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monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
monsanto EU_HughGrant_1110006
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monsanto EU_HughGrant_1110006

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  • 1. HUGH GRANT CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER MONSANTO EUROPEAN INVESTOR DAY November 10, 2006 1
  • 2. Forward-Looking Statements Certain statements contained in this release 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, including Delta and Pine Land Company; 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 release. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results. 2
  • 3. Non-GAAP Financial Information This presentation may use the non-GAAP financial measures of “free cash flow,” earnings per share (EPS) on an ongoing basis, and Return on Capital (ROC). We define free cash flow as the total of cash flows from operating activities and investing activities. A non-GAAP EPS financial measure, which we refer to as on-going EPS, excludes certain after-tax items that we do not consider part of ongoing operations, which are identified in the reconciliation. ROC means net income (without the effect of certain items) exclusive of after-tax interest expenses, divided by the average of the beginning year and ending year net capital employed, as defined in the reconciliation. Our presentation of non-GAAP financial measures is intended to supplement investors’ understanding of our operating performance. These non-GAAP financial measures are not intended to replace net income (loss), cash flows, financial position, or comprehensive income (loss), as determined in accordance with accounting principles generally accepted in the United States. Furthermore, these non-GAAP financial measures may not be comparable to similar measures used by other companies. The non-GAAP financial measures used in this presentation are reconciled to the most directly comparable financial measures calculated and presented in accordance with GAAP, which can be found at the end of this presentation. The ROC goal for 2007 reflects Monsanto's aspiration to reach an industry standard measure of performance. Monsanto is unable to provide a reconciliation of this goal to projected net income and financial position for 2007 without unreasonable effort. As shown in the ROC reconciliation for previous years, the calculation of ROC is complex, and Monsanto does not have sufficient information at this point in the fiscal year to reasonably estimate its operating profit after-tax and average capital for 2007 due to market and other conditions that are outside of Monsanto's control. Trademarks Trademarks owned by Monsanto Company and its wholly-owned subsidiaries are italicized in this presentation. Mavera™ is a trademark of Renessen. All other trademarks are the property of their respective owners. © 2006 Monsanto Company 3
  • 4. OVERVIEW Building From Established Platform, Monsanto Has a Window of Opportunity to Extend Our Leadership R&D LEADERSHIP STRATEGIC PERFORMANCE SEEDS & TRAITS COMMERCIAL PLATFORM In the 10 years since the introduction of Integrated platform with commonality the first biotech trait, Monsanto has of technology and commercial invested >$5B in seeds-and-traits R&D approach among crop platforms TRAITS Monsanto developed and CHANNELS TO MARKET commercialized the first Industry’s only company to broad-acre biotech traits; widely employ dual market First to launch stacked approach of branded and traits and second- licensed seed and trait sales generation traits SEEDS Global germplasm library COMMERCIAL COORDINATION unmatched in scale – with Roundup, world’s best- 36 integrated breeding SEED & TRAIT selling herbicide brand, programs from 12 PLATFORM uniquely complements countries for corn and soy seed-and-trait platform and the world’s leading vegetable seed company BREEDING >100 breeding research FINANCIAL PERFORMANCE High-margin technology centers worldwide, business that generates underpinning companywide sustainable free cash flow focus around molecular breeding 4
