monsanto 06-05-08

664 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
664
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
8
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

monsanto 06-05-08

  1. 1. BRETT BEGEMANN EXECUTIVE VICE PRESIDENT, GLOBAL COMMERCIAL MERRILL LYNCH AGRICULTURAL CHEMICALS CONFERENCE June 5, 2008 1
  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; 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. 3. OVERVIEW Even with Record Corn Prices Spurring Planting, Global Corn Production Per Acre Is Sub-Optimized Today GLOBAL CORN PRODUCTION1: YIELD CORE PRODUCTIVITY MEASURES AND EVALUATION Boosting yield-per- acre can make a meaningful difference in supply-demand CANADA environment EU 27 3M ACRES 136 BU/AC 500M BUSHELS 27M ACRES • If India, Mexico and 90% HYBRID U.S. Brazil moved to 100 99 BU/AC CHINA 2B BUSHELS bushel per acre yields, 90M ACRES 151 BU/AC 69M ACRES they could produce MEXICO 13B BUSHELS 83 BU/AC 6B BUSHELS nearly 4 billion 18M ACRES additional bushels of 25% HYBRID INDIA 48 BU/AC BRAZIL corn annually – equal to 900M BUSHELS 20M ACRES 36M ACRES total world corn exports 45% HYBRID 75% HYBRID 32 BU/AC in 2007. 58 BU/AC 700M BUSHELS 2B BUSHELS ARGENTINA 10M ACRES 111 BU/AC 900M BUSHELS Optimization of yield per acre 1. Source: USDA FAS and internal Poor/Subsistence Sub-Optimized Optimized estimates. 3
  4. 4. OVERVIEW Monsanto Is the Technology Play in the Ag Space, Creating Value By Using Technology to Boost Yield and Reduce Risk MONSANTO’S TECHNOLOGY PROPOSITION: CREATING VALUE THROUGH ‘YIELD’ 2.00 BIOTECH PROTECTING YIELD U.S. Corn Yield Per Acre Making sure potential U.S. Yield Per Acre (Indexed: 1980) 1.75 yield translates to realized yield 1.50 REDUCING RISK 1.25 By reducing volatility caused by insects and environment, 1.00 biotech reduces production risk 0.75 1980 1985 1990 1995 2000 2005 BREEDING VALUE INCREASING YIELD Average U.S. yields for CREATING YIELD corn has increased >20% in Food, Feed and Boosting the inherent yield last 20 years Fuel possible from the seed 4
  5. 5. OVERVIEW With Continued Emphasis on Breeding and Biotech, 300 Bushel-Per-Acre Corn Is Achievable by 2030 PROJECTED CORN YIELD PROGRESSION: 1970-2030F 300 BIOTECH Yield & stress traits bring incremental and additive yield gains 250 MOLECULAR BREEDING U.S. Yield Per Acre (bu/ac) Advanced breeding 200 doubles the rate of annual genetic gain BASELINE 150 U.S. average corn yield: 151 bu/ac in 2007 100 50 YIELD Historically yields 0 doubled over 1970 1990 2010 2030 almost 50 years; Historical Yield 30-Year Trend Going forward, yields should Molecular Breeding Advances Biotech Advances double in 25 5
  6. 6. OVERVIEW 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 GROWTH COMES FROM SEEDS & $2,000 TRAITS $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 • Complete Roundup penetration • Drive trait • Drive int’l traits DeRuiter Ready 2 Yield penetration purchase SmartStax Accelerated trait Roundup Ready Globalized $1B Vegetable Game-Changing Platform platform 2 Yield Platform Cotton Platform Platform Launches
