monsanto 11-08-07-2_v2

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monsanto 11-08-07-2_v2

  1. 1. CARL CASALE EXECUTIVE VICE PRESIDENT MONSANTO BIENNIAL U.S. INVESTOR DAY NOVEMBER 8, 2007 1
  2. 2. OVERVIEW Corn Growth Continues, Becoming Increasingly Global with Continued Emphasis On Improving Per-Acre Margins MONSANTO GROSS PROFIT 2012 GROWTH RANGE GROWTH TARGET Gross profit targeted to double $9,000 from 2007 through 2012 STRATEGIC PLAYBOOK $8,000 U.S. Corn $7,000 International Corn $6,000 GROSS PROFIT (IN MILLIONS) 1. Grow U.S. seed footprint $5,000 2. Expand trait penetration $4,000 and bridge to SmartStax $3,000 2010 launch 3. Expand international seed $2,000 footprint $1,000 4. Set the table for biotech $0 trait ramp up outside the U.S. MILESTONES 2004 2007 2012 2010 2007 Gross margin Base Gross Profit: target: 52-54% $4,286M ONGOING EPS GROWTH: MID-TO-HIGH TEENS 2
  3. 3. U.S. CORN U.S. Corn Growth Continues Through 2012, Reflecting Differentiated Opportunities Across Commercial Channels U.S. CORN SEED & TRAITS GROSS PROFIT BY CHANNEL INDEX=2004 2004 2007 2012F >8X OVER 2004 INDEX Trait licensing outside Holden’s/Corn States 3
  4. 4. U.S. CORN DEKALB’s Performance Accelerated Share Gains Ahead of Schedule; Fundamentals Remain Viable Through 2012 DEKALB U.S. CORN SHARE EVOLUTION: 2001-2012F 32% 30% 2012 TARGET RANGE GEOGRAPHY: U.S. 28% OBJECTIVE: Grow footprint 2008 STATUS 26% • DEKALB earned 4 points 24% in 2007 for total share of ORIGINAL 2010 TARGET RANGE 22% 23%, doubling its share in 5 years 23% 20% 2012 OUTLOOK 18% • Grow share through 2012 19% 16% DEKALB expected to by up to 10 points continue share gains, cumulatively 16% 14% with cumulative target 14% of as much as 10 12% 13% points in 5 years 10% 12% 10% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2007 2005 DEKALB ends 2007 with Monsanto projects 1-2 point 23% share, achieving 2010 share gains for DEKALB from target 3 years early 2005 through 2010 4
  5. 5. U.S. CORN With Strong Yield Performance, Value of DEKALB Seed Portfolio Continues to Expand DEKALB SEED PORTFOLIO MIX “SWEET SPOT” DEKALB PORTFOLIO GEOGRAPHY: U.S. RELATIVE MIX IN • Roughly 60% of OBJECTIVE: Grow footprint DEKALB brand comes 2008 STATUS from 25 hybrids – all less than 4 years old • Average retail value in DEKALB’s portfolio increased 20% since 2001 2012 OUTLOOK Momentum continuing: MATURE HYBRIDS NEW HYBRIDS CORE HYBRIDS • 2007 initial results show New hybrids consistently drive mix and value of DEKALB portfolio DEKALB has 8.3 bu/ac yield advantage over $44 AVERAGE RETAIL competitors $42 PRICE/ACRE Average Retail Value $40 Of DEKALB Portfolio $38 $36 $34 2001 2002 2003 2004 2005 2006 2007 5
  6. 6. U.S. CORN ASI Gross Profit Per Acre Comparable to DEKALB; Growth Accelerating Through End of Decade ASI GROSS PROFIT PER ACRE GEOGRAPHY: U.S. GP/acre increases 2 OBJECTIVE: Grow footprint AVERAGE GROSS PROFIT/ACRE 85% after ASI 2008 STATUS Average 1.8 acquisition GP/acre in 1.85 • ASI includes 24 brands, 1.6 same band with differentiated as DEKALB 1.4 (INDEXED) customer experience from DEKALB 1.2 • Organic growth of 1 1 share point in 2007 to 1 0.8 bring ASI to 9 points total 2012 OUTLOOK 0.6 0.4 • Emphasis on organic growth 0.2 0 POST- PRE- DEKALB ACQUISITION ACQUISITION • With technology infusion, gross profit per acre lifts when seed company brought under ASI umbrella 6
