monsanto 11-08-07-4

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monsanto 11-08-07-4

  1. 1. TERRY CREWS EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER MONSANTO BIENNIAL U.S. INVESTOR DAY NOVEMBER 8, 2007 1
  2. 2. OVERVIEW Operational Excellence, Pricing to Value, Pipeline Drive Seminis Growth Over Next Five Years MONSANTO GROSS PROFIT 2012 GROWTH RANGE GROWTH TARGETS Gross profit targeted to double $9,000 from 2007 through 2012 STRATEGIC PLAYBOOK $8,000 $7,000 Seminis GROSS PROFIT (IN MILLIONS) $6,000 1. Improve working capital and margins through $5,000 operational excellence $4,000 2. Price existing products to value $3,000 3. Shift portfolio to richer mix of products $2,000 4. Launch new products with $1,000 increased value $0 5. Accelerate new product launches via use of MILESTONES 2004 2007 2012 molecular markers 2010 2007 Gross margin Base Gross Profit: target: 52-54% $4,286M ONGOING EPS GROWTH: MID-TO-HIGH TEENS 2
  3. 3. SEMINIS Tomatoes, Peppers, Cucumbers and Melons Predominant Revenue Opportunities in Vegetable Industry INDUSTRY SALES MONSANTO SALES 2007 TOTAL INDUSTRY PROJECTION FY 2007 ACTUALS 11% 16% 28% 31% 10% Solanaceous Solanaceous 7% Cucurbits Cucurbits Brassica Brassica Large Seed Large Seed 17% Leafy & Other 13% Leafy & Other Root & Bulb Root & Bulb 21% 20% 13% 13% Product categories that Similar to industry, Monsanto’s include tomatoes, sales of product categories that peppers, cucumbers and include tomatoes, peppers, melons represent 51% of cucumbers and melons represent global vegetable seed 49% of FY 2007 vegetable seed revenues of $3B revenues of $612M 3 Source: Company estimates
  4. 4. SEMINIS Strong Positions Established in Key Crops to Capture or Maintain Leadership in Growing Market CURRENT STATUS AND OPPORTUNITY: SEMINIS KEY CROPS IN PROFESSIONAL MARKETS TOTAL TOTAL SEED SEMINIS MARKET TOP TWO MARKET VALUE CURRENT ACREAGE COUNTRIES OPPORTUNITY VALUE SHARE OPPORTUNITY (ANNUAL SALES $M) (PERCENT) (M ACRES) SOLANACEOUS TOMATOES 6.7 $500M-$550M 17%-19% Spain, Italy PEPPERS 7.1 $325M-$375M 24%-27% Spain, U.S. ROOT & BULB ONION 4.8 $250M-$300M 14%-17% U.S., China CUCURBITS CUCUMBERS 2.7 $175M-$225M 28%-35% U.S., Spain MELON 1.8 $125M-$175M 10%-15% Spain, France 4
  5. 5. SEMINIS Focus on Operational Excellence Will Lift Margins, Improve Working Capital and Create Base for Further Value Creation (PERCENT OF NET SALES) TARGET 70% CROP: Vegetables 60% GROSS PROFIT Operational 50% OBJECTIVE: excellence 40% 2008 STATUS 65% 30% • Inventory write-downs in 44% 20% FY 2007 resulted in 44% 10% margin • Inventories and 0% RECEIVABLES AND INVENTORIES receivables at 80% of net 2007 2012F sales in FY 2007 (PERCENT OF NET SALES) 90% 2012 OUTLOOK 80% 70% • Streamlined portfolio, TARGET 25% 60% improved demand forecasting and focus on 50% 20% working capital lead to 40% 20+ point improvement 30% 55% in gross margin and and 20% 40% 5-15 point reduction in 10% receivables and 0% inventories as percent of 2007 2012F net sales INVENTORIES RECEIVABLES 5
  6. 6. SEMINIS Similar to Strategy in Row Crops, Strategy in Seminis Is to Shift Commodity Inputs and Downstream Value Into Seed VEGETABLE PRODUCTION INPUTS CROP: Vegetables 2007 NAFTA, EUROPE AND MIDDLE EAST INDUSTRY PROJECTION Improve value OBJECTIVE: of the seed 1% 1% 2008 STATUS 12% • Today, vegetable Insecticides producers spend 5% of 12% Fungicides their total input costs on Herbicides seeds 5% Fertilizer 2012 OUTLOOK Seed 69% Labor, Harvest, • Introduce new varieties Marketing & that move value from Chemical Application inputs into seed or that improve yields to improve grower returns • Additional opportunity to shift value from retail Vegetable growers in North vegetable value into seed America, Middle East and with improvements in Europe spend $43B on inputs; quality and processing seed only $2B of this total characteristics 6 Source: Company estimates
