October 23,  2001

• Excluding the effects of foreign exchange, sales increased 2 percent in the quarter.
• U.S. acreage for Monsanto's biotechnology-enhanced traits in 2001 rose by 17 percent to more than 84 million acres.
• Monsanto and DuPont resolve issues regarding YieldGard(R) insect-protected corn trait and agree to a royalty-bearing license.
• U.S. EPA renews registrations for Monsanto's insect-protected YieldGard(R) corn and Bollgard(R) cotton.
• New glyphosate manufacturing plant in Camacari, Brazil, begins production.

* See note 4 for details.
** EPS for third-quarter 2000 and nine months of 2000 were calculated using pro forma shares outstanding.

 *** Net income (loss) and net income (loss) diluted EPS are before nonrecurring items (see note 7 for details). Results for 2000 are on a pro forma basis, assuming Monsanto's reduced debt level as applied to all of 2000 (see note 6 for details). EPS for all 2000 periods was calculated using pro forma shares outstanding.

St. Louis, Missouri
October 23, 2001

Monsanto Company (NYSE: MON) today reported financial results for the third quarter and for the nine months ended Sept. 30, 2001.

"The fundamentals of our business remain strong, as evidenced by the increasing demand for Monsanto's biotechnology-enhanced solutions and our family of Roundup(R) herbicide products," said Monsanto President and Chief Executive Officer Hendrik A. Verfaillie.

"The last four months of the calendar year represent the peak selling season for our products in Latin America. The market for Roundup(R) herbicide continues to grow in that region, and while foreign currency exchange rates negatively affected our Latin American sales in the third quarter, we've taken proactive steps to strengthen our business there for the longer term."

Sales

Third-quarter net sales of $936 million decreased 7 percent compared with third-quarter sales last year. As expected, sales during the third quarter are historically the lightest of the year for Monsanto as the quarter falls after the planting season in North America and before the major portion of the planting season in Latin America. Sales would have increased 2 percent compared with those in the same period last year if the effect of foreign currency exchange rates, particularly in Brazil, was excluded.

An increase in trait revenues for Monsanto's cotton and soybean technologies in the third quarter was more than offset by lower sales of Roundup(R). Sales of Roundup(R) decreased 18 percent for the quarter and 5 percent for the first nine months of the year, with currency negatively affecting results in both periods.

Sales for the first nine months of 2001 of $4.3 billion were 2 percent lower compared with sales in the same period last year. Sales would have increased 2 percent if the effect of currency was excluded.

Reported Earnings

For the third quarter of 2001, the company reported a net loss of $45 million, or a loss of 17 cents per share. This compares with a net loss of $64 million, or a loss of 25 cents per share, during the third quarter of 2000. For the first nine months of 2001, Monsanto reported net income of $399 million, or $1.51 per share, compared with net income of $201 million, or $0.78 per share for the same period last year.

As previously stated, the company expects to take $425 million to $475 million in total pretax restructuring and other special items for the two-year period ending Dec. 31, 2001, of which $342 million was recorded during 2000 and the first three quarters of 2001.

In the third quarter of 2001, the company recorded aftertax restructuring and other special items of $8 million, primarily associated with our restructuring action to exit product lines or businesses and to focus our efforts on key crops. In the third quarter of 2000, Monsanto recorded aftertax restructuring and other special items of $21 million, primarily associated with our restructuring plan.

The company recorded aftertax restructuring and other special items of $51 million in the first three quarters of 2001, while aftertax restructuring and other special items of $144 million were recorded in the same period last year. These items were primarily associated with our restructuring plan.

2001 Third-Quarter and Nine-Month Earnings vs. 2000 Pro Forma Third- Quarter and Pro Forma Nine-Month Earnings

As discussed in this section, net income excludes nonrecurring items. Nonrecurring items include an extraordinary loss in 2001 for the early retirement of debt, the cumulative effect of an accounting change effective Jan. 1, 2000, and restructuring and other special items.

Monsanto's pro forma net income and earnings per pro forma share for 2000 also have been adjusted to reflect the effect of a capital contribution from Pharmacia Corporation and proceeds from the company's initial public offering (IPO). This adjustment is reflected as of Jan. 1, 2000, for 2000 results.

The company recorded a third-quarter net loss of $37 million, or a loss of 15 cents per share, compared with a net loss of $32 million, or a loss of 13 cents per share, in the same period last year. 

For the nine-month period, net income increased 3 percent to $452 million in 2001, from $437 million in the same period last year. Nine-month 2001 EPS was up 2 cents to $1.71 per share.