  • 5. OVERVIEW Six Building Blocks Extend Leadership and Elevate Gross Margin Opportunity Through 2010 MONSANTO’S OPPORTUNITY GROSS MARGIN OPPORTUNITY Delta between 2006 current gross GROSS PROFIT AS A PERCENT OF SALES margin and a 51-53% trajectory 54% reflects continued growth opportunity for seeds and traits FACTOR VALUE1 GROSS MARGIN ‘PULL’ 52% HIGH U.S. corn International MEDIUM 50% corn Global biotech MEDIUM traits 48% LOW CURRENT LEVEL Cotton platform MEDIUM Seminis 46% HIGH R&D pipeline 44% 2003 2004 2005 2006 2007F 2008F 2009F 2010F 1. Increment to total gross profit in the period 2006-2010; Some categories will overlap. MEDIUM LOW HIGH >$250M $100M - $250M <$100M 5
  • 6. U.S. CORN GROWTH Opportunity for Corn Gross Profit Increases in Next Four Years With Increased Traits and Branded Seed Share U.S PLANTED ACREAGE 90 TOTAL PLANTED CORN & SOYBEAN ACRES (2001-2010)1 U.S. Corn CORN SITUATION: 85 ACRES (IN MILLIONS) SOYBEANS • Monsanto assumes a U.S. corn market of 80M acres annually 80 • Largest historical swing in U.S. acreage has been less than 5 75 percent OUTLOOK: 70 • Combination of increased penetration of stacked traits 65 and expansion of Monsanto branded share increases 60 relative value of a corn acre versus a soy acre 2001 2002 2003 2004 2005 2008F 2009F 2010F 2006-2007F • The gross profit differential between an average soybean GROSS PROFIT DIFFERENTIAL: CORN vs. SOY acre and a corn acre in a Monsanto national seed brand In 2006, the average gross-profit differential for seeds and increased 2X in favor of corn traits in DEKALB and Asgrow brands favored corn at ~$0.80 from 2006 to 2007F an acre. For 2007, that differential is expected to be ~$3.00 an acre in favor of corn. 1. USDA data and projections 2. Comparative difference in seeds-and-traits gross profit between soybeans and corn, as sold in Monsanto national seed brands 6
  • 7. U.S. CORN GROWTH Projected Demand From Ethanol in U.S. Provides Positive Pull for Monsanto Corn Technology U.S. ETHANOL AND CORN TRAITS U.S. Corn CORRELATION OF ETHANOL SITES AND TRAIT PENETRATION SITUATION: • Assumption that by 2010, Average trait ethanol is MTBE replacement – penetration was representing 10% of U.S. fuel 2.5 X greater in supply NON- areas with a high • Ethanol demand could require DRAW concentration of AREA equivalent of up to 25M U.S. ETHANOL ethanol facilities DRAW AREA acres by 2010 compared with OUTLOOK: areas without or having low • Ethanol demand creates pull concentrations of on corn that favors ethanol facilities technologies that enhance yield, such as molecular Higher trait breeding and biotech penetration per • The average trait penetration is acre corresponds 2.5 X greater in areas of to increased ethanol facilities gross profit per ETHANOL PLANTS UNDER ETHANOL PLANTS IN CONSTRUCTION acre PRODUCTION 7
  • 8. U.S. CORN GROWTH First Decision Farmers Make Is Seed Germplasm; More and More Farmers Have Been Choosing Monsanto Seed U.S. CORN MARKET SHARE EVOLUTION MONSANTO BRANDS AND LICENSEES U.S. Corn LICENSEES’ BRANDS 60% AMERICAN SEEDS, INC. BRANDS SITUATION: ASGROW AND DEKALB BRANDS • In 2006, Monsanto’s DEKALB 50% and Asgrow brands grew by 3 market share points 40% Continued • Over 5 years, comparable gains of 1-2 market share gain was 9 points 30% points for OUTLOOK: national 20% • Gain of 1 market share point in brands U.S. adds approximately $10 to $15M to corn seed gross profit 10% in a Monsanto national seed brand 0% 2001 2002 2003 2004 2005 2007F 2006 ACREAGE EXPANSION In 2006, the addition of 1 market share point in a Monsanto national brand translated into an average incremental value of approximately $10M-$15M in gross profit opportunity for Monsanto for the seed alone 8