  7. 7. U.S. CORN In a Contracted Corn Market, Monsanto Brands Have Grown Share and Increased Trait Penetration U.S. Corn Pre-Season Current Estimate Estimate STATUS 2-3 share SEED SHARE 1-2 share GROWTH: • With acres down from 93M in 2007, in 2008 Monsanto 55%-60% TRIPLE 50%+ PENETRATION: has: 1-2 share SEED SHARE Organic growth – Increased market share in GROWTH: DEKALB and ASI 55%-60% TRIPLE 50%+ – Expanded triple stack PENETRATION: penetration – Realized trait price MARKET RESEARCH1: FARMER SATISFACTION WITH DEKALB increases • Share growth continues to Percent of customers “very satisfied” or “somewhat satisfied” with seed be based on farmers’ corn brand: recognition of superior 100% performance vs. direct 93% competitors 88% 80% 1.Monsanto market research, 60% December 2007 40% 20% 0% 2006 2007 7
  8. 8. U.S. CORN SmartStax Resets Trait Platform in 2010, Changes Competitive Standard and Opens New Acre Opportunity LIKELIHOOD OF PLANTING SmartStax TECHNOLOGY SMARTSTAX Assuming it was available at a reasonable or acceptable price and in the right hybrids for COMMERCIAL OPPORTUNITY your farm, how likely are you to plant this next generation of insect protection technology? “Definitely will” or “Probably will” 2010 LAUNCH TARGET: YIELDGARD CORN TARGET ACRE 60-65M 85% BORER USERS WHO OPPORTUNITY: TREAT FOR ROOTWORM VALUE PROPOSITION 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2008 trials evaluating SmartStax in elite PERCENT OF FARMERS germplasm, quantifying sources of potential yield advantages: HERCULEX® I CORN 81% BORER USERS WHO TREAT FOR Improved  ROOTWORM 1-2% consistency: 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Primary pests Improved  LIKELIHOOD OF SWITCHING BRANDS FOR SmartStax consistency: 1-2% Secondary pests If your current seed brand did not offer this new Monsanto Insect Protection Technology, how likely would you be to switch seed brands to obtain this new technology? Would you say: “Very likely” or “Somewhat likely” 3-6% Reduced refuge  YIELDGARD CORN 74% BORER USERS WHO 5-10% TREAT FOR ROOTWORM 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% PERCENT OF FARMERS HERCULEX I CORN 65% BORER USERS WHO TREAT FOR ROOTWORM 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 8
  9. 9. INTERNATIONAL CORN Corn Growth Isn’t Isolated to U.S.; Expanding Seed Footprint Ahead of New Biotech Launches Increasingly Important INTERNATIONAL CORN BRAND PERFORMANCE: LEADING MARKET INDICATORS OF MONSANTO BRAND SHARE PERFORMANCE – 2008 U.S. EU27 2007 NATIONAL 2007 BRAND 23% 13% BRAND SHARE: SHARE: PRE-SEASON PRE-SEASON +1-2 share SHARE +1-2 share SHARE ESTIMATE: ESTIMATE: CURRENT CURRENT +2-3 share SHARE +0.5 share SHARE ESTIMATE: ESTIMATE: INDIA ARGENTINA 2007 BRAND 2007 TOTAL 39% 40% SHARE: BRAND SHARE: PRE-SEASON PRE-SEASON +1-2 share +1-2 share SHARE SHARE ESTIMATE: ESTIMATE: CURRENT BRAZIL CURRENT Flat +5 share SHARE SHARE ESTIMATE: ESTIMATE: 2007 TOTAL 40% BRAND SHARE: PRE-SEASON Flat SHARE ESTIMATE: CURRENT Held SHARE Share ESTIMATE: 9
  10. 10. INTERNATIONAL CORN Larger Seed Footprints in South America Enable Larger Launches and Faster Ramp Up Than Competition LATIN AMERICAN TRAIT OUTLOOK: 2008-2009 PLANTING SEASON BRAZIL ARGENTINA 2007-2008 SEASON 2007-2008 SEASON HYBRID MARKET SIZE: 27M HYBRID MARKET SIZE: 10M BRAND SHARE: 40% BRAND SHARE: 45% NEAREST-COMPETITOR NEAREST-COMPETITOR ~20% ~15% SHARE: SHARE: 2008-2009 SEASON 2008-2009 SEASON RECENT TRAIT YieldGard Corn RECENT TRAIT Stack: APPROVAL: APPROVAL: Borer YieldGard Corn Borer with ESTIMATED TOTAL 15-20M ACRE OPPORTUNITY: Roundup Ready Corn 2 TOTAL ACRES 10M ACCESSED IN ESTIMATED TOTAL MONSANTO BRAND: 7-9M ACRE OPPORTUNITY: TOTAL ACRES 4.5M ACCESSED IN MONSANTO BRAND: Strong brand presence means Monsanto has 2008-2009 TRAIT LAUNCH access to >50% of trait TARGETED LAUNCH: 1-2M market opportunity in its brands – allowing 2008-2009 TRAIT LAUNCH for aggressive trait penetration TARGETED LAUNCH: 1-1.5M 10