  7. 7. U.S. CORN Opportunity Exists to Nearly Triple Penetration of Triple- Stack Traits in U.S. By End of Decade U.S. CORN TRAIT OPPORTUNITY: 2007-2010F 220 60 U.S. TRIPLE-STACK ACRES 200 U.S. TRAIT ACRES 50 180 (IN MILLIONS) (IN MILLIONS) 160 40 140 120 30 100 80 20 60 40 10 20 0 0 CATALYSTS OF 2010 2005 2006 2007 2010F TRIPLE STACK 2007 Opportunity GROWTH Rootworm Control 45-55M 20.8M Channel Triple Corn Borer Control Penetration 60-70M 42.4M Glyphosate Tolerance DEKALB Supply 80M 57.9M Guarantee Triple Stack 17.7M 45-55M Yield Insurance 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. Program Source: “Monsanto Biotechnology Trait Acreage” available through: monsanto.com/investors/ 7
  8. 8. U.S. CORN Starting in 2010, New Margin Opportunity Created by Upgrade From Triple-Stack Acres To SmartStax DEKALB SEED GROSS PROFIT/ACRE: GEOGRAPHY: U.S. 2007 VS. 2010F OBJECTIVE: Expand margin 2008 STATUS AVERAGE GROSS PROFIT/ACRE 1.2 • To be sold through 1.15 DEKALB and ASI; 1.1 Monsanto also SmartStax representative for joint 1 (INDEXED) increases the third-party licensing of 1.00 GP potential SmartStax through of DEKALB by 0.9 Holden’s/Corn States 12-15% per acre 2012 OUTLOOK 0.8 • SmartStax expected 0.7 average gross profit per acre greater than gross profit of current-triple 0.6 stack acre, net of 2010F 2007 royalties paid and Indexed Gross Profit: Indexed Gross received Average SmartStax Acre Profit: Average (Net Of Royalties Paid) Triple-Stack Acre 8
  9. 9. U.S. CORN SmartStax Creates Value on Multiple Dimensions; Primary Benefit Is Increased Yield, Both Per-Acre and Total Farm SmartStax Value: On-Farm Commercial Preparation: Field Data Generation + Increased Yield (per-acre and on-farm) YEAR 1 YEAR 2 YEAR 3 FORWARD YIELD YIELD COMPONENT 2006 2008+ BENEFIT1 Focus: Focus: SmartStax PER-ACRE Feasibility of full bred into elite Improved consistency: 1-2% trait integration germplasm; yield Primary pests data generation Improved protection: 1-2% Secondary pests Field Testing: 2007 ON-FARM Testing focused on trait performance, such as Reduced refuge 3-6% consistency of control of Flexibility to move to one technology targeted pests + platform on-farm Initial 2007 Results + Durability • Indicates superior Flexibility to increase planting rootworm consistency + populations versus triple-stack + Platform for future traits standard TRIALS: 56 • Good control of + Access to superior seed STATES: 12 secondary pests Total SmartStax Value = 1. Yield benefit reflects expected yield benefit above triple-stack standard, on a per-acre and whole-farm basis as noted. Ranges may overlap 9