  • 9. U.S. CORN GROWTH Farmer Demand Speeds Stacked Penetration, Accelerating Seeds-and-Traits Opportunity INCREASED MARGINS WITH STACKING GROSS PROFIT VALUE PROGRESSION IN DEKALB/ASGROW BRANDS U.S. Corn 4 3.63 SITUATION: TRAIT GROSS PROFIT VALUE PER ACRE 3.5 • Stacking corn traits on to our 2.63 germplasm improves gross 3 profit contribution to the 2.5 business (INDEXED) • In 2006, Monsanto sold more 2 stacked traits than single traits 1.48 • In 2007, in our national brands, 1.5 1.00 Monsanto expects to sell more 1 triple stacks than singles OUTLOOK: 0.5 • The average additional gross 0 profit value for a triple stack is SEED ONLY 1 TR A IT 2 TR A ITS 3 TR A ITS 4 TR A ITS almost 2.5X above a single • For a potential quadruple MARGIN EXPANSION stack, the premium over the single would be >3X The average additional gross profit value for a triple stack is almost 2.5X above a single “4 trait” value assumed to be an average of the retail value of the three other first-generation traits 9
  • 10. U.S. CORN GROWTH With the Corn Trait Technology in Hand Today, There’s Opportunity to Double Penetration By End of Decade U.S. CORN TRAIT OPPORTUNITY U.S. TRAIT ACRE OPPORTUNITY: TOTAL MARKET OPPORTUNITY IN 20101 U.S. Corn CURRENT COMMERCIAL CORN TRAITS SITUATION: RELATIVE RETAIL VALUE YIELDGARD ROOTWORM • Through 2006, roughly 50 2006F: percent of the available market PER ACRE has been penetrated with traits Only 50% YIELDGARD penetrated CORN BORER to date OUTLOOK: 2006 2010 ROUNDUP READY ROUNDUP READY 32.7M 60M CORN CORN 2 YIELDGARD 10.0M 25-30M 60 40 50 ROOTWORM 30 10 20 U.S. TRAIT-ACRE OPPORTUNITY YIELDGARD CORN 32.3M 50-60M (ACRES IN MILLIONS) BORER TRIPLE STACK SINGLE TRIPLE 6.0M 25-30M DOUBLE TRAITS ~10M ACRES 25-30M ACRES 20-25M ACRES OPPORTUNITY 1. Market Opportunity Acres exclusively Because YieldGard Above triple STACKED reflects total acres where technology is using Roundup Rootworm has the stack, remaining applicable, not Ready, which would lowest market YieldGard Corn necessarily acres projected for include “refuge” opportunity of the 3 Borer forms penetration by 2010. acres required for traits, its market double-stack other acres using potential is the proxy for opportunity insect-protected total potential for triple traits stack 10
  • 11. INTERNATIONAL CORN GROWTH Gross Profit Value of Seed Internationally Varies, Yet Still Solid Contributor to Growth, Commercial Platform TOTAL HYBRID GROSS MONSANTO CHANGE MARKET MARKET PROFIT BRAND OUTLOOK (’04-’06) SIZE SIZE VALUE PER SHARE (ACRES) (ACRES) ACRE1 International Corn EUROPE-AFRICA SITUATION: HIGH France 7.5M 7.5M 15% +5% • Second most • Primary value in valuable market HIGH Italy 3.2M 3.2M 21% +7% international corn markets behind U.S. today is in the seed • Molecular MEDIUM Hungary 2.7M 2.7M 32% +6% breeding • Breeding gains that have HIGH application is ~ 2 Turkey 0.8M 0.7M 21% +4% been made in the U.S. set years behind LOW U.S. South Africa 6.0M 6.0M 50% +12% pace for market share LATIN AMERICA growth in other international markets MEDIUM • Argentina is Mexico 17.3M 3.9M 61% +3% OUTLOOK: only country in LOW Brazil 30.8M 20.6M 34% -1% region with • Monsanto is targeting to biotech traits grow share in each of the • Next priority for LOW Argentina 7.3M 7.0M 35% FLAT most valuable corn-growing molecular breeding countries ASIA-PACIFIC • India is primary market of LOW India 15.6M 5.9M 35% +6% longer-term value in region 1. Average incremental value in gross profit opportunity for the seed value (excluding traits) of the addition of an acre in a Monsanto brand: MEDIUM HIGH LOW >$20 $10 - $20 <$10 11