  11. 11. U.S. CORN Monsanto’s Pricing Model Aimed at Total Value Created; Shared with Farmer YieldGard VT Triple  Improved Yield PRICING TO VALUE EXAMPLE: 2008 Yield-advantage value at 3-5 year average Yield1 Improved commodity price  IMPROVED YIELD • Value shared with farmers 15-20 (BU/AC): 3-5 YEAR COMMODITY PRICE: $2.35  Indirect Benefits Quantified benefits, such as convenience and $35-$47 peace of mind Indirect Benefits2  • Value shared with farmers CONVENIENCE/ $5 PEACE OF MIND:  Replacement Value Incremental Value Created $40-$52 Factors costs farmers would have incurred for ( + ) substitute insect and weed control • 100% of replacement value is captured PRICING APPROACH PRICING APPROACH Cost3: Per-Acre Trait $28-$36 Percentage of incremental value shared ultimately determined by market research, Value4 Replacement ($17)  pricing simulations and focus groups to assess: Incremental Farmer Cost: $11-$19 • Market Share Implications Incremental Value Shared: 60-70% • Trait Penetration Effect • Competitive Reaction 1. Monsanto estimates, based on better insect and weed control over conventional options 2. Monsanto estimates, based on farmer surveys quantifying benefits such as convenience and peace of mind 3. Retail price range for YieldGard VT Triple in 2008, at normal seeding rates 4. Subtracts costs farmers would have spent had they not used a trait package 11
  12. 12. SOYBEANS Yield Improvement in Soybeans is Largest Area of Interest Among U.S. Farmers Today CORN VS. SOYBEAN HISTORIC YIELD TRENDS: 1930-2007 8 Corn Yield Soybean Yield CORN Corn yields have 7 increased 7X in the last century 6 Indexed Yield Per Acre 5 4 SOYBEANS 3 Soybean yields have increased 3X in the same period 2 1 0 YIELD 1930 1940 1950 1960 1970 1980 1990 2000 U.S. soybean growers are anxious for technology that can deliver step- change in yield 12
  13. 13. SOYBEANS Roundup Ready 2 Yield Soybeans Have Potential to Deliver Up to 10 Years of Breeding Gains Through One Trait 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% AVERAGE ANNUAL 0.5 bu/ac GAIN OVER 30 YEARS: 11% 10% 9% ROUNDUP READY 2 YIELD TARGETED YIELD 7-11% 9% 8% IMPROVEMENT: YIELD 3-5 bu/ac IMPROVEMENT ON 7% 7% 6% AVERAGE YIELDS 4% 2% YIELD 0% 4 YEAR Roundup Ready 2 Yield has 2004 2005 2006 2007 AVERAGE potential to deliver up to 10 years of breeding gains with a single  Roundup Ready 2 Yield soybeans yield 7 to 11 percent trait higher than Roundup Ready soybeans based on 73 Monsanto field trials from 2004-2007 13
  14. 14. COTTON Declining Planted Acres in U.S. Cotton Shifts Production Focus Globally; Needs Technology Application CORN VS. COTTON HISTORIC YIELD TRENDS: 1930-2007 8 CORN Corn Yield Cotton Yield Corn yields have 7 increased 7X in the last century 6 Indexed Yield Per Acre COTTON Cotton yields have 5 increased 5X, but cotton acres are only 4 1/4 of what the U.S. planted at the 3 beginning of this period 2 1 0 YIELD 1930 1940 1950 1960 1970 1980 1990 2000 With shrinking U.S. cotton acres, importance of yield-enhancing technology becomes magnified 14
