monsanto 11-10-05c

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monsanto 11-10-05c

  1. 1. CARL CASALE EXECUTIVE VICE PRESIDENT, NORTH AMERICA COMMERCIAL MONSANTO BIENNIAL U.S. INVESTOR DAY Nov. 10, 2005 1
  2. 2. OVERVIEW Two-Step, Two-Horizon Strategy Creates a Line of Sight for Success through 2010 TARGET: NORTH AMERICA 2006 2007 2008 2009 2010 GROW Grow Current Portfolio Grow Globally LEAD Grow the Pipeline Lead through Innovation Lead in an Increasingly Competitive Market Lead in New Market Opportunities 2
  3. 3. OVERVIEW Roundup Is Positioned for Stable Contribution U.S. Branded Roundup Herbicide CREATING VALUE BUSINESS REPORT Structural changes to Roundup business completed; staffing, U.S. Branded Roundup Herbicide portfolio, marketing programs Decreased Increased optimized Business Complexity Working capital structure changed to unlock additional Product Innovations free cash Pricing in world band of Staffing $11-$13 per REG; incremental volume growth with Roundup Working Capital Investment Ready crop expansion 3
  4. 4. OVERVIEW Acceleration In Seeds and Traits Drives NALAN Commercial Gross Profit Evolution MONSANTO GROSS PROFIT GROWTH 2003 2005 2007F TOTAL GROSS TOTAL GROSS TOTAL GROSS PROFIT = $2.3M PROFIT = $3.0M PROFIT = $3.6M ALL OTHER AGRICULTURAL SEEDS & GENOMICS ROUNDUP AND OTHER PRODUCTIVITY GLYPHOSATE-BASED HERBICIDES 4
  5. 5. OVERVIEW Biotechnology Adoption Reflects Trait Value, Independent of Commodity Prices MONSANTO U.S. BIOTECH ACRES VS. AVERAGE MARKET PRICE CORN SOYBEANS ACRES ACRES $/BU (IN MILLIONS) $/BU (IN MILLIONS) 70 50 $8.00 $3.00 R2 = .58 R2 = .38 45 60 $7.00 $2.50 40 $6.00 50 35 $2.00 $5.00 30 40 25 $4.00 $1.50 30 20 $3.00 $1.00 15 20 $2.00 10 $0.50 10 $1.00 5 0 0 $0.00 $0.00 2000 2001 2002 2003 2004 2005 2000 2001 2002 2003 2004 2005 SOYBEAN SOYBEAN COMMODITY CORN BIOTECH CORN COMMODITY BITOECH ACRES PRICES ACRES PRICES Source: USDA and Monsanto estimates 5
  6. 6. OVERVIEW Corn and Soy Acreage Is Resistant to Change and Monsanto Is Protected if it Does PLANTED CORN ACRES PLANTED SOYBEAN ACRES 3M ACRES 3.2M ACRES LARGEST ONE- 85 LARGEST ONE- 78 YEAR CHANGE YEAR CHANGE 83 IN FIVE-YEAR IN FIVE-YEAR 76 PERIOD PERIOD 81 ACRES (IN MILLIONS) ACRES (IN MILLIONS) 74 79 77 72 75 70 73 71 68 69 66 67 65 64 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 2006 AVERAGE GROSS PROFIT DIFFERENTIAL PER ACRE Corn vs. Soy = $0.33 Source: USDA and Monsanto estimates 6
  7. 7. GROW AND LEAD Growth in Next Two Years Primarily Comes From Corn and Cotton, Leadership Comes from Expanding the Market TARGET: NORTH AMERICA 2006 2007 2008 2009 2010 GROW Grow value of corn franchise by using LEAD multiple go-to-market channels; increasing market share; expanding the trait market; and driving stacked-trait penetration Monsanto’s global “genetic footprint” has expanded Grow branded and licensed cotton seed market share while rapidly penetrating Monsanto’s combination of germplasm second-generation stacked trait and stacked traits is platform of choice combinations for farmers, and foundation for introduction and expansion of new traits New traits are commercialized annually 7
  8. 8. GROW Monsanto’s Germplasm Reach Continues to Translate to Greater Market Share TARGET: GROW U.S. Corn Grow the value of the corn franchise Market Share 60% 51% 49% 46% 50% 44% 43% 40% 30% SUSTAINABLE 1-2 POINT BRANDED 20% SHARE GAINS 10% 0% 2001 2002 2003 2004 2005 2006F 2007F AMERICAN SEEDS, INC BRANDS HOLDENS/CORN STATES LICENSEES DEKALB AND ASGROW BRANDS 8