  10. 10. U.S. CORN Potential for Refuge Reduction Can Raise Total Farm Yield With Standardized Technology Platform Refuge Reduction Benefit Example: SmartStax Value: 100 Acres In Illinois1,2 Refuge Reduction Considerations Standard 20% Refuge 20 Acres X 20 Bushels U.S. EPA requires set-aside refuge for current single-mode-of-action (400) BU REFUGE LOSS: insect-protected traits in corn 20% Reduced Refuge Option3: 10% 80% 10 Acres X 20 Bushels (200) BU REFUGE LOSS: GAIN OVER CURRENT 200 BU REFUGE STANDARD: 20 BU/AC 1 Reduced Refuge Option3: 5% Yield Differential 5 Acres X 20 Bushels Farmers in Illinois in 2007 reported (100) BU average 20 bu/acre yield difference REFUGE LOSS: between YieldGard VT Triple and GAIN OVER CURRENT 300 BU refuge acres REFUGE STANDARD: 1. Based on reported yield differential refuge vs. traited acres, Central Illinois – Monsanto market research (2007) Farmers only access upside if technology 2. Based on assumed average triple-stack (YieldGard VT Pro) platform standardized across farm yields in Illinois 3. Refuge reduction would require regulatory review and approval by the U.S. EPA 10
  11. 11. U.S. CORN By 2010, SmartStax Resets Trait Platform, Changes Competitive Standard and Opens New Acreage Opportunity U.S. ACREAGE OPPORTUNITY: SWITCH FROM TRIPLES TO SMARTSTAX IN 2010 70 65 60 60-65M +10-15M 55 Total Competitive (10-15M) 27-37M 45-55M Opportunity 50 +10-15M (IN MILLIONS) 45-50M 45 All acres are Monsanto 40 in play as ACRES Baseline superior 35 performance 30 from 25 SmartStax 20 creates compelling 17.7M 15 competitive 10 platform 5 0 Acres from Potential 2007 Remaining Total 2010 Total Competitors Upside from Monsanto Upside; Triple-Stack SmartStax Not Using Refuge Triple-Stack Shared with Opportunity Opportunity SmartStax Reduction Penetration Competitors TRIPLE-STACK BASELINE SMARTSTAX OPPORTUNITY 11
  12. 12. U.S. CORN Size of U.S. Gross Profit Opportunity Grows Significantly; Components Shift to Highest-Margin Contributors U.S. CORN SEED & TRAITS GROSS PROFIT BY CHANNEL INDEX=2004 2004 2007 2012F >8X OVER 2004 INDEX Trait licensing outside Holden’s/Corn States 12
  13. 13. INTERNATIONAL CORN International Corn Markets Compare Favorably Against U.S. Market for Value GENETIC FOOTPRINT: GLOBAL CORN PRODUCTION GEOGRAPHY: International Average OBJECTIVE: Grow footprint 2007 Value Of DEKALB 2007 Hybrid Average Corn Monsanto 2008 STATUS Retail Share Market Yield Per Seed Brand Value Point Size1 Acre1 Share2 Market • Target of 1 to 2 share Per Acre Change (Acres) (U.S. $B) (U.S. $) point gains in all regions except Brazil, where plan 153 $44 $3.2B 23% 4 U.S. 92M is to stabilize share bu/ac 2012 OUTLOOK 99 $65 $1.9B 13% 1 EU27 27M • Outside the U.S., 70M bu/ac3 acres of hybrids in 57 higher-value markets $29 $0.7B 30% 4 Brazil 23M • Targeted 1-2 share point bu/ac gains annually in all key 120 $28 $0.2B 40% 5 Argentina 8M countries through 2012 bu/ac • Brazil targeted to grow 29 after share trait stabilizes $20 $0.1B 39% 4 India 7M in 2008 bu/ac TOTAL 157M 1. Corn acreage and production; USDA FAS 2007/08 projections report and internal estimates 2. Reflects share performance for 2007 planting season; for Brazil and Argentina, reflects 2006-2007 planting season 3. Average yield; from 55 bu/acre in Romania to 150 bu/acre in France, Italy 13
