monsanto 05-08-06
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monsanto 05-08-06

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monsanto 05-08-06 monsanto 05-08-06 Presentation Transcript

  • Investor Day Transforming an Industry Mark Leidy EXECUTIVE VICE PRESIDENT, GLOBAL MANUFACTURING May 8, 2006 1
  • The Basic Structure of a Corn Plant CONCEPT 1 How is corn seed produced? SEED PRODUCTION FIELD FARMERS’ PRODUCTION CORN PLANT (MONSANTO) FIELD (GRAIN PRODUCTION) TASSEL SILK EAR STALK ROOTS DEFINITION: HYBRID DEFINITION: INBRED A TYPE OF CORN PRODUCED BY BREEDING TWO INBREDS. HYBRIDS AN INBRED, OR PARENT LINE, IS A HAVE THE BENEFICIAL ATTRIBUTES TYPE OF CORN USED TO PRODUCE OF THE INBREDS, SUCH AS BETTER HYBRID SEED YIELD, DISEASE RESISTANCE OR STALK STRENGTH. 2
  • The Process of Creating Corn Hybrids in the Field CONCEPT 1 How is corn seed produced? STEP 2 STEP 3 STEP 5 STEP 6 STEP 4 STEP 1 GROW AND IN FIELDS IN PLANT MALE REMOVE THE MALE REMOVE MALE HARVEST OTHER INBRED AT A TASSELS POLLINATES INBREDS FOR MATURE LOCATIONS, 1:4 RATIO FROM MALE THE FEMALE INCREASED FEMALES BULK UP INBRED TO INBRED TO FEMALE FOR NEW MALE AND CREATE CREATE GROWTH HYBRIDS FEMALE FEMALES HYBRID CORN INBREDS SEED 3
  • Advanced Planning Can Help Improve Speed to Market, Translate to Competitive Advantage CONCEPT 1 How is seed corn produced? SAMPLE TIMELINE RESEARCH INBRED HYBRIDS R&D HAND-OFF SEED PARENT PARENT SEED HYBRID FIELD HYBRID SEED FINISH AND PARENT SEED PURITY INCREASE PRODUCTION HARVEST DELIVERY 12 / 2004 3 / 2005 2 / 2006 4 / 2006 9 / 2006 12 / 2006 20 EARS 2 UNITS 650 UNITS 50,000 UNITS 50,000 UNITS CUSTOMER PARENT SEED EQUIVALENT EQUIVALENT CORN SEED CORN SEED FULFILLMENT SCALE OF PRODUCTION COST-INFLECTION POINT: PRODUCTION COST RISES CONSIDERABLY ONCE A COST OF HYBRID, OR SKU, REACHES THE BULK-UP PHASE. PRODUCTION 4
  • Global Supply Chain Redesign and Disciplined Manufacturing Management Improve Seed Production CONCEPT 2 What has Monsanto done to increase our competitive position in production? Monsanto’s capital investments and THEN NOW best-in-class operational capabilities have transformed seed production by One 10 improving… Company Companies 72 Sites 138 Sites Upgraded Aged Facilities Facilities Cost Management Latest Traditional Technology Technology Portfolio Use Six Independent Management Sigma® Supply Chains Applied Production Quality Conventional Technology Seed Farming 5 Six Sigma® is a registered service mark and trademark of Motorola, Inc.
  • Like the Chemistry Business, Cost Management Process in Seed Production Identifies Opportunities CONCEPT 2 What has Monsanto done to increase our competitive position in production? THIS CYCLE, BORROWED FROM THE Top Five Cost CHEMISTRY BUSINESS, CAN Opportunities are: SYSTEMATICALLY IMPROVE SEED Cost PRODUCTION Management Field Production Yield TRACK METRICS Facility production yield Portfolio IMPROVE FOCUS Management RESOURCES ON Product advancement OPPORTUNITIES People productivity Quality Inventory and SKU EXPENDITURES EVALUATE FOR MEASURED BY management OPPORTUNITY DOLLARS SCREEN EXPENDITURES FOR VALUE CONTINUOUS IMPROVEMENT 6
  • Leveraging Technology to Move Seed Production Into 21st Century CONCEPT 2 What has Monsanto done to increase our NA SEED PRODUCTION competitive position in production? IMPROVED DETASSELING EFFICIENCY GROWER SELECTION PROCESS Use technology to select seed growers Sterilize female inbreds’ tassles Production % Sterile Cost Management Portfolio 2000 2001 2002 2003 2004 2005 Management IMPROVED POLLEN EFFICIENCY FEMALE POPULATIONS INCREASED Flaming to widen pollen duration Maximize the use of assets Quality NA Production Yield 1993 - 2005 160 1993 = 100% % of Target 80 0 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 7
