monsanto 09-18-2006
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monsanto 09-18-2006 Presentation Transcript

  • 1. TERRY CREWS CHIEF FINANCIAL OFFICER, MONSANTO COMPANY BANK OF AMERICA 36TH ANNUAL INVESTMENT CONFERENCE September 18, 2006 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, including proceedings related to Solutia Inc.; developments related to foreign currencies and economies; successful completion and operation of recent and proposed 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 filings with 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. Mavera™ is a trademark of Renessen. © 2006 Monsanto Company 2
  • 3. OVERVIEW Monsanto Is an Agricultural Company; Our Strategy Is Focused on Helping Farmers Be More Productive We are an agricultural company. We apply innovation and technology to make farmers more productive and profitable by improving the ways they can produce food, fiber and feed. 2005 SALES BREAKDOWN FOCUS: NET SALES SEEDS & GENOMICS 7 6.3 AGRICULTURAL NET SALES ($ IN BILLIONS) 5.4 6 PRODUCTIVITY 4.9 5 4 3 NORTH AMERICA 2 LATIN AMERICA 1 EUROPE-AFRICA 0 ASIA PACIFIC 2003 2004 2005 3
  • 4. OVERVIEW Monsanto’s Strategic and Financial Opportunity Lies In The Seed and Trait Business FOCUS: 12-MONTH ROLLING GROSS PROFIT BY BUSINESS SEGMENT $3,000 SEEDS & GENOMICS SEGMENT AGRICULTURAL PRODUCTIVITY SEGMENT $2,500 12-MONTH ROLLING GROSS PROFIT $2,000 ($ IN MILLIONS) $1,500 $1,000 KEY INFLECTION POINT: MID-2004, THE ROLLING $500 GROSS PROFIT FOR THE SEEDS & GENOMICS BUSINESS SEGMENT SURPASSES AGRICULTURAL PRODUCTIVITY $0 03 3 03 3 04 4 04 4 05 05 05 5 06 06 06 0 00 0 00 00 20 20 20 20 20 20 20 20 20 20 20 20 2 2 2 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 4
  • 5. OVERVIEW Profit Growth Is Reflected Across All Four Seed and Trait Platforms CORN COTTON • DEKALB/ASGROW • PROPOSED DELTA SEED • ASI, INC. AND PINE LAND SEED CHANNELS ACQUISITION CHANNELS • HOLDEN’S/CORN STATES • COTTON STATES • YIELDGARD FAMILY • BOLLGARD FAMILY KEY KEY • ROUNDUP READY • ROUNDUP READY TRAITS TRAITS FAMILY FAMILY BIOTECH AND BREEDING R&D PLATFORM SOYBEANS VEGETABLES • DEKALB/ASGROW • SEMINIS AND SEED SEED • ASI, INC. RELATED BRANDS CHANNELS CHANNELS • HOLDEN’S/CORN STATES • TOMATOES, KEY MELONS, PEPPERS • ROUNDUP READY CROPS KEY FAMILY TRAITS • VISTIVE FAMILY 5
  • 6. COMMERCIAL OPPORTUNITY Six Factors Will Redefine the Game By End of the Decade PERIOD : PERIOD : PERIOD : SEED & TRAITS ESTABLISHED CORN IS ON THE LEADING EDGE THE GAME CHANGES 2003 2004 2005 2006 2007 2008 2009 2010 Commercial viability of seeds Seed and trait growth comes from: penetration, Gross profit opportunity expands and traits established; stacking, multi-generation traits, and breeding with penetration, stacking, and Supporting infrastructure in enhancement. Corn defines the future direction second-generation traits– even as place competition advances THESE SIX FACTORS SHOULD COLLECTIVELY DRIVE GROSS PROFIT THROUGH 2010 1 Growth in the U.S. corn market is not over 2 Growth in international corn market share 3 Biotech traits are advancing internationally Cotton platform creates new opportunities for 4 growth 5 Seminis to capture additional gross margin Next-generation pipeline poised for enhanced 6 commercial delivery 6