  • 12. GLOBAL BIOTECH TRAIT GROWTH Expansion of Corn Market Share Sets Stage for Corn Traits Internationally INTERNATIONAL MARKET OPPORTUNITY: CORN1 ROUNDUP YIELDGARD YIELDGARD OUTLOOK Global Biotech Traits READY CORN 2 CORN BORER ROOTWORM SITUATION: • All traits in the regulatory 20M 15M 5M Brazil queue • “Footprint” established by • ~85% YGCB penetration, 5M 4M 1M Argentina Monsanto’s corn market share Minor acres of RR growth globally establishes • YGCB and RR received 3 – 5M 3 – 5M - India the base to launch traits as approvals for field trials they earn regulatory approvals • YGCB planting on small OUTLOOK: 24M 8M 5M Europe acres in 7 countries in 2006 • Corn traits outside U.S. have • Focused on S. Africa, significant opportunity for where both traits are penetration 6M 4M - Africa commercial on small acres and moving to stacks Total 58-60M 34-36M 11M International BIOTECH ACRES Markets PLANTED 3% 16% 0% 2006 YGCB=YieldGard Corn Borer YGRW=YieldGard Rootworm REMAINING RR = Roundup Ready Corn 2 AVAILABLE ACRES 1. Market Opportunity reflects total acres where technology is applicable, not necessarily acres projected for penetration by 2010. 12
  • 13. GLOBAL BIOTECH TRAIT GROWTH Soybean Trait Growth Expected to Be Fueled By Increased Penetration in Brazil INTERNATIONAL MARKET OPPORTUNITY: SOYBEANS1 Global Biotech Traits OUTLOOK SITUATION: ROUNDUP READY • Largest soybean market • Pricing for penetration to grow total 50M Brazil acres and shift sales to new seed outside U.S. is Brazil; Recent pricing action taken there to • Legal proceedings pending in EU 35M Argentina promote penetration courts OUTLOOK: 1M Europe • Small acreage • Driven by expanded 0.2M Africa • Small acreage penetration in Brazil, upside of 30M+ acres for continued Total 86.2M expansion International Markets 63% BIOTECH ACRES PLANTED 2006 REMAINING AVAILABLE ACRES 1. Market Opportunity reflects total acres where technology is applicable, not necessarily acres projected for penetration by 2010. 13
  • 14. GLOBAL BIOTECH TRAIT GROWTH Like U.S., International Markets Are Already Moving Toward Higher Technology Platforms in Cotton INTERNATIONAL MARKET OPPORTUNITY: COTTON1 ROUNDUP READY BOLLGARD OUTLOOK Global Biotech Traits AND ROUNDUP AND BOLLGARD II READY FLEX SITUATION: • BG currently planted on 2M 3M Brazil • Cotton traits are among most limited acres advanced on global scale, with • Pursuing dual path to second-generation upgrades resolution on pricing for 10-15M 10-15M India already beginning in FY2007 in BG before BGII Australia and India introduced OUTLOOK: • S. Africa focus, where BG 10M 11M Africa and RR are planted on • Dual opportunity of initial small acres penetration into markets and upgrading to second- • On par with U.S.; generation traits offers a Penetration moving to 2nd- 0.5M-0.8M 0.5M-0.8M Australia strong gross profit addition gen traits in 2007 Total BIOTECH 24.5-32.7M 22.5-27.8M International ACRES Markets PLANTED 2006 4% 38% BG=Bollgard cotton REMAINING BGII=Bollgard II cotton AVAILABLE RR = Roundup Ready cotton ACRES 1. Market Opportunity reflects total acres where technology is applicable, not necessarily acres projected for penetration by 2010. 14
  • 15. COTTON GROWTH Most Significant Near-Term Opportunity in Cotton Is Upgrading to Second-Generation Traits U.S. PENETRATION OF COTTON TRAITS: 2006 PENETRATION OF COTTON TRAITS IN 2006 AS A PERCENT OF 2010 TOTAL MARKET OPPORTUNITY1 Cotton Platform FIRST GENERATION SITUATION: • Cotton trait platform is the first Bollgard to move forward on complete replacement of first-generation Roundup traits with second-generation Ready upgrades • Roundup Ready Flex cotton SECOND GENERATION launched in the U.S. in 2006; Launched in Australia for Bollgard II FY2007 planting Roundup OUTLOOK: Ready • Expansion of second- Flex generation trait offerings creates opportunity to invest 0% 20% 40% 60% 80% 100% in penetration of higher-margin 2006 SECOND-GENERATION TRAIT traits in Delta and Pine Land PENETRATION2 offerings <10% DELTA AND PINE LAND >40% STONEVILLE 1. Percent of total market opportunity reflects the ratio of number of actual acres planted to total trait-acre opportunity identified for each particular trait 2. Second-generation trait penetration reflects percent of commercial portfolio containing either Roundup Ready Flex, Bollgard II or both traits. 15
