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monsanto 02_10_09


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  • 1. TERRY CREWS CHIEF FINANCIAL OFFICER GOLDMAN SACHS Thirteenth Annual Agricultural Biotech Forum February 10, 2009 1
  • 2. Forward-Looking Statements Certain statements contained in this presentation are quot;forward-looking statements,quot; 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 periodic 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 presentation. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results. Trademarks Trademarks owned by Monsanto Company and its wholly-owned subsidiaries are italicized in this presentation. All other trademarks are the property of their respective owners. © 2009 Monsanto Company 2
  • 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 ongoing 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, not replace net income (loss), cash flows, financial position, or comprehensive income (loss), as determined in accordance with GAAP. 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. With respect to the time period prior to Sept. 1, 2000, references to Monsanto in this presentation also refer to the agricultural business of Pharmacia. FISCAL YEAR: References to year, or to fiscal year, are on a fiscal year basis and refer to the 12-month period ending August 31. 3
  • 4. Yield and Innovation Create Runway of Growth to 2012 Driven By Seeds and Traits GROSS PROFIT COMMITMENT: 2012 GROWTH RANGE 2007-2012F Gross profit targeted to more than double from 2007 through $9.5 - 2012 SEEDS & GENOMICS GROSS PROFIT $9.75B STRATEGIC PLAYBOOK $10,000 AG PRODUCTIVITY GROSS PROFIT All growth is organic, from $7.3 - base business and pipeline $7.5B $8,000 GROSS PROFIT (in millions)  U.S. Corn  International Corn $6.2B  Soybeans ~2.25X  Cotton $6,000 2007  Seminis BASELINE  R&D Pipeline $4.2B $4.40 - Earnings continue to translate $4,000 $4.50 into operating cash, and value created for shareowners ON-GOING EPS through combination of $2,000 acquisitions, share repurchases and dividends $0 2007 2008 2009F 2012F BASELINE 4
  • 5. Step Change in Roundup Reflects Historical Decisions on Price, Volume, Cost, and Working Capital ROUNDUP AND OTHER GLYPHOSATE-BASED HERBICIDES: BRANDED AND NON-BRANDED TRENDS – 2007-2009F 350 Non-Branded Branded 300 250 Volume (M REGs) 200 150 100 50 0 2007 2008 2009F 2012F GLOBAL VOLUME 252M 257M ~230M ~300M (EQUIVALENT GALLONS): BRANDED PRICE BAND >$11-$13 ~$20 >$20 $16-$18 (PER EQUIVALENT GALLON): TOTAL ROUNDUP AND OTHER $854M $2.0B $2.4-$2.5B $1.9B GLYPHOSATE - BASED HERBICIDES GROSS PROFIT 5
  • 6. Corn Gross Profit in FY2009 Targeted to Grow 25 Percent; Margins Up 300 Basis Points CORN SEED & TRAITS CORN SEED AND TRAITS SEGMENT 2009 UPDATES GROSS PROFIT PROGRESSION ► Target to increase gross profit by more than 25% ► Target to increase gross margins by 300 basis points ► On track to deliver 1 – 2 share points in DEKALB $ in millions $4,500- $4,600 brand and 1 point gain in American Seeds in U.S. $2,800 ► Branded triple mix expected to increase to 70% $2,174 $1,721 in U.S. 2012 MILESTONE TARGETS ► Advanced U.S. lead drought-tolerant corn project 2007 2008 2009F 2012F to Phase 4 GLOBAL GROSS PROFIT SPLIT ► Advanced SmartStax to Phase 4 – Commercial Launch expected in 2010 ► Grow U.S. DEKALB corn share to 30-34 share 30% points; grow American Seeds to ~15 share points 30% U.S. Intl. 70% 70% 2012F 2008 6
