monsanto 09-18-07


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monsanto 09-18-07

  2. 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, including proceedings related to Solutia Inc.; developments related to foreign currencies and economies; successful completion and 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. © 2007 Monsanto Company 2
  3. 3. OVERVIEW Market Forces Are Changing Agricultural Production Trends Globally MACRO PRODUCTION TRENDS OVER THE NEXT DECADE: CORN, SOYBEANS, COTTON, VEGETABLES Biodiesel drives oilseed demand in Expanding ethanol and Europe export demands favor U.S. Growing wealth and as low-cost corn producer; population in Asia vegetable consumption creates new demand continues to grow for imported grain and vegetables Biggest increases in U.S. ramps up production of cotton acreage come in corn; Soy crop becomes Asia, with U.S. focused on increasingly focused on quality and consistency of higher-value segments over supply commodities Brazil exploits land Argentina leverages availability advantage to geographic proximity to become commodity soy supply corn to Latin producer to meet demand America from China 3
  4. 4. OVERVIEW Monsanto Uniquely Positioned to Maximize Growth in Shifting Ag Market GROSS MARGIN OPPORTUNITY MONSANTO’S OPPORTUNITY GROSS PROFIT AS A PERCENT OF SALES 54% Delta between 2006 gross margin and a 52-54% trajectory reflects continued GROSS MARGIN ‘PULL’ growth opportunity for seeds and traits 52% FACTOR U.S. corn 50% International corn Global biotech traits 48% CURRENT LEVEL Cotton platform 46% Seminis R&D pipeline 44% 2003 2004 2005 2006 2007F 2008F 2009F 2010F 4
  5. 5. U.S. CORN By Delivering Better Yielding Products, DEKALB Has More than Doubled Share in Six Years DEKALB U.S. CORN SHARE EVOLUTION: 2001-2007F 25% 2007 STATUS • Share gain of 4-5 points 23-24% 20% expected for 2007 season U.S. SHARE • Farmers continue to cite 19% 15% DEKALB’s superior yield 16% 14% as primary driver 13% 10% • Continue to plan for 1-2 12% 10% point share gains per year 5% in DEKALB through end of decade 0% 2001 2002 2003 2004 2005 2006 2007F UPDATED MONSANTO 2007 FORECAST TRAIT END-OF-DECADE ACRE TRAIT CATEGORY TRAIT ACRES OPPORTUNITY OFFERING CIRCA JUNE 2007 CIRCA 2007 (IN MILLIONS OF ACRES) GLYPHOSATE- Roundup 55-56M 80M TOLERANT CORN Ready Corn 2 CORN-BORER YieldGard 41-42M 60-70M CONTROL Corn Borer ROOTWORM YieldGard 21-22M 45-55M CONTROL Rootworm 117-120M 185-205M 5
  6. 6. PRODUCT CONCEPT First-Ever Eight-Gene Stack Leapfrogs Competitive Products, Boosting Performance, Creating New Value for Farmers SmartStax SmartStax is in proof-of- concept testing, establishing: Anatomy of first-ever eight-way gene platform Feasibility of full trait integration TRAIT GENES FUNCTION STATUS Viability of enhanced performance for insect YieldGard VT Triple PRO Pending Regulatory Review and weed control COMPONENTS Below-Ground Insect Control YieldGard VT Rootworm/RR2 1 Commercial PRIMARY: ROOTWORM 2ND-GENERATION ROOTWORM CONTROL Roundup Ready 2 Technology Weed Control VIA YIELDGARD VT ROOTWORM/RR2 1 Commercial MODE: GLYPHOSATE YieldGard VT PRO PHASE IV 2ND-GENERATION YIELDGARD CORN Above-Ground Insect Control 2 BORER PRIMARY: CORN BORER Pending Regulatory Review Herculex XTRA SMARTSTAX CORN PLANTED COMPONENTS IN WESTERN IOWA, SHOWING FULL, HEALTHY EARS AND STRONG, HEALTHY ROOTS Above-Ground Insect 1 Herculex I Commercial Control PRIMARY: CORN BORER Below-Ground Insect 2 Herculex RW Commercial Control PRIMARY: ROOTWORM Weed Control 1 Liberty Link Commercial MODE: GLUFOSINATE • Application for EPA Multiple modes of SmartStax registration to be submitted action for above- and Industry-Standard Trait • On track for end-of-decade below-ground insect Platform1 commercialization in U.S., and weed control with global roll-out following 1. This product has not been registered by the U.S. Environmental Protection Agency. It is a violation of federal law to promote or sell an unregistered pesticide. 6