  • 16. SEMINIS GROWTH Seminis To Leverage Portfolio, Pricing and Molecular Breeding To Create New Growth SEMINIS VALUE CREATION STAGED OPPORTUNITIES FOR INCREASING BUSINESS VALUE Seminis SITUATION: Significant use of molecular markers • In 2006, narrowed commercial VALUE CREATION OPPORTUNITY and research focus to 25 crops Aggressively make hybrid that generate the most profit conversions in strategic crops • Began application of breeding technology, with genome-wide Identify and implement opportunities marker platform for tomatoes to price products to value and peppers; Melons, watermelons and the brassica Assemble genetic maps for key crops family of cabbage, broccoli and cauliflower next OUTLOOK: Focus on 25 most-profitable key crops • Seminis is targeted to contribute $0.10 - $0.125 to 2005 2006 2007 2008 2009 2010 EPS in FY2007 now that NEW VALUE CREATION inventory step-charge is OPERATIONAL EXCELLENCE PIPELINE ADVANCEMENT complete Monsanto Seminis Seminis Commercialize acquires modestly accretive to first hybrids Seminis accretive FY2007 EPS developed by to FY2006 in range of molecular EPS $0.10-$0.125 breeding 16
  • 17. PIPELINE Monsanto’s Pipeline Is Proven By Experience and Poised for Further Success DISCOVERY PHASE I PHASE II PHASE III PHASE IV Proof Of Early Advanced Gene/Trait Pre-launch As of Jan. 1, 2006 Concept Development Development Identification R&D Pipeline Roundup Ready Flex cotton SITUATION: Roundup RReady2Yield soybeans Roundup RReady2Yield canola In FY2006: Dicamba-tolerant soybeans • Three products exited the Dicamba-tolerant cotton YieldGard VT Rootworm/RR2 pipeline for commercialization 2nd-Gen YieldGard Corn Borer • There was positive movement Insect-protected soybeans – advancing phases or adding YieldGard Rootworm II to the pipeline – in 50 percent Soybean nematode-resistance Bollgard III of the pipeline projects Drought-tolerant corn • Three projects were 2nd-Gen Drought-tolerant corn designated as “HIT” projects Higher-yielding canola reflecting our confidence in Drought-tolerant soybeans Drought-tolerant cotton their commercial track Higher-yielding corn Nitrogen utilization corn Higher-yielding soybeans Mavera™ High-value corn with lysine1 Mavera™ I High-value soybeans1 Mavera™ II High-value soybeans1 2nd-Gen High-value corn with lysine1 Feed Corn with balanced proteins1 High oil soybeans for processing1 Improved-protein soybeans Vistive II soybeans Vistive III soybeans Omega-3 soybeans 17 1. These product candidates are in the Renessen pipeline. Renessen is a Monsanto/Cargill joint venture
  • 18. SUMMARY Six Building Blocks Extend Leadership and Elevate Gross Margin Opportunity Through 2010 MONSANTO’S OPPORTUNITY GROSS MARGIN OPPORTUNITY Delta between 2006 current gross GROSS PROFIT AS A PERCENT OF SALES margin and a 51-53% trajectory 54% reflects continued growth opportunity for seeds and traits FACTOR VALUE1 GROSS MARGIN ‘PULL’ 52% HIGH U.S. corn International MEDIUM 50% corn Global biotech MEDIUM traits 48% LOW CURRENT LEVEL Cotton platform MEDIUM Seminis 46% HIGH R&D pipeline 44% 2003 2004 2005 2006 2007F 2008F 2009F 2010F 1. Increment to total gross profit in the period 2006-2010; Some categories will overlap. MEDIUM LOW HIGH >$250M $100M - $250M <$100M 18

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