  • 7. Triple-Stack Penetration Accelerates Setting Stage for SmartStax Launch U.S. CORN TRAIT OPPORTUNITY: 2007-2010F MONSANTO TRIPLE-STACK ACRES 60 SMARTSTAX ACRE OPPORTUNITY U.S. GEOGRAPHY: 50 2009 PERFORMANCE UPDATE (IN MILLIONS) U.S. ACRES • Expect approximately 70% of 40 U.S. branded corn seed orders to be triple-stack orders, 30 reflecting farmers’ demand for technology and yield 20 10 • Over the past two years, DEKALB VT Triple outperformed competition by 0 nearly 9.7 bushels per acre 1 2010 2007 2008 2009F 2007 2008 2009F 2010F Opportunity • This is value above and beyond Triple 17.6M 29.1M 34-35M 55-65M the 15-20 bu/acre advantage of Stack/SmartStax our triple-stack over Opportunity widens in 2010 with planned launch of SmartStax conventional seed 1. Source: 2008 Monsanto and third party head-to-head comparisons of 5 leading DEKALB hybrids within each RM zone to Pioneer® products containing similar crop protection traits within 2 RM days as of November 23, 2008. Weighted average calculated to 15% moisture. 7
  • 8. SmartStax Offers Farmers Most Complete Package of Insect and Weed Control; Expands Market Opportunity 2007 & 2008 SmartStax EFFICACY TRIALS NEW: R&D Pipeline Node Injury Scale 0-3 1.5 SmartStax Corn ADVANCED STATUS: Phase 4 1.0 CRW Root Damage Ratings PROJECT CONCEPT: 0.5 SmartStax combines the following herbicide-tolerant and insect-protection 0.0 traits for the most complete control: YieldGard VT Roundup SmartStax Herculex® • YieldGard VT Rootworm with Ready Corn Rootworm Rootworm with Roundup Roundup Ready Corn 2 and YieldGard 6.0 Ready Corn 2 VT PRO Damaged Area (cm2) 5.0 • Herculex I and Herculex RW • Liberty Link 4.0 VALUE: 3.0 Corn Earworm Damage 2.0 LAUNCH-COUNTRY 55-65M ACRES1: 1.0 2020 VALUE2: 0.0 >$500M Roundup Herculex® SmartStax YieldGard VT Ready Corn Corn Borer Triple PRO WHOLE-FARM YIELD IMPROVEMENT  Second-generation YieldGard corn borer trait, a key SmartStax ESTIMATES: component, demonstrates incremental yield benefit of 4 IMPROVED CONSISTENCY FOR percent over first-generation corn borer traits in preliminary 1 PRIMARY AND SECONDARY data from 2 years of comparisons PESTS 3  Fewer damaged kernels from earworm drives yield advantage 2 REDUCED REFUGE 4 TOTAL: 5-10% 1. Acre opportunity reflects acres where technology fits at Monsanto's current 2007 market share in respective crops 2. 2020 value reflects gross sales opportunity in launch country in year 2020 3. As compared to YieldGard VT Triple 4. Subject to EPA approval Herculex® is a registered trademark of Dow Agrosciences LLC 8 Liberty Link® is a registered trademark of Bayer CropScience AG
  • 9. Increasing Biotech Penetration in Brazil and Argentina Sets Stage for Significant Contributions to Gross Profit LATIN AMERICA: TRAIT OPPORTUNITY ARGENTINA BRAZIL APPROVED TRAITS • YieldGard Corn Borer • YieldGard Corn Borer • Roundup Ready Corn 2 • Roundup Ready Corn 2 • YieldGard Corn Borer + Roundup Ready Corn 2 Stack RECENT • Granted approval for stack in • YieldGard Corn Borer approved in DEVELOPMENTS August 2007 February 2007 • Roundup Ready Corn 2 approved January 2008 2010 OUTLOOK • Increase penetration of YieldGard • Increase penetration of YieldGard Corn Borer + Roundup Ready Corn 2 Corn Borer • Target gaining 1-2 share points • Launch Roundup Ready Corn 2 • Continue process to approve double-stack product • Target gaining 1-2 share points 2009 TRAIT RETAIL • YieldGard Corn Borer: $12-$13 • YieldGard Corn Borer: $14-$15 PRICING • YieldGard Corn Borer + Roundup Ready Corn 2 Stack: $15-$16 OPPORTUNITIES 7M 15-20M CORN BORER CONTROL 2010 TRAIT ACRES GLYPHOSATE 9M 15-20M TOLERANCE 5M 5M ROOTWORM CONTROL 9