  14. 14. INTERNATIONAL CORN DEKALB Gained Five Share Points in Four Years in EU27; Highest Share Gain of Any Company DEKALB EU27 CORN SHARE EVOLUTION: 2002-20071,2,3 GEOGRAPHY: Europe OBJECTIVE: Grow footprint 30% 2008 STATUS 25% • Because of demand for higher-yielding hybrids, 20% seed in western Europe most valuable per-acre in 15% the world 10% 2012 OUTLOOK • DEKALB share in EU27 5% increased 5% since 2004 – largest gain by any seed 0% company in the region PIONEER LIMAGRAIN KWS SYNGENTA • Share gains have come without widespread use of 2002 2003 2004 2005 2006 2007 biotech traits 1. Kleffman Market Research 2. EU27 + Serbia included, reflecting parameters of market research 3. 2007: new sampling methodology in Italy 14
  15. 15. INTERNATIONAL CORN Continued DEKALB Growth in EU27 to Come From Greater Emphasis on Highest Value Segment EARLY SILAGE SEGMENT CORN MATURITY ZONES: EU 27 GEOGRAPHY • Mainly silage market: <85 day RM • Historically led by European breeders • DEKALB initiated significant breeding investments 4 years ago SEGMENT SHARE 2002 2007 3% 5% MID TO EARLY SEGMENT • Grain market: 85-100 day RM • Similar to Minnesota – strongest area for DEKALB in U.S. • DEKALB genetics leading this segment SEGMENT SHARE 2002 2007 10% 23% LATE SEGMENT • Grain market: 100-110 day RM • Similar to Iowa – area of significant U.S. breeding gains • Highest value segment SEGMENT SHARE 2002 2007 9% 17% 15
  16. 16. INTERNATIONAL CORN Brazil Is Turnaround Story; Agroeste Acquisition, Enhanced Focus on Tropical Breeding to Improve Position BRAZIL CORN MARKET COMPOSITION: 2007-2008 GEOGRAPHY: Brazil OBJECTIVE: Grow footprint Agroeste Opportunity: 2008 STATUS Market share for all segments of ► Agroeste provided share Brazilian hybrid corn seed market • Acquisition increases strength in the south, gap focus on high value for DEKALB segment in Brazil AGROESTE, 10% DEKALB, 30% ► Agroeste mainly uses • Agroeste’s solid position direct-to-grower model, DOW/ in southern region AGROMEN, complementing DEKALB’s complements existing 15% distribution; similar to ASI base channel in U.S. 2012 OUTLOOK Opportunity to Expand Brazil • Increased emphasis on OTHERS, Footprint: 11% breeding in tropical hybrids and access to ► Greater tropical germplasm SYNGENTA, 12% PIONEER, 22% germplasm from opportunity Agroeste to improve ► Larger footprint for trait position in Brazil penetration • Potential to accelerate ► Export opportunity to serve launch of YieldGard Corn growing economies in Borer China, Russia 16
  17. 17. INTERNATIONAL CORN Trait Expansion Opportunity Still Early Globally; SmartStax Resets Stage in 2010 and Beyond COMMERCIAL PLATFORM: 2007-20101 GLOBAL MARKET OPPORTUNITY: • Reflects technology fit; actual penetration determined by regulatory approvals and CORN TRAITS competitive share 2010 VS 2012 • Competitors continue to license Monsanto traits in key markets 2007 HYBRID MARKET SIZE2 (ACRES) U.S. 92M 80M 60-70M 45-55M Europe (EU27) 27M 24M 8M 5M Brazil 23M 15-20M 15-20M 5M Argentina 8M 9M 7M 5M India 7M 6M 6M -- Total Markets 157M 134-139M 96-111M 60-70M 2007 Penetration 43-45% 46-53% 30-35% 1. Market Opportunity reflects total acres where technology is applicable, not necessarily Targets marked in green representing countries currently planting acres projected for penetration by 2010. 80M or with primary regulatory approval secured for respective trait 2. Corn acreage and production; USDA FAS 2007/08 projections report and internal estimates 17
