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monsanto 09-16-08b

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  • 1. TERRY CREWS CHIEF FINANCIAL OFFICER BANK OF AMERICA 38th Annual Investment Conference Sept. 16, 2008 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 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
  • 3. OVERVIEW Monsanto’s Growth Opportunity Lies at the Intersection of Demand, Innovation and Execution Monsanto’s Simple Philosophy on Opportunity:  More demand requires more YIELD  More yield requires more INNOVATION  More innovation delivers more GROWTH 3
  • 4. OVERVIEW Wrap-Up to Exceptional 2008 Demonstrates Strength in Core Business and Outlook on Continued Growth Through 2012 2012 GROSS PROFIT TARGET RELATIVE TO 2007 BASELINE GROSS PROFIT OUTLOOK BY SEGMENT >2x Total Gross Profit 2007-2012F BUSINESS DETAIL Roundup and Other All Other Agricultural Productivity $10,000 Glyphosate-Based ~$1.8B Roundup and Other Glyphosate-based Herbicides Herbicides Seeds & Genomics $8,000 All Other Ag Productivity Roughly flat at $350M $6,000 >2x Seeds & Genomics $4,000 2.5x Corn Seeds & Traits GROWTH COMES FROM ~2x Soybean Seeds & SEEDS & $2,000 TRAITS Traits ~2x Cotton Seeds & Traits $0 2007 2008F 2012F >2x 2007 2008F 2012F Vegetable Seeds 2008 Seeds & Genomics to be ~$3.8B, up from prior $3.7B guidance 4
  • 5. OVERVIEW Gross Profit Growth Comes From Two-Step Strategy: Establish Seed Footprint, Then Layer on Biotech Traits BREEDING BIOTECH TRAIT 3 R&D TRAIT 2 SEED ENGINE TRAIT 1 SEED  Establish Seed Footprint  Add Biotech Traits • Seed provides a core gross-profit • Higher margins than seed with contribution minimal incremental cost of goods  STRATEGIC VALUE  • Seed footprint speeds penetration • Opportunity to stack multiple traits rate of biotech traits per acre • Access to global germplasm • Proven, commercial-driven R&D pools combined with most program backed by industry’s  DIFFERENTIATORS  advanced breeding technology largest seed-and-trait R&D spend creates seed that outperforms • Collaborator of choice competitors • New trait introductions  MEASURES OF SUCCESS  • Seed share growth • Trait upgrade and trait platform opportunity Corn: U.S., Argentina, Brazil, Europe, Central America Corn: U.S., Argentina, Brazil Soybeans: U.S.  KEY CROPS & GEOGRAPHIES  Soybeans: U.S., Brazil Cotton: U.S., India Cotton: U.S., India, Australia Vegetables: Global 5
  • 6. CORN SEEDS & TRAITS Corn Gross Profit to Expand 25-30% in 2009, Reflecting Continuing Momentum in Seed Share and Trait Penetration CORN SEEDS AND TRAITS: KEY FINANCIAL METRICS AND DRIVERS – 2005-2008F CORN FINANCIAL OUTLOOK $3,500 64% Gross Profit as Percent of Sales  For 2009, Corn Seeds & >$3.5B $3,000 62% Traits gross profit is forecast to be up 25-30% $2,500 60%  Absolute gross profit is $1,000s increased by growing seed $2,000 58% >$2.1B share, increasing trait $1,721 $1,500 56% penetration and increasing prices $1,000 54% $1,019  Margin increases by $825 $500 52% increasing mix toward traits 2009 DRIVERS $0 50% 2005 2006 2007 2008F  Increasing triple-stack penetration in U.S. combined Net Sales Gross Profit Gross Profit as Percent of Sales with stronger trait pricing  Launch of new traits in Argentina and Brazil 6
  • 7. CORN SEEDS & TRAITS U.S. DEKALB Share Consistently Ahead of Expectations; Growth Trend Continues in 2009 DEKALB U.S. CORN SHARE EVOLUTION: CORN 2001-2009F FINANCIAL OUTLOOK  Three years of growth since 28% 2005 have outpaced average GROW 26% target each year 2%+ >25% 24%  2009: Trend continues with early commitment for 23% 22% accelerated growth in 20% DEKALB and ASI 2009 DRIVERS 19% TARGET 18% 2+ U.S. DEKALB Share 16%  2005 PROJECTED 16% +1 AVERAGE GROWTH U.S. ASI Share 14% TREND 14% TRAIT TARGETS 13% 12% U.S. Triple-Stack 10% 12% 34-35M Penetration 10% 2001 2002 2003 2004 2005 2006 2007 2008F 2009F 1.4 1.5 1.7 1.9 2.2 >2.4 ~2.5 DEKALB Trait Penetration Trend: 2003-2009F Average Number of Traits Per Acre in DEKALB Seed1 1. Trait intensity reflects the average number of traits per acre with at least one trait 7