  7. 7. INTERNATIONAL CORN Expansion of Corn Market Share Sets Stage for Corn Traits Internationally INTERNATIONAL MARKET OPPORTUNITY: CORN1 SEED ROUNDUP YIELDGARD YIELDGARD Global Biotech OUTLOOK MARKET READY CORN 2 CORN BORER ROOTWORM SHARE Traits • YGCB received initial SITUATION: 30% 15-20M 5M 15-20M Brazil regulatory approval • “Footprint” • YGCB/RR stacked product 40% 9M 5M 7M established by Argentina approved; potential FY2009 launch Monsanto’s corn market share growth • YGCB and RR received 39% 6M - 6M India approvals for field trials globally establishes • YGCB planting on small the base to launch 13% 24M 5M 8M Europe(EU27) acres in 7 countries in traits as they earn 2007 regulatory approvals • YGCB and RR are OUTLOOK: 51% 6M 4M - South Africa commercial on small acres, moving to stacks • Corn traits outside Total U.S. have significant 40-45M 60-65M 15M International opportunity for Markets penetration 3% 0% 16-18% YGCB=YieldGard Corn Borer BIOTECH YGRW=YieldGard Rootworm ACRES RR = Roundup Ready Corn 2 PLANTED 2007 REMAINING AVAILABLE ACRES 1. Market Opportunity reflects total acres where technology is applicable, not necessarily acres projected for penetration by 2010. 7
  8. 8. GLOBAL BIOTECH TRAITS Roundup RReady2Yield Soybeans Signal Emerging Platform of New Stacked Soybean Products KEY MARKET ACRES U.S. BRAZIL ARGENTINA ROUNDUP RREADY2YIELD AVAILABLE MARKET 70M 50-60M 35M SOYBEANS PERCENT PENETRATED 0% 0% 0% P R O JE CT R&D Pipeline HIT Project ROUNDUP RREADY2YIELD SOYBEANS SITUATION: Phase IV 2007 STATUS: • Roundup RReady2Yield soybeans have completed regulatory process in the United States and Canada • Three years of field comparisons show a yield advantage of 7-to-11 percent compared with its first- generation Roundup Ready counterpart VALUE CONSIDERATIONS: • Value created through yield gains will be shared with farmer as has been Monsanto’s historical practice • Roundup Ready2Yield will become preferred platform for host of new soybean traits for yield, quality and ease of farming • To be stacked with insect traits protection for exclusive Latin American market RETAIL VALUE/ACRE: >$10 - <$30/acre 8
  9. 9. COTTON PLATFORM Cotton Breeding Is Today Where Corn Was In Late 1990s; Huge Opportunity to Bolster Yield Ahead COTTON TREND Greece U.S. (9) Cotton must become more profitable for farmers – boosting yields is key NEED India Costa Rica (3) Boost yield returns per acre Brazil Australia SOLUTIONS Breeding Programs South MOLECULAR Testing Programs IN PROCESS Africa BREEDING FOCUS Winter Nurseries COTTON BREEDING STATUS: 2007 RESOURCES CAPABILITIES OUTLOOK • ‘Jumpstart’ of up to 3 years World’s largest Zeroing in on drought, over corn in 1990s because private cotton fiber quality, lint yield infrastructure is in place: breeding program and disease resistance • Labs, IT and markers are New, novel targets: ready to go; “Plug-and-Play” Diverse germplasm opportunity base can lead to genetic • Largest marker collection in pairings that greatly the world benefit farmers 9