  18. 18. INTERNATIONAL CORN Trait Expansion Opportunity Still Early Globally; SmartStax Resets Stage in 2010 and Beyond GLOBAL MARKET TRAIT PLATFORM: 2010+ OPPORTUNITY: • SmartStax resets trait opportunities CORN TRAITS • Acreage reflects potential acres 2010 VS 2012 • Competition, penetration and technology fit being evaluated further for each geography 2007 HYBRID SmartStax MARKET SIZE1 (ACRES) U.S. 92M 60-65M Europe (EU27) 27M 15-20M Brazil 23M 15-20M Argentina 8M 5-7M India 7M 5-6M Total Markets 157M 100-118M 1. Corn acreage and production; USDA FAS 2007/08 projections report and internal estimates 18
  19. 19. INTERNATIONAL CORN Recent Regulatory Approval in Argentina Opens Door For Stacked Traits; Ramp Up Under Way CORN TRAIT PENETRATION IN ARGENTINA: ANNUALLY AS A PERCENT OF TOTAL ACRE OPPORTUNITY1 GEOGRAPHY: Argentina OBJECTIVE: Expand margin YGCB-RR Stack2 100% PERCENT OF TRAIT ACRE 2008 STATUS INTRODUCED 2008F TOTAL • Roundup Ready/YieldGard 7M OPPORTUNITY 75% OPPORTUNITY1 Corn Borer received YieldGard Corn Borer regulatory approval in INTRODUCED 1997 50% Argentina end of August TOTAL 2007 7M OPPORTUNITY • Local approvals for some 25% Roundup Ready Corn stacked hybrids completed INTRODUCED 2001 2012 OUTLOOK TOTAL 0% 9M OPPORTUNITY • 8 million total corn acres 1 2 3 4 5 6 7 8 9 planted in Argentina today; YEARS FROM COMMERCIAL LAUNCH► expected to grow to 10 million acres to fill U.S. • YieldGard Corn Borer/Roundup Ready stack should change export gap inflection of penetration curve, moving toward peak penetration faster than single traits in Argentina 1. Percent of total market opportunity reflects the ratio of number of actual acres planted to total trait-acre opportunity identified for each trait 2. Forecasted possible trend curve for YieldGard Corn Borer-Roundup Ready stack (YGCB+RR). Based on commercial production planning for DEKALB brand. 19
  20. 20. INTERNATIONAL CORN SmartStax Agreement Creates Step-Change Opportunity in Brazil and Argentina for Insect Control INSECT CONTROL OPPORTUNITY: South SMARTSTAX IN BRAZIL AND ARGENTINA GEOGRAPHY: America Expand OBJECTIVE: margin 2008 STATUS • SmartStax agreement BRAZIL with Dow is global deal, spanning all geographies where respective traits are registered INA 2012 OUTLOOK NT GE • Currently evaluating the AR CORN PEST ESTIMATED: SOUTH AMERICA commercial opportunity for SmartStax in Brazil ACRES INFESTED SmartStax and Argentina BRAZIL ARGENTINA Control Fall Armyworm 20-22 M 4M Sugarcane Corn Borer 16-18 M 10 M Corn Earworm 16-18 M 10 M Very Good to Excellent Control 20
  21. 21. SUMMARY By 2012, Sustained Momentum in U.S. Corn Combined With International Growth Expands Corn Gross Profit Contribution GLOBAL CORN SEED AND TRAITS GROSS PROFIT INDEX=2004 2004 2012F 2007 >6X OVER 2004 INDEX • In 2007, international markets generated more than 25% of gross profit • By 2012, total gross profit expected to U.S. Corn Seeds & Traits Gross Profit expand significantly with continued penetration of traits globally, conversion International Corn Seeds & to SmartStax and greater seed brand Traits Gross Profit share worldwide 21

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