Segments

Monsanto reports its results in two segments: Agricultural Productivity and Seeds and Genomics. The Agricultural Productivity segment consists primarily of crop protection products and the company's animal agriculture business. The Seeds and Genomics segment consists of the global seeds and related trait business, and genetic technology platforms. As discussed in this section, EBIT (earnings before interest and taxes) excludes special items.

Agricultural Productivity: In the Agricultural Productivity segment, sales decreased 15 percent for the third quarter, and 1 percent for the first nine months of 2001. EBIT declined to $99 million for the third quarter of 2001, from $176 million in the third quarter of 2000. EBIT decreased to $913 million in the first nine months of 2001 versus $988 million in the first nine months of 2000. Lower volumes of Roundup(R) and the effect of currency were the primary reasons for the decline in sales
and EBIT for the segment during the quarter. The company also continues to aggressively manage inventory levels in the Latin American distribution channel.

Seeds and Genomics: Sales for the Seeds and Genomics segment increased $49 million, or 25 percent, to $245 million for the third quarter of 2001. Sales increased because of a grain exchange program in Latin America, which was introduced this year to reduce the company's risk on receivables. Also contributing to the increase were higher trait revenues for Monsanto's cotton and soybean technologies, which were partially driven by a shift in timing related to the royalty sales for the Roundup Ready(R) soybean trait. These gains were partially offset by the company's strategic approach to selling its products closer to the use season in Latin America. For the first three quarters of 2001, sales declined 4 percent to $1.2 billion for this segment, primarily because of higher-than-expected returns of conventional corn seed in Latin America in the first half of the year.

EBIT improved by $42 million to a loss of $153 million in the third quarter of 2001 for the Seeds and Genomics segment. For the nine-month period, EBIT improved by $67 million, to a loss of $141 million this year, from a loss of $208 million in the first three quarters of 2000. Better cost management and increased revenues from biotechnology traits were the major reasons for this segment's improved performance during the first nine months.

Final results of U.S. acres planted with Monsanto's insect-resistant and Roundup Ready(R) technologies during 2001 show higher use than previously estimated. The updated acreage figures are as follows:

An increasing number of U.S. farmers are choosing corn and cotton seeds that contain both Monsanto's insect-protection and Roundup Ready(R) traits. These "stacked" traits provide a more complete solution to growers while delivering a higher revenue stream to the company in a single seed.

Other Developments

Earlier this month, Monsanto and DuPont announced the resolution of issues between them regarding Monsanto's YieldGard(R) insect-protected corn trait currently used in Pioneer Hi-Bred International Inc.'s corn hybrids. The resolution included the granting of a royalty-bearing license from Monsanto. Monsanto's DEKALB subsidiary and Dow AgroSciences also announced an arrangement that includes a royalty to Monsanto in exchange for a license to use several DEKALB
patents in certain of Dow AgroSciences' future insect- protected corn products.

Monsanto announced in October that it received extensions to the company's registrations to sell its insect-protected corn and cotton technologies to U.S. farmers from the U.S. Environmental Protection Agency. The company's Bollgard(R) insect-protected cotton and YieldGard(R) insect-protected corn have helped growers reduce their input costs and use of chemical pesticides since these technologies were introduced in 1995 and 1996, respectively.

Also in October, Monsanto successfully completed construction and startup of its new glyphosate manufacturing plant in Camacari, Brazil. This substantially completes the company's plan to aggressively expand global capacity to meet the growing demand for Roundup(R).

Future Guidance

Monsanto is updating its guidance for 2001 sales and earnings to reflect lower third-quarter results in Latin America, where the company has proactively reduced inventory levels in the distribution channel. While the company's sales growth guidance for 2001 was in the 2 percent to 4 percent range, management now expects that revenues will increase at the lower end of that range, roughly at 2 percent. EPS growth excluding nonrecurring items is expected to be in the range of 5 percent to 7 percent, or $1.79 per share to $1.82 per share, when compared with 2000 pro forma results.

Management expects EPS growth in 2002 to be in the range of 20 percent to 30 percent, including the effect of lower goodwill amortization expense resulting from the company's adoption of a new accounting standard. Business growth is expected to contribute roughly one-fifth of this expected EPS growth in 2002, with the remainder coming from the adoption of the new accounting standard. Growth of the base business in 2003 is expected to accelerate as additional anticipated biotechnology-enhanced product approvals are received.

The company also reiterated that it plans to improve its free cash flow (cash provided by operations less cash required by investing activities), and expects to have positive free cash flow in 2001. Collections through the first three quarters are up 10 percent, and management expects to reduce year- end receivables as a percent of sales by one-to-two percentage points.

Monsanto Company, an 85 percent-owned subsidiary of Pharmacia Corporation, is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality.

YieldGard, Roundup, Roundup Ready and Bollgard are trademarks owned by Monsanto Technology LLC.

Company news release
N3896