  • 7. COMMERCIAL OPPORTUNITY Performance Acceleration Across U.S. Commercial Channels Is Reflected in Market Share Growth GROSS PROFIT DRIVERS U.S. CORN MARKET SHARE Growth in the U.S. corn 1 60% market is not over Growth in international corn 2 50% market share Biotech traits are advancing 3 internationally 40% Cotton platform creates new 4 opportunities for growth 30% Seminis to capture 5 additional gross margin 20% Next-generation pipeline 6 poised for enhanced commercial delivery 10% GROSS PROFIT 0% OBJECTIVES 2001 2002 2003 2004 2005 2006F Grow U.S. national branded seed market share by 1-2 1 HOLDENS/CORN STATES AMERICAN SEEDS, INC. points annually through 2010 LICENSEES BRANDS 2 Grow trait penetration DEKALB AND ASGROW Migrate more of the portfolio BRANDS 3 to multiple-trait, high-margin sales 7
  • 8. COMMERCIAL OPPORTUNITY With the Corn Trait Technology in Hand Today, There’s Opportunity to Double Penetration By End of Decade GROSS PROFIT U.S. CORN TRAIT OPPORTUNITY DRIVERS ROUNDUP YIELDGARD YIELDGARD Growth in the U.S. corn 1 READY CORN BORER ROOTWORM market is not over CORN 2 Growth in international corn 2 2010 market share 60M 50-60M 25-30M OPPORTUNITY Biotech traits are advancing 3 internationally 2006F 33-34M 31-32M 9-10M Cotton platform creates new 4 55% 52% 30% BIOTECH opportunities for growth ACRES PLANTED 2006F Seminis to capture 5 additional gross margin REMAINING Next-generation pipeline AVAILABLE 6 poised for enhanced ACRES commercial delivery GROSS PROFIT FOCUS: OPPORTUNITY OBJECTIVES U.S. TRAIT ACRE OPPORTUNITY: Grow U.S. national branded CURRENT COMMERCIAL seed market share by 1-2 1 By the end of 2006, Monsanto should CORN TRAITS points annually through penetrate roughly half of the market 2010 opportunity with existing biotech traits. 2 This means we have the opportunity to 2006F: Grow trait penetration penetrate another 50% by the end of the Under 50% decade with our current commercial Migrate more of the portfolio penetrated 3 portfolio. to multiple-trait, high-margin to date sales 8
  • 9. COMMERCIAL OPPORTUNITY Stacking Multiplies the Value Opportunity Per Acre GROSS PROFIT DRIVERS AVERAGE U.S. RETAIL VALUE ADDED WITH STACKED TRAITS Growth in the U.S. corn 1 TRAIT RETAIL VALUE ADDED market is not over PER ACRE 3.42 3.5 TRAIT RETAIL VALUE PER Growth in international corn 2 market share 3 Biotech traits are advancing 3 (INDEXED) internationally 2.5 ACRE Cotton platform creates new 4 opportunities for growth 2 1.59 Seminis to capture 5 1.5 additional gross margin Next-generation pipeline 6 1 poised for enhanced DOUBLE TRIPLE commercial delivery STACK STACK GROSS PROFIT 1 = INDEXED VALUE OF SINGLE TRAIT OBJECTIVES Grow U.S. national branded ABSOLUTE U.S. CORN ACRES1 (IN MILLIONS) seed market share by 1-2 1 points annually through 2001 2002 2003 2004 2005 2006F 2010 U.S. SINGLE TRAIT 17.7 23.8 27.3 33.6 30.6 23-24 2 ACRES Grow trait penetration U.S. DOUBLE TRAIT 1.2 2.2 5.1 8.7 13.0 20-21 Migrate more of the portfolio ACRES 3 to multiple-trait, high-margin U.S. TRIPLE TRAIT sales 0 0 0 0 1.3 5-6 ACRES 1. Absolute acres represent the total number of acres with at least one trait. 9
  • 10. COMMERCIAL OPPORTUNITY Monsanto’s U.S. Market Share Gains Poised to Be Replicated in Key International Corn Growing Areas GROSS PROFIT DRIVERS SCORECARD GLOBAL BRANDED MARKET SHARE Growth in the U.S. corn 1 market is not over CHANGE FY2004 FY2005 FY2006F (’04-’06) Growth in international corn 2 NORTH AMERICAN REGION 14% 16% 19% +5% market share UNITED STATES 14% 16% 18% +4% Biotech traits are advancing 3 internationally EUROPE-AFRICA REGION 13% 15% 15% +2% Cotton platform creates new 4 FRANCE 10% 14% 15% +5% opportunities for growth ITALY 14% 17% 21% +7% Seminis to capture 5 additional gross margin HUNGARY 26% 30% 32% +6% Next-generation pipeline 6 TURKEY 17% 23% 23% +6% poised for enhanced commercial delivery SOUTH AFRICA 38% 44% 49% +11% GROSS PROFIT ASIA-PACIFIC REGION 35% 37% 35% FLAT OBJECTIVES INDIA 29% 34% 35% +6% Grow branded seed market LATIN AMERICA REGION 37% 38% 38% +1% share overall internationally 1 by 1-2 points annually MEXICO 58% 57% 60% +2% through 2010 BRAZIL 35% 35% 34% -1% Build strategic alliances and ARGENTINA 35% 37% 35% FLAT establish hybrid licensing to 2 increase genetic footprint for future trait penetration 10