  • 10. Roundup Ready 2 Yield Soybeans Drive Long-Term Growth of Leading Soybean Platform SOY SEED AND TRAITS SEGMENT SOYBEAN SEED & TRAITS 2009 UPDATES GROSS PROFIT PROGRESSION ► On track to gain 1 share point in Asgrow brand ► Controlled commercial release of Roundup $ in millions Ready 2 Yield soybeans on 1.5M acres ~$1,200 ► Roundup Ready soybean in Brazil appears to $725 ~$700 $588 be on track to approach 60% penetration mark 2012 MILESTONE TARGETS ► 2009 U.S. controlled commercial release of 2007 2008 2009F 2012F Roundup Ready 2 Yield on 1.5M acres GLOBAL GROSS PROFIT SPLIT ► Large-scale launch of Roundup Ready 2 Yield in 2010; target market of 45-55M acres 1 ► Grow Asgrow brand to 25 share points in the 15% U.S. by 2012 20% ► Increase Brazil Roundup Ready soybean U.S. penetration to 80 percent by 2012 in Intl. anticipation of launch of insect-protected 80% 85% Roundup Ready 2 Yield soybeans 2012F 2008 1. Target market defined as acres where technology is applicable, not necessarily a projection of acres penetrated by 2012. 10
  • 11. Roundup Ready 2 Yield Step Change in Yield to Revolutionize Soybean Farming FINAL ROUNDUP READY 2 YIELD SOYBEANS VERSUS COMMERCIAL CHECKS NEW: COMPARISONS TO COMMERCIAL ROUNDUP READY SOYBEANS – 2 YEAR SUMMARY 60 VALUE PROPOSITION COMPETITORS’ PRODUCT WITH ROUNDUP READY 2 YIELD ROUNDUP READY TRAIT YIELD IMPROVEMENT ON 55 AVERAGE YIELDS IN ~3.8 bu/ac 55.5 GROUPS 2 & 3: Bushels per Acre 55.2 54.5 INCREMENTAL YIELD 50 51.7 VALUE TO FARMER 51.4 ~$38/ac (VERSUS ROUNDUP 49.9 READY): 45 PRICING SEAMLESS PRICE FOR $49-$52 FIRST-GENERATION 40 ROUNDUP READY SEED (PER ACRE)1: $69-$72 SEAMLESS PRICE FOR 35 ROUNDUP READY 2 YIELD SEED (PER ACRE)1: 2 3 Overall RELATIVE MATURITIES: COMPARISONS: >1,000 >2,900 >3,900 APPROXIMATE BU/AC ADVANTAGE FOR ROUNDUP 4.6 3.8 3.8 READY 2 YIELD: PERCENT YIELD ADVANTAGE 9.1% 7.3% 7.4% FOR ROUNDUP READY 2 YIELD1: Two year summary (2007-2008) of head-to-head comparisons between all Roundup Ready 2 Yield products available for sale in 2009 vs. national competitor Roundup Ready products. Final data as of December 9, 2008. 11 1. Reflects seamless price to the farmer, including trait value, germplasm value and value provided by the seed treatment.
  • 12. Cotton Gross Profit to Show U.S. Turnaround in 2010, As India Penetration Expands COTTON SEED & TRAITS 2008 PERFORMANCE UPDATE  ► In > 530 trials, new class of Deltapine GROSS PROFIT PROGRESSION Bollgard II/Roundup Ready Flex varieties outperforms the competition and existing Deltapine varieties, from a value $ in millions ~$500 perspective, by nearly 5%-12% across U.S. cotton-growing regions $313 ~$300 $267 2012 MILESTONE TARGETS  ► Expand second-generation trait penetration in U.S. Deltapine brand 2007 2008 2009F 2012F GLOBAL GROSS PROFIT SPLIT ► Expand Bollgard II acres in India; currently 25 percent penetrated in 18-20M acre opportunity ► Grow U.S. Deltapine brand share from 30% current share of 41 percent to ~50 percent 45% U.S. by 2012 55% Intl. ► Grow Brazil branded cotton share by 10 70% points to 31 percent; grow India to 12 percent share 2012F 2008 12
  • 13. Vegetable Platform Becomes Third Largest Crop by 2012 with Margin Goal of 65 Percent 2012 MILESTONE TARGETS VEGETABLE SEEDS ► Integrate De Ruiter protected culture GROSS MARGIN PROGRESSION seeds ► Continue margin expansion toward goal of 65 percent by 2012 65%  Price existing products to value ~55% 53% 44%  Launch new products with increased value  Expand high-margin protected- 2007 2008 2009F 2012F culture segment GLOBAL GROSS PROFIT SPLIT ► Accelerate new product launches via use of molecular markers 10% Open 40% Field Protected 60% 90% Culture 2012F 2008 13