  7. 7. SEMINIS Seminis Expected to Outpace Industry Sales Growth Projection with 6 Percent CAGR Through 2012 VEGETABLE SEED: GLOBAL MARKET SIZE $4,000 $3,500 $3,000 ANNUAL REVENUE (IN MILLIONS) 4 percent CAGR drives $2,500 seed market $2,000 opportunity of $3.7 Seminis expected to grow billion annually by 2012 faster than industry with 6 $1,500 percent CAGR $1,000 $500 $0 2007 2008F 2009F 2010F 2011F 2012F MARKET BENCHMARKS SEMINIS REVENUES SEED MARKET $3B PRODUCTION ALL OTHER VEGETABLE SEED REVENUES 96M ACRES 7 Source: Company estimates
  8. 8. SEMINIS Shift to Higher Value Segments, Such as Protected Culture, Lifts Sales and Margins MULTIPLE MARKET OPPORTUNITIES IN TOMATOES INPUT COST/ REVENUE/ SEED SEED YIELD/ACRE ACRE ACRE RATE/ACRE1 COST/ACRE OPEN-FIELD 32 tons $1.6K $2.4K 6Mx $42 PLASTIC HOUSE 57 tons $26K $32K 10Mx $1200 PROTECTED- CULTURE GLASS HOUSE 230 tons $180K $207K 14Mx $2600 PROTECTED-CULTURE PROTECTED-CULTURE VALUE CREATION Because of added value from increased yield and quality, 30 VALUE PER ACRE premium on greenhouse tomato AVERAGE SEED 25 seed is 26X seed for open-field (INDEXED) 20 cultivation 15 In protected culture cultivation, 10 growers raise crops indoors for controlled environment, consistent 5 quality and less pressure from 0 insects and disease OPEN-FIELD PLASTIC HOUSE GREENHOUSE TOMATOES 8 1. Mx = 1000 seeds
  9. 9. SEMINIS Roughly 35 Percent of Seminis’ Tomato Sales from Protected Culture Today; Segment to Grow by Nearly 10 Percent CAGR CROP: Vegetables SEMINIS ANNUAL TOMATO SEED SALES PROTECTED CULTURE VS OPEN FIELD Improve OBJECTIVE: market share INDEX = 2007 mix 2008 STATUS 2012F 2007 • Tomato seeds for protected culture garners 17x to 26x price 16% of open field seed from 13% improved yields • Current protected 55% culture tomato seed 26% 61% sales only 38% of our 29% annual tomato sales 1.3X 2012 OUTLOOK • Target to grow segment by nearly 10% OVER 2007 INDEX CAGR via breeding OPEN FIELD investment and PLASTIC HOUSE acquisitions such as Western Seed GLASS HOUSE 9 Source: Company estimates
  10. 10. SEMINIS Five New Products Identified As Key Launches By 2012 NEW PRODUCT OPPORTUNITY: PRODUCTS TO BE LAUNCHED BY 2012 TYPE OF VALUE PER ACREAGE KEY EXPECTED PRODUCT CONCEPT BENEFIT ACRE OPPORTUNITY REGIONS LAUNCH SOLANACEOUS Disease, Multiple agronomic SWEET PEPPER $1,600 26,000 U.S. 2011 nematode and improvements virus resistance BRASSICA RAISED HEAD Enabled mechanical U.K., U.S., Labor savings Up to $600 200,000 2010 BROCCOLI harvest Spain CUCURBITS $80-$100 50,000 pickling pickling Disease U.S., CUCUMBER Disease resistance 2011 resistance Mexico 100,000 slicers $150-$170 slicers Enhanced U.S., $160 NA WATERMELON Improved texture 290,000 2011 processing and Europe, $260 EA shelf life Mexico LEAFY RUGBY Extended shelf U.S., Processor quality $160 40,000 2009 LETTUCE life Mexico 10
  11. 11. SEMINIS Raised-Head Broccoli Brings Cost of Harvesting Into Value of Seed KEY REGIONS Spain, U.K., Mexico, U.S. AVAILABLE ACRES 200K Acres Raised-Head Broccoli PERCENT PENETRATED 0% CROP: Vegetables OBJECTIVE: New products PRODUCT CONCEPT Mechanical • Raised-head broccoli enables harvesters mechanical harvest and can move improved quality through fields, more 2007 PERFORMANCE UPDATE easily removing • Breeding and mechanical individual harvester prototypes broccoli developed heads from • Commercial varieties under raised-head development varieties • Demonstration trials planted Labor for traditional broccoli harvesting costs $200-$400/acre Increased use of mechanization for harvesting could result in cost savings per acre of up to 80% of labor Reduced cooling/warehousing costs and greater harvest flexibility provide additional $200/acre of savings Market delivery improvement leads to enhanced quality 11