  • 11. COMMERCIAL OPPORTUNITY Biotech Traits Set Up Three Pathways for Mid-Term Growth Internationally GROSS PROFIT DRIVERS EXAMPLE: BIOTECH TRAITS IN EUROPE Growth in the U.S. corn 1 24M acre opportunity for market is not over Roundup Ready Corn 2 and 8M OPPORTUNITY: PENETRATION acres for Yieldgard Corn Borer Growth in international corn 2 AND at the turn of the decade market share EXPANSION CURRENT In 2006, biotech traits were Biotech traits are advancing 3 STATUS: planted in six countries internationally EXAMPLE: BIOTECH TRAITS IN BRAZIL Cotton platform creates new 4 opportunities for growth 20M acre potential for stack of Seminis to capture 5 Insect Resistant Soybeans with additional gross margin Roundup RReady2Yield and OPPORTUNITY: STACKING 15M acre potential for stack of Next-generation pipeline 6 Roundup Ready Corn 2 and poised for enhanced Yieldgard Corn Borer commercial delivery CURRENT Biotech traits in regulatory STATUS: queue GROSS PROFIT EXAMPLE: COTTON TRAITS IN AUSTRALIA OBJECTIVES Roundup Ready Flex with Rapidly penetrate and OPPORTUNITY: Bollgard II stack launches in FY 1 MULTI- expand planting of biotech 2007 GENERATION traits in key countries In 2005-2006 season, over half CURRENT Migrate the portfolio to of all acres with at least one STATUS: multiple-trait, and/or second trait were stacked 2 generation trait, high-margin sales 11
  • 12. COMMERCIAL Market Potential for International Biotech Traits by 2010 Highlights Continued Growth Opportunity GROSS PROFIT DRIVERS 2010 INTERNATIONAL TRAIT OPPORTUNITY Growth in the U.S. corn 1 market is not over SOYBEANS COTTON CORN Growth in international corn 2 KEY ROUNDUP ROUNDUP YIELDGARD market share MARKETS BOLLGARD & ROUNDUP YIELDGARD READY READY CORN BOLLGARD II READY ROOTWORM CORN 2 BORER FLEX Biotech traits are advancing 3 internationally BRAZIL 50M 3M 2M 20M 15M 5M Cotton platform creates new ARGENTINA 37M - - 5M 4M 1M 4 opportunities for growth INDIA - 10-15M 10-15M 3 – 5M 3 – 5M - Seminis to capture 5 EUROPE 1M - - 24M 8M 5M additional gross margin AFRICA 0.2M 11M 10M 6M 4M - Next-generation pipeline 6 0.5M- 0.5M- poised for enhanced AUSTRALIA - - - - 0.8M 0.8M commercial delivery TOTAL KEY 24.5– 22.5- 88.2M 58-60M 34-36M 11M MARKETS 29.8M 27.8M GROSS PROFIT 63% 0% 31% 1% 11% 0% OBJECTIVES BIOTECH ACRES PLANTED 2006F Rapidly penetrate and 1 REMAINING expand planting of biotech AVAILABLE traits in key countries ACRES Migrate the portfolio to multiple-trait, and / or 2 second generation trait, high-margin sales 12
  • 13. COMMERCIAL OPPORTUNITY In Cotton, Expanded Trait Offerings Create Most Significant Opportunity for Increased Profitability GROSS PROFIT U.S. COTTON MARKET SHARE DRIVERS 100% DELTA AND Growth in the U.S. corn 1 PINE LAND 80% market is not over STONEVILLE Growth in international corn 2 60% market share FIBERMAX Biotech traits are advancing 3 40% OTHERS internationally Cotton platform creates new 4 20% opportunities for growth Seminis to capture 5 0% additional gross margin Next-generation pipeline 1999 2000 2001 2002 2003 2004 2005 6 poised for enhanced commercial delivery GROSS PROFIT 2006 SECOND-GENERATION TRAIT OBJECTIVES PENETRATION 1 Expand second-generation, 1 7% DELTA AND PINE LAND higher-margin trait offerings 2010 U.S. MARKET OPPORTUNITY Apply molecular breeding to 2 cotton 10-15M ROUNDUP READY FLEX 6-8M BOLLGARD II 1. Second-generation trait penetration reflects percent of commercial portfolio containing either Roundup Ready Flex, Bollgard II or both traits. 13
