.monsanto 04-02-08
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.monsanto 04-02-08

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    .monsanto 04-02-08 .monsanto 04-02-08 Presentation Transcript

    • SECOND-QUARTER 2008 FINANCIAL RESULTS April 2, 2008
    • 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 reports on forms 10-Q and 10-K. 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. © 2008 Monsanto Company 2
    • Non-GAAP Financial Information This presentation may use the non-GAAP financial measures of “free cash flow,” and earnings per share (EPS) on an ongoing basis. 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 on-going 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. These non-GAAP financial measures are not intended to replace net income (loss), cash flows, financial position, or comprehensive income (loss), as determined in accordance with accounting principles generally accepted in the United States. 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, which can be found at the end of this presentation. 3
    • PERFORMANCE SUMMARY Ongoing and As-Reported Earnings Second First Half Second First Half Quarter 2007 2007 Quarter 2008 2008 Diluted Earnings $2.02 $0.98 $2.48 $1.14 Per Share Solutia Claim ($0.23) - ($0.23) - Settlement Loss (Income) From - - $0.01 $0.02 Discontinued Operations Diluted Earnings $1.79 $0.99 $2.25 $1.16 Per Share on an Ongoing Basis 4
    • PERFORMANCE SUMMARY Second-Quarter Financial Summary Second Second First First Half Change Change Quarter Quarter Half 2007 2007 2008 2008 45% 42% NET SALES $3,779M $2,609M $5,878M $4,148M GROSS 54% 54% $2,229M $1,448M $3,284M $2,130M PROFIT 108% 119% NET INCOME $1,129M $543M $1,385M $633M DILUTED EPS ON AS- 106% 118% $2.02 $0.98 $2.48 $1.14 REPORTED BASIS FREE CASH 408% $1,473M $290M FLOW 5
    • FINANCIAL OUTLOOK Monsanto’s Strategic and Financial Opportunity Lies in Seeds and Traits GROSS PROFIT OUTLOOK BY SEGMENT 2007-2012F Gross Profit 2008 STATUS $10,000 • New FY2008 targets of $3.6 - ALL OTHER AGRICULTURAL PRODUCTIVITY $3.7B gross profit for Seeds and $8,000 ROUNDUP AND OTHER GLYPHOSATE- Genomics; $1.7 - $1.8B for BASED HERBICIDES Roundup and other glyphosate- IN MILLIONS $6,000 based herbicides SEEDS & GENOMICS 2012 OUTLOOK 2012F $4,000 SEEDS & $6.5-7.0B GENOMICS $2,000 ROUNDUP AND OTHER $0 $1.8B GLYPHOSATE- 2007 2008F 2012F BASED HERBICIDES SEEDS & GENOMICS CAGR 15-18% FROM 2008 ALL OTHER AG $350M ROUNDUP AND PRODUCTIVITY ALL OTHER GLYPHOSATE- FLAT BASED HERBICIDES CAGR FROM 2008 6
    • FINANCIAL OUTLOOK Monsanto Has Portfolio Balance That Carries Between Crops When Acres Switch Year-to-Year PORTFOLIO BALANCE: STATE OF AGRICULTURE: INDEXED GROSS PROFIT FOR MONSANTO-BRANDED CROP OFFERINGS Portfolio Balance 1.2 ► In 2008, for every 1 million 1.00 acres that shift between 1 0.94 soybeans and corn or cotton, on average, there is 0.8 an estimated $0.01 EPS change for Monsanto 0.6 ► With brands in corn, cotton 0.47 and soybeans, Monsanto is 0.4 positioned to meet demand regardless of crop planting 0.2 patterns in any given year 0 CORN COTTON SOYBEANS 2008 U.S. TRAIT PENETRATION – 1.6 1.4 0.95 ALL CHANNELS 7