  • Six Sigma® and Other Continuous Improvement Have Improved Field Performance and Reduced Cost in North America by More Than 30% CONCEPT 2 What has Monsanto done to increase our competitive position in production? Increase Populations of female parents/acre by reducing spacing between rows Reduced variability of seed planting Cost equipment using Six Sigma tools Management Assure pollen timing of the male occurs when female silk is receptive Portfolio BEFORE SIX SIGMA Management Quality THE RESULT OF ROW OPTIMIZATION IS SEEN ABOVE ON THE RIGHT. ROW SPACING WAS SHIFTED FROM 30 INCHES TO 20-INCHES. AFTER SIX SIGMA 8
  • Six Sigma® and Other Continuous Improvement Have Improved Field Performance and Reduced Cost in North America by More Than 30% CONCEPT 2 What has Monsanto done to increase our competitive position in production? SEED SPACING AND ROW WIDTH IMPROVEMENTS 10-ACRE PLOTS (FIXED COSTS) THEN: Use of this model in Monsanto corn Cost seed operations Management can benefit Genetics Portfolio Management NOW: Steriles Row Width Seed Spacing Quality Uniformity Grower Selection USING FIELDS MORE EFFECTIVELY THROUGH CAREFUL PLANTING CAN Pollination Efficiency RESULT IN APPROXIMATELY 30 PERCENT MORE PLANTS PER ACRE WITH BETTER YIELD 9
  • Carefully Managing Trait and Genetic Offerings Reduces Portfolio Complexity CONCEPT 2 What has Monsanto done to increase our competitive position in production? Corn shelf life is 3 to 5 years Production planning and forecasting helps minimize obsolescence and maximize portfolio “freshness” Cost 200% Management 3 TRAITS ON 1 HYBRID LINE ADDS 7 NEW SKUs Portfolio SKU POTENTIAL PERCENT OF TARGET Management WITH TRAITS 100% ACTUAL Quality SKU RED ZONE REPRESENTS COUNT THE GOAL IN PRODUCTION AND SALES FORECAST VARIABILITY, AND THE IMPORTANCE OF ZONE BASED PRICING 0% 2002 2003 2004 2005 VOLUME SOLD / VOLUME PRODUCED 10
  • As Portfolio Evolves Toward Stacked Traits, We Can Produce Fewer Products on Seed Grower Acreage CONCEPT 2 What has Monsanto done to increase our competitive position in production? S IN G L E S DOUBLES T R IP L E SKUs 60 250 ACRES IN MILLIONS 50 200 SKU COUNT 40 150 Cost 30 Management 100 20 50 10 Portfolio Management 0 0 2001 2002 2003 2004 2005 2006 Quality SKU SKU A B SKU Unproductive Area A REDUCING SKUs ALLOWS SKU SKU MONSANTO C D TO USE PRODUCTION FIELDS MORE Border Rows Border Row EFFECTIVELY HYPOTHETICAL SEED FACTORY 11
  • Ensuring Production Quality and Consistency Improves Farmer Yield CONCEPT 2 What has Monsanto done to increase our competitive position in production? GENETIC GAIN Testing programs assure trait purity of FROM IMPROVED PERFORMANCE COLD TEST QUALITY: products Monsanto advances into SEED QUALITY IS AT production PEAK IN THE FIELD, SO THE OBJECTIVE IS Quality checkpoints in trait TO MINIMIZE EROSION development process control the OF SEED QUALITY, presence of traits other than those of WHICH CAN NULLIFY Cost BREEDING GAINS interest Management Research shows significant increase in HARVEST PACKAGING emergence over all maturity groups vs. Portfolio competitor Seed Quality Measured by Emergence Management The result (right) is continued satisfaction improvement in quality, 100 Monsanto compared to the competition Leading Competitor Quality 95 (IN PERCENT) EMERGENCE 90 85 RM<96 RM 96-105 RM 106-112 RM>113 RELATIVE MATURITY 12
  • World Class Seed Production Yields Significant Improvement in Gross Profit CONCEPT 3 What are the result so far? NA Varieties/Trait Options 2000 - 2005 NA Production Yield 1993 - 2005 8 YG on female 160 f ar ei s #o v r i t e #o o t o s f pi n 1993 = 100% % of Target 5 80 2 '01 '02 '03 '04 '05 0 Varieties T raits Options '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 Seed Quality Measured by Emergence NA Production Unit Cost 2000 - 2005 100 Monsanto 100% Leading Competitor $71M (IN PERCENT) 95 EMERGENCE 2000 = 100% 90 85 50% RM<96 RM 96-105 RM 106-112 RM>113 RELATIVE MATURITY FY00 FY01 FY02 FY03 FY04 FY05 13
  • Paired With Great Breeding, Monsanto’s Seed Production Capability Is Helping Boost Our Commercial Opportunity U.S. CORN MARKET SHARE 60% 2006 50% FRONTLINE UPDATE: ASGROW AND 40% DEKALB AND ASI BRANDS 30% ARE EXPECTED TO GROW MARKET 20% SHARE IN 2006 10% 0% 2001 2002 2003 2004 2005 2006F DEKALB AND ASGROW AMERICAN SEEDS, INC. HOLDEN’S/CORN STATES 14