  • 14. COMMERCIAL OPPORTUNITY Seminis to Leverage Portfolio, Pricing and Molecular Breeding to Create New Growth GROSS PROFIT VALUE ENHANCEMENT TIMELINE DRIVERS OVER THE MID-TERM, SEMINIS WILL UNDERGO THREE PHASES OF Growth in the U.S. corn 1 EXECUTION EN ROUTE TO UNLOCKING ADDITIONAL VALUE + market is not over + Growth in international corn 2 OPERATIONAL NEW VALUE PIPELINE market share EXCELLENCE CREATION ADVANCEMENT Biotech traits are advancing 3 BY END OF FY 2007 BY END OF FY 2008 BY END OF FY 2010 internationally Cotton platform creates new 4 opportunities for growth Prioritize product Identify and Commercialize Seminis to capture 5 portfolio by focusing implement first hybrids additional gross margin on 20 – 25 key crops opportunities to developed by Next-generation pipeline that drive profitability price products to molecular 6 poised for enhanced value breeding commercial delivery Assemble genetic maps for key crops Build business Launch GROSS PROFIT models to create and succession of capture downstream consumer OBJECTIVES Enhance R&D value opportunities benefit capability and deploy products 1 molecular markers for Prioritize product portfolio agronomic and Enhance product consumer benefits quality and reduce Intensify value creation by costs through commercializing new 2 manufacturing and Integrate and products derived from logistical streamline back– molecular breeding improvements office operations 14
  • 15. PIPELINE OPPORTUNITY “HIT” Projects Designed to Pull Forward the Net Present Value of Select Pipeline Traits Through Larger-Acre Launches GROSS PROFIT High-Impact Technology: A designated sub-set of the R&D DRIVERS pipeline placed on a graduated track to streamline development P R O JE CT work and improve commercial readiness. Designed to pull Growth in the U.S. corn 1 forward the Net Present Value (NPV) through larger-acre market is not over launches in elite germplasm with a greater financial benefit. Growth in international corn 2 market share Roundup RReady2Yield soybeans Biotech traits are advancing 3 P R O JE CT internationally PHASE III Cotton platform creates new 4 opportunities for growth • Parallel work in breeding and biotechnology Seminis to capture • Simultaneous regulatory work, submissions moving 5 additional gross margin forward along with project testing for key launch countries Next-generation pipeline 6 poised for enhanced Drought-tolerant corn commercial delivery P R O JE CT PHASE II GROSS PROFIT • Parallel work in breeding and biotechnology OBJECTIVES • Early-stage R&D and commercial integration Streamline development work and advance Vistive III soybeans 1 regulatory submissions P R O JE CT PHASE II simultaneously with project testing • Progress will allow Vistive III to “leap-frog,” shortening the gap in commercialization between Bring “HIT” traits to market 2 Vistive I and Vistive III with larger-acre launches in the best seed 15
  • 16. PIPELINE OPPORTUNITY Reflecting HIT Status, Roundup RReady2Yield Soybeans Is Targeted for Most Significant Commercial Trait Launch KEY MARKET ACRES U.S. BRAZIL ARGENTINA Roundup RReady2Yield AVAILABLE MARKET 70M 50M 35M Soybeans CREATING VALUE PERCENT PENETRATED 0% 0% 0% LAUNCH ACRES OF U.S. TRAITS PRODUCT CONCEPT 3 HISTORICAL COMMERCIALIZED TRAITS (1996-2006) 2.5 HIT Project ACRES (IN MILLIONS) Roundup RReady2Yield soybeans AVERAGE 2 DISCOVERY PHASE I PHASE II PHASE III PHASE IV HISTORIC TRAIT LAUNCH: 1.5 1.2M ACRES 1 • Roundup RReady2Yield is