  • 14. Strong Pipeline Reflects Growing Innovation and Value of Emerging Yield and Stress Traits DISCOVERY PHASE 1 PHASE 2 PHASE 3 PHASE 4 Drought-Tolerant Family HIGH FAMILY TRAITS► CORN: COLLABORATION YIELD & STRESS Nitrogen- BROAD-ACRE HIGH Utilization FAMILY TRAITS► YIELD Family Broad-Acre, MEGA Higher-Yielding FAMILY TRAITS► Family SOYBEANS: Broad-Acre, BROAD-ACRE HIGH Higher-Yielding FAMILY TRAITS► YIELD Family 2020 VALUE RANGES: Bollgard III Omega-3 cotton soybeans Higher - MEGA HIGH SmartStax Yielding corn $300M-$500M Insect-protected Roundup >$1BM Roundup Ready Ready 2 2 Yield soybeans Yield canola Dicamba- Dicamba MID LOW tolerant and soybeans <$150M glufosinate- $150M-$300M tolerant Vistive III cotton High-oil Corn Soybeans Cotton Canola soybeans Note: 2020 value ranges reflect expected annual gross sales in launch country in 2020. 14
  • 15. New Game-Changing Traits Enter Mid-Term Launch Horizon 2012 TO END OF DECADE     Drought 2nd Nitrogen- Higher Tolerant Corn Utilization Yielding Generation Family 1 Soybeans 1 Drought 1 Corn Family1 • Advanced to Phase IV • Phase I Project • Advanced to Phase III • Phase II project • First dry-land drought • Consistent yield benefit • Built upon yield platform • 9% yield advantage in product submitted for after two years of testing of Roundup Ready 2 2008 in water-stressed FDA approval Yield environments • 8% yield benefit at lower • 5 years of testing nitrogen levels • Lead events 1 & 2 • Currently selecting exceeded 6%-10% yield experienced average commercial event for improvement target yields of 7.4% and 6.7%, broad acre application respectively SUPERIOR, NE - FIELD TRIALS – 2007 FARM PROGRESS SHOW – 2007 Dayton, Iowa -- 2008 Transgenic Control WITH GENE CONTROL HYBRID (94 BU/AC) (76 BU/AC) 15 1. Part of the Monsanto-BASF Yield and Stress R&D Collaboration
  • 16. Strong Cash Position Gives Monsanto the Resources to Extend Its Competitive Lead MONSANTO’S FINANCIAL INDICATORS: Cash Generation OPERATING CASH AND ONGOING EPS – 2003 TO 2009F Strong cash generation $3,500 $5.00 allows Monsanto to invest to extend its competitive lead: Operating Cash $4.50 Ongoing EPS $3,000 Bolster direct returns to $4.00  shareowners Cash from Operations (in $ thousands) $3.50 Ongoing EPS Support commercial growth $2,500  through capital spending $3.00 $2.50 Invest in future growth  through R&D $2,000 $2.00 Expand core businesses $1.50  through strategic $1,500 acquisitions $1.00 $0.50 $1,000 2003 2004 2005 2006 2007 2008 2009F 2003-2006 2009F >$1B in working capital Monsanto operating cash reductions used to fund key guidance exceeds $3B, as acquisitions like Seminis net income grows with and American Seeds EPS of $4.40-$4.50 16
  • 17. Over Last Four Years, Use of Cash Focused on Areas That Contribute to Growth and Return Value to Shareowners USES OF CASH CUMULATIVE: 2005-2008 Fiscal Years SHARE REPURCHASES 10% OF CASH USED • Completed 4-year $800M share-repurchase program and began previously announced 3-year $800M authorization in December 2008 DIVIDENDS 12% OF CASH USED $906 • From 2002-2008, Monsanto’s Board of Directors raised the dividend seven times for a total increase of 300 percent $1,058 TECHNOLOGY SPENDING 4% OF CASH USED $4,485 $307 • Over $300M spent to expand technology partnership network ACQUISITIONS 51% OF CASH USED $2,078 • American Seeds LLC • Delta & Pine Land (2007) (2004-2007) • Agroeste (2007) • Seminis (2005) • De Ruiter (2008) • Cristiani (2008) $ in thousands CAPITAL SPENDING 24% OF CASH USED • Spent $918M in 2008, 60% for new or expanding seed facilities 17