  • 8. CORN SEEDS & TRAITS Larger Seed Footprints in South America Enable Larger Launches and Faster Ramp Up Than Competition LATIN AMERICAN CORN LATIN AMERICA NORTH OUTLOOK: CURRENT 5-YEAR OUTLOOK #1 position in all key SEED & TRAIT TRENDS THROUGH 2012   SEED SHARE: countries 7-8M MEXICO  HYBRID ACRES: In approval stage  BIOTECH STATUS: HONDURAS GUATEMALA • Integration of Cristiani; Expand seed footprint for FY2009 PRIORITIES: EL SALVADOR pending trait introductions COLOMBIA BRAZIL CURRENT 5-YEAR OUTLOOK 40% (#1 position)   SEED SHARE: BRAZIL PERU 27M  HYBRID ACRES: 1st commercial trait in BIOTECH  FY2009 STATUS: • Targeted share gain: 1-2 points FY2009 PRIORITIES: • 1-2M acre launch of YieldGard Corn Borer ARGENTINA ARGENTINA CURRENT 5-YEAR OUTLOOK 45% (#1 position)   SEED SHARE: 10M  HYBRID ACRES: Commercial planting  BIOTECH STATUS: • Targeted share gain: 1-2 points FY2009 PRIORITIES: • 1-2M acre launch of YieldGard Corn Borer with Roundup Ready Corn 2 stack 8
  • 9. SOYBEAN SEEDS & TRAITS Soybean Seeds and Traits Poised for Renaissance Driven By Roundup Ready 2 Yield Opportunity SOYBEAN SEEDS AND TRAITS: KEY FINANCIAL METRICS AND DRIVERS – 2005-2008F SOYBEANS FINANCIAL OUTLOOK $1,200 70% Gross Profit as Percent of Sales >$1.1B  For 2009, Soybean Seeds & 60% Traits gross profit is forecast $1,000 to be up ~5% 50% $800  Performance more subject to $1,000s 40% planted acres because of >$700M $667 $600 significant trait penetration $613 $588 30%  In 2009, lower acres and $400 higher production cost for 20% seed still prominent $200 10%  Beyond 2009, Roundup Ready 2 Yield creates new margin $0 0% opportunity as acres expand 2005 2006 2007 2008F 2009 DRIVERS Net Sales Gross Profit Gross Profit as Percent of Sales  Focus on 1-2M acre controlled commercial release of Roundup Ready 2 Yield 9
  • 10. SOYBEAN SEEDS & TRAITS Roundup Ready 2 Yield Soybeans Is One Of the Most- Anticipated Launches Because of Step-Change In Yield ROUNDUP READY 2 YIELD SOYBEANS: SECOND-GENERATION WEED CONTROL OPPORTUNITY U.S. SOYBEANS Near-Isoline Comparisons: Roundup Ready 2 Yield vs. Roundup Ready 2007 U.S. AVERAGE 41.6 bu YIELD PER ACRE: % Yield Increase over Roundup Ready 12% ROUNDUP READY 2 YIELD TARGETED YIELD 7-11% 11% 10% IMPROVEMENT: 9% 9% 8% VALUE PROPOSITION 7% 7% 6% YIELD 3-5 bu/ac IMPROVEMENT ON AVERAGE YIELDS: 4% INCREMENTAL YIELD VALUE TO $35-$65/acre FARMER (VERSUS ROUNDUP READY): 2% PRICING SEAMLESS PRICE 0% $69-$72 FOR ROUNDUP 4 YEAR READY 2 YIELD 2004 2005 2006 2007 SEED (PER ACRE)1: AVERAGE SEAMLESS PRICE FOR FIRST-  Roundup Ready 2 Yield soybeans yield 7 to 11 percent GENERATION $49-$52 higher than Roundup Ready soybeans based on 73 ROUNDUP READY SEED (PER ACRE)1: Monsanto field trials from 2004-2007 1. Reflects seamless pricing to farmer, including trait value, germplasm value and value provided by seed treatment 10
  • 11. COTTON SEEDS & TRAITS Continued Application of New Technology Critical to Increasingly Global Opportunity in Cotton GLOBAL COTTON SEED AND TRAITS GROSS PROFIT COTTON INDEX=2007 FINANCIAL OUTLOOK 2012F 2007  With Delta & Pine Land acquisition, lower-margin seed is greater portion of product mix – softening margins  Corn and soybeans have displaced cotton in Deltapine brand’s core U.S. geographies ~2X 2009 DRIVERS  Re-establish U.S. share OVER 2007 INDEX growth, promote second-gen U.S Cotton Seeds & Traits Gross Profit penetration in U.S. and India International Cotton Seeds & Traits Gross Profit 11