    • FINANCIAL OUTLOOK Vegetable Seed Business On Track; De Ruiter Seeds Boosts Achievement of Identified Goals VALUE CREATION FOR VEGETABLE SEED PLATFORM: STAGED OPPORTUNITIES FOR INCREASING GROSS PROFIT VALUE CREATION OPPORTUNITY New product launches; use of molecular markers Aggressively shift mix via protected culture and hybrid conversion Identify and implement opportunities to price products to value Assemble genetic maps for key crops Focus on operational excellence; working capital management 2007 2008 2009 2010 2011 2012 PIPELINE OPERATIONAL EXCELLENCE NEW VALUE CREATION ADVANCEMENT ~2010 2012 2007 De Ruiter Seeds accretive to Monsanto vegetable Monsanto vegetable Monsanto vegetable seed EPS seeds projected to seed sales top contribution in second full fiscal be >$1B in sales, $600M in 2007; 7.5% year following closing mid-60s margin top-line growth 2008 2012 De Ruiter Seeds Molecular marker platform acquisition announced – begins transforming strengthens protected- Seminis and De Ruiter portfolios culture portfolio 8
    • FINANCIAL OUTLOOK 2008 Again Projects Double-Digit Earnings Growth, Strong Cash Generation and Improved Margins 2007 2008F EARNINGS $2.00 $3.15-$3.25 ONGOING EARNINGS PER SHARE 54% GROWTH 58-63% GROWTH FROM 2006 FROM 2007 53%; two years ahead of Gross Profit as a Percent of Sales 50% 2010 target of 52-54% Seeds & Traits Gross Profit $3.0B $3.6 - $3.7B Roundup and All Other Glyphosate-based $1.7 – $1.8B $854M Herbicides Gross Profit All Other Ag Productivity Gross Profit $418M ~$350M CASH MANAGEMENT AND SPENDING FREE CASH FLOW $(57)M ~$1.3B Capital Expenditures $509M ~$950M SG&A as a Percent of Sales 22% ~20% R&D as a Percent of Sales 9% ~9% Receivables as a Percent of Sales 18% High Teens Inventories as a Percent of Sales 20% High Teens 9
    • FINANCIAL REVIEW Earnings Growth of 58 to 63 Percent and Increased Cash from Operations Reflect Strong Growth Drivers EARNINGS PER SHARE GROWTH CASH FLOW PROJECTIONS PROGRESSION OF ONGOING EPS (2004-2008F) 2007-2008F 2008F ONGOING EPS GUIDANCE: 2007 2008F $3.50 58-63% GROWTH $3.15-$3.25 $3,000 $2,450 $3.25 $2,500 $3.00 $1,854 $2,000 $2.75 $1,500 $2.50 $1,000 $2.25 $500 $2.00 $0 $1.75 $2.00 ($500) $1.50 ($200) ($509) $1.25 ($1,000) ($950) $1.30 $1.00 ($1,500) ($1,402) $1.04 $0.75 ($2,000) $0.80 $0.50 2004 2005 2006 2007 2008F Cash Flows from Operations 30% 25% 54% 58-63% Cash Used in Investing, Excluding Capital Expenditures Capital Expenditures Guidance previously set as $2.70 to $2.80 per share Note: EPS figures reflect the stock split effective July 28, 2006 10
    • OVERVIEW On Track to Double Gross Profit From 2007 to 2012, Growth Drivers Roll Out In Balanced, Additive Progression GROSS PROFIT DRIVERS: • Yield & stress platform DRIVERS: R&D Pipeline TIMELINE OF INCREMENTAL IMPACT • Breakthrough platforms • Protected culture Planned progression of significant new DRIVERS: Seminis • Molecular markers gross-profit generation from each strategic driver • 2nd-gen trait acceleration DRIVERS: Cotton • Breeding inroads • Roundup Ready 2 Yield platform DRIVERS: Soybean • Seed share growth • Seed share growth International Corn DRIVERS: • New trait approvals in LA • Trait penetration and seed share growth U.S. Corn DRIVERS: • SmartStax platform 2008 2009 2010 2011 2012 2012+ 2011-2012 2009 2010 U.S. drought- Delta and Pine Roundup Ready 2 U.S. SmartStax MILESTONES tolerant corn launch Land U.S. Yield soybeans corn launch portfolio controlled 2012+ Large-scale converted to commercial release Stacked trait Roundup Ready 2 second- soybean launches, First major selling Yield soybean generation stack including dedicated season for LA corn launch product for Brazil traits 2008 to 2012 Projected branded corn share gains globally 11