  • 18. Earnings Growth Reflected in Dividend Payout, While Newly Authorized Program Extends Share Repurchase Initiative MONSANTO ANNUAL SHARE REPURCHASE: MONSANTO QUARTERLY DIVIDENDS: 2004-2008 2001-2009 $500 2004-2005 $0.30 2007-2008 $450 3-year $500M repurchase program – completed early Two increases in a 12-month period $400 2009 $0.25 1 $350 Increased quarterly dividend 10% for Per-Share Amounts $ in millions shareholders of record on April 3rd $0.20 $300 $250 $0.15 $200 $150 $0.10 $100 $0.05 $50 $0 $0.00 2004 2005 2006 2007 2008 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Dividends Share Repurchases STATUS STATUS • Since becoming an independent company in • Completed 4-year $800M repurchase August of 2002, Monsanto has increased program ahead of schedule dividends 8 times – an increase of more than • Focus areas in 2009: 340 percent • Began previously announced 3-year, $800M program in 1. Amounts for record dates from Jan. 1, 2001 – July 7, 2006 adjusted to allow December 2008 comparison following Monsanto’s stock split 18
  • 19. FY2009 Guidance Supports 20 Percent Plus EPS Growth Rate 2009F EARNINGS $4.40-$4.50 ONGOING EARNINGS PER SHARE ~20-24% GROWTH FROM 2008 Seeds & Genomics Gross Profit $4.5-$4.6B Corn Seed & Traits Gross Profit ~$2.8B Soybean Seed & Traits Gross Profit ~$700M Cotton Seed & Traits Gross Profit ~$300M Vegetable Seeds Gross Profit ~$500M All Other Seed & Traits Gross Profit ~$200M Roundup and All Other Glyphosate-based Herbicides Gross Profit $2.4-2.5B All Other Ag Productivity Gross Profit ~$400M CASH MANAGEMENT AND SPENDING FREE CASH FLOW >$1.8B Operating Cash >$3B Capital Expenditures ~$1B SG&A as a Percent of Sales 19% Range R&D as a Percent of Sales (excluding acquired IPR&D) 9.5%-10% Range 19
  • 20. Yield and Innovation Runway of Growth to 2012 Driven By Seeds and Traits GROSS PROFIT COMMITMENT: 2012F 2007-2012F TARGETS $9.5 - Total Gross $9.5 - $9.75B Profit SEEDS & GENOMICS GROSS PROFIT $9.75B $10,000 AG PRODUCTIVITY GROSS PROFIT Roundup and All Other $7.3 - Glyphosate- $1.9B Based $7.5B $8,000 GROSS PROFIT (in millions) Herbicides Gross Profit $6.2B All Other Ag $300M ~2.25X Productivity $6,000 Gross Profit 2007 BASELINE Seeds & Traits $7.3 - $7.5B $4.2B Gross Profit $4.40 - $4,000 $4.50 ON-GOING EPS $2,000 $0 2007 2008 2009F 2012F BASELINE 20
  • 21. Reconciliation of Non-GAAP Financial Measures Reconciliation of Free Cash Flow Fiscal Year Fiscal Year Fiscal Year First First $ Millions 2009 Forecast 2008 2007 Quarter 2009 Quarter 2008 Net Cash Provided (Required) by Operations $3,000 $2,799 $1,854 $114 $996 Net Cash Provided (Required) by Investing Activities (1,200) (2,027) (1,911) $10 (256) Free Cash Flow $1,800 $772 $(57) $124 $740 Net Cash Provided (Required) by Financing Activities N/A (102) (583) (258) (47) Effect of Exchange Rate Changes on Cash and Cash Equivalents N/A 77 46 (137) 58 Net Increase (Decrease) in Cash and Cash Equivalents N/A $747 $(594) $(271) $751 Reconciliation of Non-GAAP EPS First First Fiscal Year Fiscal Year Fiscal Year $ per share 2009 Forecast 2008 2007 Quarter 2009 Quarter 2008 Diluted Earnings (Loss) per Share TBD1 $3.62 $1.79 $1.00 $0.46 Solutia Claim Settlement -- ($0.23) -- -- -- Loss (Income) on Discontinued Operations ($0.02) ($0.04) ($0.15) ($0.02) ($0.01) In-Process R & D Write-Off Related to the De Ruiter Acquisition -- $0.29 -- -- -- In-Process R & D Write-Off Related to the Delta & Pine Land -- -- $0.34 -- -- (D&PL) Acquisition In-Process R & D Write-Off Related to the Aly Participacoes TBD1 -- -- -- -- Ltda. Acquisition Diluted Earnings (Loss) per Share from Ongoing Business $4.40-$4.50 $3.64 $1.98 $0.98 $0.45 1. The company is not able to provide a reconciliation to reported EPS guidance for fiscal year 2009 at this time, as it is still evaluating purchase accounting adjustments related to its recent acquisition of the Brazilian sugar cane business Aly Participacoes Ltda. Such adjustments are dependent upon the completion of valuations of certain intangible 21 assets, including in-process R&D which requires immediate expense recognition and it is expected to be significant.