  12. 12. SEMINIS Improved-Texture Watermelon Expected To Be First of Several Products to Move Downstream Value into Seed KEY REGIONS U.S., Europe AVAILABLE ACRES 290K Acres Improved-Texture Watermelon PERCENT PENETRATED 0% VALUE OPPORTUNITY: SHELF-LIFE AND EATING QUALITY CROP: Vegetables OBJECTIVE: Watermelon hybrids with 2x New Products improved texture compared with PRODUCT CONCEPT commercial standards to provide superior shelf life • Improved texture enables improved shelf-life benefit and Minimal water loss and flesh deterioration provides greater enhanced eating quality as appeal processed product has superior firmness, lower Superior texture and crispness liquid purge and improved compared with commercial visual appeal standards 2007 PERFORMANCE UPDATE U.S. Watermelon Value Chain • Oval and round shape hybrids $1,450M developed • Initial consumer taste panels $800M complete $325M • Commercial trials initiated $12M Grower/ Retailer/Food Wholesaler1 Seed Shipper1 Service1 12 1. Source: Cirrus
  13. 13. SEMINIS Genetic Mapping Timetable One Year Ahead of Original Plans with Target Increase of 50 to 150 Percent CROP: Vegetables MARKER PLATFORMS Accelerated OBJECTIVE: launches 2008 STATUS SWEET CORN 5,000 NUMBER OF MARKERS DEVELOPED • Began application of NEW breeding technology, TARGET: 2,500 with genome-wide 2,500 markers marker platform for tomatoes and peppers NEW TARGET: 1,500 2012 OUTLOOK 1,500 markers • By 2009, Seminis 1,000 should have 1,500 OLD markers for each of the TARGET: BRASSICA 1,000 9 crops, 2,500 plus ON TOMATO EL markers markers for tomatoes RM 500 MELON TE and peppers; one year EXPLORATORY: WA PEPPER ONION, CUCUMBER, ahead of original target LETTUCE, BEAN with 50-150% more markers 2009F 2007F 2008F 2006 13
  14. 14. SEMINIS Development of New Products Using Markers Reduces Time from Discovery to Commercialization by One-to-Two Years TARGET: CHARACTERISTIC , i.e. DISEASE SNP: SINGLE NUCLEOTIDE POLYMORPHISM RESISTANCE, SEED QUALITY, VIRUS RESISTANCE, MABC: MARKER ASSISTED BACKCROSSING FLAVOR, YIELD 1,166 new SNP TARGET markers TARGET MAPPED MABC COMPLETE BRED IN LINES VIRUS DISEASE RESISTANCE RESISTANCE FLAVOR TARGET 1,218 new SNP TARGET MAPPED MABC COMPLETE BRED IN markers LINES DISEASE VIRUS RESISTANCE RESISTANCE MARKER SNP marker TARGET MAPPED MABC WORK IDENTIFICATION platform DISEASE RESISTANCE TARGET SNP marker TARGET MAPPED MABC COMPLETE BRED IN platform LINES DISEASE YIELD RESISTANCE Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY2007 FY2008 FY2009 FY2010+ 14
  15. 15. SEMINIS Breeding Transfers Value of Virus Protection From Insecticide Into Seed KEY REGIONS Europe, U.S., Mexico AVAILABLE ACRES 120K Acres Tomato Yellow Leaf PERCENT PENETRATED 0% Curl Virus – 2ND GENERATION TOMATO YELLOW LEAF CURL VIRUS: CROP: Vegetables SECOND GENERATION Tomato Yellow PRODUCT: Leaf Curl Virus 2008 STATUS • First generation of resistance to tomato yellow leaf curl is in marketplace and increasing in penetration with profound effects on grower returns vs. susceptible varieties 2012 OUTLOOK • Second-generation resistance identified and being developed Yield losses from areas affected by tomato yellow leaf curl aggressively to bring to virus range from 50%-90%; value created, $1000-$3250/acre marketplace Disease prevalent in most tropical climates where tomatoes are grown 15
  16. 16. SEMINIS Focus on Operational Excellence and Creation of New Value Lift Sales and Margins Through 2012 SEMINIS VALUE CREATION: CROP: Vegetables STAGED OPPORTUNITIES FOR INCREASING GROSS PROFIT 2008 STATUS VALUE CREATION OPPORTUNITY • Focus on operational New product launches; excellence, pricing to use of molecular markers value, shifting to richer Aggressively shift mix via protected culture and mix and new product hybrid conversion launches • Continue application of Identify and implement opportunities to price products breeding technology, to value with target of 1,500+ markers each for 9 Assemble genetic maps for key crops crops by end of calendar year 2009 Focus on operational excellence; working capital 2012 OUTLOOK management • Operational excellence 2007 2008 2009 2010 2011 2012 generates improved PIPELINE OPERATIONAL EXCELLENCE NEW VALUE CREATION ADVANCEMENT working capital; margins and sales lift 2007 2012 FORECAST from pricing to value • Use of molecular Seminis Net Sales $612M >$800M markers should allow Seminis Gross Profit for rapid introduction 44% 65% Percentage Of Net Sales of new products 16

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