    • U.S. CORN DEKALB and ASI Share Growth Ahead of Original Plan – 2008 Milestones Reinforce Acceleration DEKALB AND ASI U.S. CORN SHARE EVOLUTION: U.S. Corn 2001-2008F GEOGRAPHY: U.S. 30% OBJECTIVE: Grow footprint 25 - 26% 2008 STATUS 25% • DEKALB brand expected to gain 2- 3 points in 2008 for 23% 20% total share of 25-to-26 20% percent in U.S. 15% • ASI expected to gain 1-to-2 16% 10 - 11% share points organically in 14% 9% 13% 2008 season 10% 12% 2012 OUTLOOK 10% 5% • DEKALB to grow share 4% 5% through 2012 by up to 10 points cumulatively from 0% 2007 share of 23 percent 2001 2002 2003 2004 2005 2006 2007 2008F • Continued organic share growth in ASI DEKALB Brand Share – U.S. ASI Share – U.S. 12
    • INTERNATIONAL CORN Monsanto Expected to Gain Corn Share in Argentina and Hold Share in Brazil; Retaining Leadership in Both Markets International Corn Argentina & GEOGRAPHY: Brazil LATIN AMERICA: SEED FOOTPRINT Expand ARGENTINA BRAZIL OBJECTIVE: international 2007 2008F 2007 2008F footprint 2008 STATUS (06/07 SEASON) (07/08 SEASON) (06/07 SEASON) (07/08 SEASON) HYBRID MARKET • Expected to grow 5 share 8M1 10M1 23M 27M SIZE points in a market that is 25 percent larger than in 2007 in Argentina MONSANTO 40% 45% 40% 40% • DEKALB and Agroeste SHARE combined are forecasted AVG. RETAIL to be flat with 2007 in PRICE FOR Brazil, delivering on our DEKALB HYBRID goal to stabilize share $23/ac $29/ac $29/ac $34/ac CORN SEED 2012 OUTLOOK • Target 1-to-2 share points of growth annually through 2012 13 1. Source: KLEFFMANN Marketing Services
    • U.S. CORN 2008 Triple Penetration Ahead of Expectations – Reinforcing Continued Opportunity and Setting Stage for SmartStax U.S. CORN TRAIT OPPORTUNITY: 2005-2010F 60 220 200 U.S. TRIPLE-STACK ACRES 50 180 U.S. TRAIT ACRES (IN MILLIONS) 160 (IN MILLIONS) 40 140 120 30 100 80 20 60 40 10 20 0 0 2008F 2005 2006 2007 2008 2010F 2010 2007 ORIGINAL Q2 Opportunity OUTLOOK UPDATE Rootworm Control 45-55M 20.8M 26-28M 27-29M Corn Borer Control 60-70M 42.4M 40-42M 40-42M Glyphosate Tolerance 80M 57.9M 63-65M 65-67M Triple Stack 17.6M 25-27M 26-28M 45-55M Trait acres reflect the total acres planted with each individual trait. In the case of stacked traits, each absolute acre will be reflected by two or more trait acres. 14
    • INTERNATIONAL CORN With Two Recent Approvals, New Growth Opportunity Exists For Corn Traits in Latin America International Corn LATIN AMERICA: TRAIT OPPORTUNITY Argentina & GEOGRAPHY: Brazil ARGENTINA BRAZIL OBJECTIVE: Trait Penetration 2008 STATUS APPROVED • YieldGard Corn Borer • Roundup Ready Corn 2 TRAITS • Roundup Ready Corn 2 with YieldGard Corn Borer • YieldGard Corn Borer • YieldGard Corn Borer + stack received regulatory Roundup Ready Corn 2 approval in Argentina end Stack of August 2007 RECENT Granted approval for Granted first corn trait DEVELOPMENTS • YieldGard Corn Borer stack in August 2007 approval in February 2009 OUTLOOK received regulatory Seed production 30-40% of DEKALB seed underway for 1-2M approval in Brazil from will be double-stack commercial acres of CTNBio and CNBS YieldGard corn • Hybrid registrations just TRAIT RETAIL On par with U.S. On par with U.S. PRICING received, opening door for seed production CORN BORER 7M 15-20M OPPORTUNITIES CONTROL 2012 OUTLOOK 2010 TRAIT GLYPHOSATE 9M 15-20M • Increasing trait penetration TOLERANCE sets the stage for ROOTWORM 5M 5M SmartStax introduction CONTROL 15
    • SOYBEANS Roundup Ready 2 Yield on Track for 2009 Controlled Commercial Release of One to Two Million Acres ROUNDUP READY 2 YIELD SOYBEANS: Soybeans LAUNCH PLANS GEOGRAPHY: U.S. U.S. Full-Scale 2nd-Gen OBJECTIVE: Launch Target: Launch P R O JE CT 5- 6M Acres 2008 STATUS U.S. Controlled • Consistent 7-to-11 Commercial Release Target: percent yield advantage 1- 2M Acres with Roundup Ready 2 Yield versus Roundup Grower level marketing, awareness and trial Ready • U.S., Canadian and Licensee breeding Japanese approvals Industry coordination and communications received; awaiting key • American Soybean Association and key agri-food export approvals from stakeholders China, Mexico and Europe PRICING Pursuit of export approvals in China, Europe and Mexico – JAPAN RECEIVED • Yield improvement shared with grower using a multi- Branded and licensed seed production year soybean commodity 2007 2008 2009 2010 price 16
    • Reconciliation of Non-GAAP Financial Measures Reconciliation of Free Cash Flow Fiscal Year 2008 Fiscal Year 6 Months Ended 6 Months Ended $ Millions Forecast 2007 Feb. 29, 2008 Feb. 28, 2007 Net Cash Provided (Required) by Operations $2,450 $1,854 $1,877 $520 Net Cash Provided (Required) by Investing Activities (1,150) (1,911) (404) (230) Free Cash Flow $1,300 ($57) $1,473 290 Net Cash Provided (Required) by Financing Activities N/A (583) (142) (200) Effect of Exchange Rate Changes on Cash and Cash Equivalents N/A 46 88 15 Net Increase (Decrease) in Cash and Cash Equivalents N/A ($594) $1,419 $105 Reconciliation of Non-GAAP EPS Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year $ per share 2008F 2007 2006 2005 2004 Net Income (Loss) per Share $3.38 - $3.48 $1.79 $1.25 $0.47 $0.50 Cumulative Effect of Change in Accounting Principle - - $0.01 -- -- $3.38 - $3.48 $1.79 $1.26 $0.47 $0.50 Diluted Earnings (Loss) per Share Before Effect of Accounting Change Solutia Claim Settlement ($0.23) -- Tax Charge on Repatriated Earnings -- $0.04 -- -- -- Seminis In-Process R&D -- -- $0.38 -- -- Solutia-Related Charge -- -- $0.32 -- -- Tax Benefit on Loss from European Wheat and -- -- $(0.19) -- Barley Business Restructuring Charges -- Net -- -- -- $0.01 $0.18 1 -- -- Loss (Income) on Discontinued Operations ($0.13) $0.05 -- Impairment of Goodwill -- -- -- -- $0.12 In-Process R & D Write-Off Related to the Delta & Pine Land -- $0.34 -- -- -- (D&PL) Acquisition $1.30 $3.15 - $3.25 $2.00 $1.04 $0.80 Diluted Earnings (Loss) per Share from Ongoing Business Note: EPS figures reflect the stock split effective July 28, 2006 17 1. The operating results of Stoneville and Nexgen have been conformed to discontinued operations for all relevant years presented.