  • 12. VEGETABLE SEEDS Vegetable Core Platforms Are Established, Focusing on Execution and Growth To Become $1B Business by 2012 $1,200 VEGETABLES >$1B $1,000 FINANCIAL OUTLOOK >$1B $1,000s $800  By 2012, Vegetable business $600 >$650M >$650M roughly equates to today’s soybean business – currently $400 Monsanto’s second-largest $200 seed-and-trait segment  Sales growth continues in $0 NET GROSS NET GROSS mid-single digits; Margin SALES PROFIT SALES PROFIT grows through pricing, new Vegetable Platform: Soybean Platform: products and increase of 2012F 2008F protected-culture business RANK ORDER GROSS PROFIT When acquired in 2005, GENERATORS: 2012F 2009 DRIVERS Seminis’ annual gross-  Corn Seeds & Traits  Focus on operation and profit contribution was execution of 3-channel  Soybean Seeds & Traits among lowest in Seeds & approach: Seminis open-field, Genomics;  Vegetable Seeds DeRuiter protected-culture, By 2012, Vegetable Seeds and ISG regional brands  Cotton Seeds & Traits will be third-largest seed- and-trait platform  All Other Seeds & Traits 12
  • 13. R&D PLATFORM R&D Engine Is Poised to Launch Average of One Game- Changing Technology Every Other Year Through Mid-Decade R&D PIPELINE: ADVANCED GAME-CHANGING TECHNOLOGIES 2008 2009 2010 2011 2012 TO MID-DECADE      Roundup Drought- Nitrogen- SmartStax Ready 2 Yield Tolerant Corn Utilization Soybeans Family1 Corn Family1 • Second-gen soybean • All-in-one corn trait • Value likely in improved • Targets ways to use trait platform platform yield under stress and nitrogen more efficiently potential for water • Just received China • On track for 2010 launch replacement import approval – on – Submitted for track for 2009 release regulatory review and refuge reduction SUPERIOR, NE - FIELD TRIALS – 2007 FARM PROGRESS SHOW – 2007 WITH GENE CONTROL HYBRID FARM PROGRESS SHOW – 2007 (94 BU/AC) (76 BU/AC) 1. Part of the Monsanto-BASF Yield and Stress R&D Collaboration 13
  • 14. FINANCIAL PERFORMANCE On Track in 2008, Growth Drivers Continue to Set Stage for Growth Through 2012 GROSS PROFIT OUTLOOK BY SEGMENT 2007-2012F $10,000 TOTAL GROSS All Other Agricultural Productivity PROFIT GROWS Roundup and Other Glyphosate-based Herbicides TO >2X $8,000 2007 BASELINE Seeds & Genomics $6,000 $4,000 2008 SEEDS & GENOMICS $2,000 EXPECTED TO GENERATE $3.8B $0 2007 2008F 2009F 2010F 2011F 2012F  U.S. Corn  Int’l Corn  Cotton  Vegetables  R&D Pipeline  Soybeans • Expand seed • Establish and • Prepare for • Accelerate U.S. • Reinvigorate • Largest-ever footprint expand seed commercial traits and margins R&D field footprint launch of breeding effort • Drive trait • DeRuiter Roundup penetration • Drive trait • Drive int’l traits integration Ready 2 Yield penetration SmartStax Accelerated trait Roundup Ready Globalized $1B Vegetable Game-Changing Platform platform 2 Yield Platform Cotton Platform Platform Launches
  • 15. FINANCIAL PERFORMANCE Strong Cash Position Allows Monsanto To Return Value To Shareowners and Extend Its Competitive Lead USES OF CASH PERCENT OF CASH USED BY CATEGORY: 2008F Cash Generation 13% Strong business performance and cash generation allows Monsanto to 40% invest to extend its competitive lead 15% CASH PRIORITIES  Bolster direct returns to shareowners  Support commercial growth through capital spending  Invest in future growth through R&D 32%  Expand the core through strategic acquisitions Acquisitions and Technology Collaborations Capital Spending Dividends Share Repurchase 15
  • 16. SUMMARY Monsanto’s Growth Opportunity Lies at the Intersection of Demand, Innovation and Execution Monsanto’s Simple Philosophy on Opportunity:  More demand requires more YIELD  More yield requires more INNOVATION  More innovation delivers more GROWTH 16

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