple tiers.

The company also is creating a new offering of solutions to address the need for a simple weed resistance package.  It will work with key U.S. distributors to combine a simplified Roundup® brand with a package of complementary chemicals to create an affordable and easy-to-use weed control regimen.

"There's good news for farmers in all of this – we're going to bring simplicity to weed management," Grant said. "Weed resistance is real, but managing it doesn't have to be complex.  The right tools exist today, and we're going to make it easy and more affordable for farmers to access those tools as a package, with Roundup as the cornerstone."

Outlook

With these structural changes, Monsanto now expects the ongoing gross profit contribution of Roundup® will be in the range of $250 million to $300 million per year.  This brings total Agricultural Productivity gross profit to $550 million to $600 million.

The company continues to project earnings growth from the adjusted 2010 base in the mid-teens going forward, reflecting growth in the seeds-and-traits business.  

Conference Call Details

Grant will discuss today's announcement in a conference call for investors at 10 to 10:30 a.m. E.T. (9 to 9:30 a.m. C.T.) today.  A live webcast of Grant's presentation will be available through Monsanto's web site at: http://www.monsanto.com/investors.  Following today's live broadcast, a replay of the webcast will be available on the Monsanto web site for three weeks. To access presentation slides and the simultaneous audio webcast of the presentation, visitors may need to download Windows Media Player™ prior to listening to the webcast.

About Monsanto Company

Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality. Monsanto remains focused on enabling both small-holder and large-scale farmers to produce more from their land while conserving more of our world's natural resources such as water and energy. To learn more about our business and our commitments, please visit: www.monsanto.com.  Follow our business on Twitter® at www.twitter.com/MonsantoCo, on the company blog, Beyond the Rows at www.monsantoblog.com, or subscribe to our News Release RSS Feed.

Cautionary Statements Regarding Forward-Looking Information:

Certain statements contained in this release are "forward-looking statements," such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. 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: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits; developments related to foreign currencies and economies; successful operation of recent acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's most recent Form 10-K Report to the SEC. 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 update any forward-looking statements or any of the factors that may affect actual results.

SOURCE Monsanto Company