  15. 15. COTTON Least U.S.-Centric Crop, Cotton Opportunities Lie In Breeding and Biotech Going Forward GLOBAL COTTON LANDSCAPE: CORE PRODUCTIVITY MEASURES AND EVALUATION India U.S. OVERVIEW  OVERVIEW  Expanding cotton market Cotton business effectively with growing demand for behind technology curve; technology, but assumes Competing against local pricing risk Monsanto’s technology head-start via Stoneville 2008 TRAIT  PENETRATION: 2008 DELTA & 33-36% PINE LAND 2008 BOLLGARD II  SHARE: PENETRATION: INITIATIVES  INITIATIVES  • Breeding: Advancing 8 • Biotech: Full conversion Australia varieties for 2008 testing to Bollgard II by 2012 using Monsanto underway OVERVIEW  breeding technology • Biotech: Approval Small, but valuable trait market; Ravaged • Biotech: Full conversion pending for Roundup by 2 years of drought to Bollgard II by 2010 Ready Flex underway INITIATIVES  • Biotech: Drought-tolerant cotton in pipeline phase 1, with expanded field testing underway 15
  16. 16. VEGETABLE SEEDS De Ruiter Seeds Helps Address Gap in Monsanto Vegetable Seed Portfolio in Growing Protected-Culture Segment FY07 Annual net Sales = $145M FY07 Annual Net Sales = $612M Portfolio Composition: Percent of Sales1 Portfolio Composition: Percent of Sales1 10% 12% Open-Field Protected-Culture 88% 90% Pairing Seminis with De Ruiter Seeds brings together the leading positions in open-field and protected-culture segments • Both segments benefit from the coordinated molecular breeding infrastructure 1. Size of pies not to scale with revenue generated by Seminis or De Ruiter Seeds 16
  17. 17. R&D PIPELINE Strong Pipeline Reflects Growing Innovation and Leadership; Expected to Create Commercial Value of $>5B in 2020 DISCOVERY PHASE 1 PHASE 2 PHASE 3 PHASE 4 Drought- HIGH Tolerant FAMILY TRAITS► Family CORN: COLLABORATION YIELD & STRESS Nitrogen- BROAD-ACRE HIGH Utilization FAMILY TRAITS► YIELD Family Broad-Acre, MEGA Higher-Yielding FAMILY TRAITS► Family SOYBEANS: Broad-Acre, BROAD-ACRE HIGH Higher-Yielding FAMILY TRAITS► YIELD Family 2020 VALUE RANGES: Roundup Bollgard III Omega-3 Ready 2 Yield soybeans soybeans Roundup MEGA HIGH Ready 2 Yield canola $300M-$500M Insect-protected >$1BM Roundup Ready 2 Yield soybeans YieldGard VT PRO corn High-oil MID LOW soybeans <$150M $150M-$300M Dicamba-tolerant Improved- soybeans protein Corn Soybeans Cotton Canola Vistive III soybeans 17
  18. 18. SUMMARY Monsanto’s Strategy to Extend Competitive Lead Through Innovation, Driving 2012 Growth 2012 GROWTH RANGE GROSS PROFIT OUTLOOK BY SEGMENT Gross profit targeted to more 2007-2012F than double from 2007 through >2X 2012 including recent lift in Roundup to $1.8B gross profit $10,000 2007 BASELINE STRATEGIC PLAYBOOK All growth is organic, from base $8,000 business and pipeline IN MILLIONS  U.S. Corn $6,000  International Corn  Soybeans  Cotton $4,000  Vegetables  R&D Pipeline $2,000 Leadership extends as we plan to deliver four game-changing $0 technologies between now and the middle of the next decade 2007 2008F 2012F All Other Agricultural Productivity Roundup And Other Glyphosate-based Herbicides Seeds & Genomics 18

×