the second-generation of Monsanto’s popular herbicide-tolerant platform in 0.5 soybeans 0 VALUE CONSIDERATIONS SOYBEAN COTTON CORN TRAITS TRAITS TRAITS • Value is additive, with target of up to 5 bushel-per- Target acreage for Roundup RReady2Yield acre yield improvement over comparable Roundup commercial launch is expected to be a Ready soybeans multiple above historical acreages in launch • Value created through yield gains will be shared with years farmer and value chain as has been Monsanto’s practice ROUNDUP RREADY2YIELD: COMMERCIAL MILESTONES • Market opportunity for Roundup RReady2Yield STARTING POINT U.S. REGULATORY soybeans recognizes competition from other traits APPROVAL RETAIL SEASON 1 LAUNCH YEAR Medium (>$10/acre to <$30/acre) VALUE/ACRE: GLOBAL REGULATORY CLEARANCES TOTAL ACRE High (>20M acres) OPPORTUNITY: PRE-COMMERCIAL USER- COMMERCIAL LAUNCH RELIABILITY TRIALS 16
  • 17. PIPELINE OPPORTUNITY Multi-Generational Drought-Tolerant Corn to Create Value Across Multiple Market Segments KEY MARKET ACRES U.S. BRAZIL ARGENTINA AVAILABLE MARKET 80M 30M 6M Drought-tolerant corn PERCENT PENETRATED 0% 0% 0% P R O JE CT SEGMENTED VALUE OPPORTUNITY PRODUCT CONCEPT ACROSS MARKETS: U.S. EXAMPLE HIT Project Drought-tolerant corn DISCOVERY PHASE I PHASE II PHASE III PHASE IV High annual precipitation • Drought-tolerance is a family of products, aimed at providing consistent yield and buffering against the effects of water limitations VALUE CONSIDERATIONS Low annual • Farmers value water-use in “acre-inches of water” needed precipitation to support yield potential – farmers need 18-20 inches of Source: Spatial Climate Analysis Service, Oregon State University moisture from natural or irrigated sources during growing WESTERN IRRIGATED STABILITY season DRYLAND • Value of the trait is in better yields under moisture- 8-12M acres 10-12M acres 50-60M acres stressed conditions; Varies by region (see table at right) • The value will be specific to the variable costs of water use 14-18” typical 14-18” typical 17-19” typical precipitation in precipitation in precipitation in by farmers, not fixed costs of irrigation growing season growing season growing season • First value models are based in U.S.; International markets Irrigated Non-irrigated Non-irrigated follow similar value proposition RETAIL Value is in Value is in Value is in Medium (>$10/acre to <$30/acre) VALUE/ACRE: replacing improved yields improved yields irrigation, reducing annually, by when moisture is TOTAL ACRE the variable costs improving water- less than optimal High (>20M acres) OPPORTUNITY: of irrigation use efficiency 17
  • 18. FINANCIAL OUTLOOK Six Drivers Set Up Seeds and Traits for Further Acceleration into the Next Decade FOCUS: BUSINESS OPPORTUNITY FOCUS: FINANCIAL TARGET Six drivers are expected to provide a positive pull on gross profit with higher- Monsanto sees a path to cross the 50% gross margin margin, higher-growth opportunity. That mark in the next few years and moving toward a 51% to pull disproportionately benefits Seeds & 53% gross margin by the end of 2010 Genomics segment, but also has a positive effect on the gross-profit-to-net- GROSS PROFIT AS A PERCENT OF SALES sales ratio for the company. 54% GROSS PROFIT DRIVERS 52% TARGET OF UP TO Growth in the U.S. corn market is not 1 51% - 53% GROSS over 50% MARGIN BY 2010 Growth in international corn market 2 48% share Biotech traits are advancing 3 46% internationally 44% Cotton platform creates new 4 opportunities for growth 42% Seminis to capture additional gross 5 2003 2004 2005 2010F margin Next-generation pipeline poised for 6 enhanced commercial delivery 18