  10. 10. SEMINIS Four Growth Drivers Enrich Seminis Gross Profit Contribution Through 2012 SEMINIS GROWTH DRIVERS Seminis SITUATION: Four growth drivers build on the strength of the existing business and begin to leverage the capability Monsanto brings to Seminis to generate growth • In 2006, narrowed commercial through the end of the decade and research focus to 25 crops that generate the most profit Increase price of existing portfolio and • Began application of breeding PRICE new products launched on basis of value technology, with a target of created and shared with the grower 1,000+ markers each for 9 crops by 2009 Increase share in higher value segments OUTLOOK: MARKET SHARE via shifts to protected culture and • Through end of decade, MIX disease resistance products post 2010 Seminis grows through current offerings – via price and improved market share mix – Develop and launch products into high NEW PRODUCT and pipeline opportunity – with value segments with a focus on disease LAUNCHES new product launches resistance, protected cultures and yield Accelerate pipeline product launches PIPELINE through the use of new molecular ACCELERATION breeding tools 10
  11. 11. R&D PIPELINE Pipeline Has Some Likely Blockbusters and Some Hidden Gems ANNUAL R&D CYCLE: SEEDS & TRAITS BIOTECH TRAIT PIPELINE SOYBEANS ARE EMERGING FROM CORN’S SHADOW Roundup RReady2Yield creates platform for future First product developed exclusively for an ex-US market will be in soybeans Soybeans could be a 3+ stack by middle of next decade COTTON POTENTIAL TO BE UNLOCKED Q1 Q4 Second-generation stacked products to accelerate globally Q2 Q3 Cotton could be a 3+ stack by middle of next decade YIELD AND STRESS POTENTIAL EXPLODING Drought tolerance in corn expected to be first of a rapid series of blockbuster traits BREEDING PIPELINE BREEDING ENGINE FIRING ON ALL CYLINDERS At a greater pace than ever before, new breeding tools are being applied across all platforms and resulting in breakthrough products 11
  12. 12. R & D PIPELINE Family of Drought-Tolerant Corn Products to Create Differentiated Value Across Multiple Market Segments KEY MARKET ACRES U.S. BRAZIL ARGENTINA EUROPE Drought-tolerant AVAILABLE MARKET 90M 20-25M 10M 24M corn PERCENT PENETRATED 0% 0% 0% 0% P R O JE CT R&D Pipeline HIT Project Drought-tolerant corn SITUATION: Phase II 2006 STATUS: • Lead events consistently delivered yield improvements compared with controls in water stressed conditions, with yield advantage of up to 12 bushels per acre in Chilean locations • Currently in fifth season of U.S. field testing; significant expansion in number of locations, test environments and germplasm backgrounds VALUE CONSIDERATIONS: • Value of trait reflects better yields under moisture- stressed conditions; varies by region • Value will be specific to variable costs of water use by farmers, not fixed costs of irrigation IRRIGATED DRYLAND STABILITY • Corn needs 18-to-20 inches of moisture during the Irrigated Non-Irrigated Non-Irrigated growing season Value is in Value is in Value is in RETAIL VALUE/ACRE: $10 - $30/acre replacing improved yields improved yields TOTAL ACRE irrigation, reducing annually, by when moisture is 144M-149M acres OPPORTUNITY: variable costs of improving water- less than optimal irrigation use efficiency 12
  13. 13. SUMMARY Fueled By Seeds-and-Traits Business Performance, Monsanto Has Created an Unparalleled Platform for Continued Growth SOURCES OF CASH USES OF CASH $3,000 CUMULATIVE: 2004-2006 CUMULATIVE: 2004-2006 ACQUISITIONS WORKING CAPITAL SEEDS & GENOMICS $2,500 CAGR 2002-2006: 34% CAPITAL EXPENDITURES NET INCOME TECHNOLOGY AND OTHER INVESTMENTS $2,000 ANNUAL GROSS PROFIT ($ IN MILLIONS) $860M $1,500 $1.8B $1.3B $1.2B $270M $1,000 AGRICULTURAL PRODUCTIVITY CAGR 2002-2006: (8)% $500 KEY INFLECTION POINT: IN 2003-2004, CASH GENERATION AND USES GROSS PROFIT FOR SEEDS & GENOMICS BUSINESS SEGMENT SURPASSED Between 2004 and 2006, much of the cash AGRICULTURAL PRODUCTIVITY generated from working capital $0 improvements was used to fund key 2002 2003 2004 2005 2006 acquisitions 13