  9. 9. LEAD Global Breeding Capabilities Create Full Product Pipeline for Three Channels TARGET: LEAD U.S. Corn Monsanto’s global “genetic footprint” Channel Strategy has expanded 1 2005 COMPETITIVE CORN Channel: Owned YIELD COMPARISON Outlet: Retail 200 Target reach: National 190 BUSHELS/ACRE 180 2 Channel: Owned Outlet: Regional, high-touch 170 Target reach: Local 160 150 95 100 105 110 115 3 Channel: Licensed, non-exclusive RELATIVE MATURITIES (DAYS) Outlet: Regional, high-touch COMPETITORS MONSANTO BRANDS Target reach: Local 9
  10. 10. GROW Market Opportunity for Roundup Ready Corn on Track for 60M Acres Longer Term TARGET: GROW Roundup Ready Grow the value of the corn franchise Corn Roundup Ready corn is on pace for 50M INFLECTION POINT: EU acres in 2008 in the IMPORT 30 APPROVALS U.S. INFLECTION POINT: 25 DOMESTIC CHANNELING PROGRAM U.S. ACRES 20 15 SUSTAINABLE ACREAGE 10 GROWTH 5 0 1998 1999 2000 2001 2002 2003 2004 2005 2006F 2007F 10
  11. 11. GROW Roundup Ready Is Poised to Penetrate Pre-Emergent Market Segments TARGET: GROW Roundup Ready Grow the value of the corn franchise Corn U.S. CORN HERBICIDE APPLICATON SEGMENTS PRE-EMERGENT TREATMENT ONLY 32% 31% POST-EMERGENT TREATMENT ONLY PRE- AND POST-EMERGENT TREATMENTS 37% PRE- AND POST-EMERGENT PRE-EMERGENT MARKET POST-EMERGENT MARKET MARKET 6% 51% 37% CURRENT PENETRATION CURRENT PENETRATION CURRENT PENETRATION MARKET OPPORTUNITY MARKET OPPORTUNITY MARKET OPPORTUNITY Source: Doane Marketing Research 11
  12. 12. GROW Roundup Ready Corn Provides Yield Advantage Vs. Conventional Pre/Pre-Post Programs TARGET: GROW Roundup Ready Grow the value of the corn franchise Corn Advantage 8.1 BU/AC YIELD 210 ADVANTAGE 200 6.5 BU/AC YIELD 6 BU/AC YIELD ADVANTAGE 190 ADVANTAGE BUSHELS/ACRE 5.4 BU/AC YIELD 180 ADVANTAGE 5.5 BU/AC YIELD 170 ADVANTAGE 160 150 2001 2002 2003 2004 4 Year Average ROUNDUP READY SYSTEM CONVENTIONAL SYSTEM – SAME ROUNDUP READY HYBRID 12
  13. 13. GROW Zone-Based Royalties Leverage Roundup Ready Corn Base and Expand Market for YieldGard Family TARGET: GROW Zone-Based Grow the value of the corn franchise Royalty System SEGMENTED VALUE OPPORTUNITY STATES WITH WEED CONTROL NEEDS STATES WITH CONSISTENT NEED FOR WEED CONTROL, CORN-BORER CONTROL AND ROOTWORM CONTROL STATES WITH CONSISTENT NEED FOR WEED CONTROL, CORN-BORER CONTROL AND SPORADIC ROOTWORM CONTROL Source: 2004 Farm Progress Grower Survey and Monsanto Estimates 13
  14. 14. GROW Seed Partners Have Responded Positively to Zone Based Royalties With Increased Trait Production TARGET: GROW Expanding Trait Grow the value of the corn franchise Penetration ROUNDUP READY SUPPLY YIELDGARD ROOTWORM SUPPLY 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2005 2006 2005 2006 BRANDED LICENSEES1 BRANDED LICENSEES1 COMPOSITE AVERAGE2 COMPOSITE AVERAGE2 Illinois/Indiana Seed Partners Are Ramping Up Production of Roundup Ready and YieldGard Rootworm 1. A sub set of largest Holden’s/Corn States Licensees Operating in Illinois and Indiana 2. A composite of all Holden’s/Corn States Licensees Operating in Illinois and Indiana 14
  15. 15. LEAD YieldGard Rootworm Penetration Increases Despite Competition TARGET: LEAD Expanding YieldGard Monsanto’s combination of germplasm Rootworm Trait Penetration and stacked traits is platform of choice 2005 2006F 2010F 4M 8M 15M TOTAL ROOTWORM ACRES = 10-15 M TOTAL ROOTWORM ACRES = 15-20 M TOTAL ROOTWORM ACRES = 25-30 M MONSANTO YIELDGARD REMAINING AVAILABLE MARKET ROOTWORM 15
  16. 16. LEAD Royalty Revenue Will Grow Despite Greater Competition as Regional Licensees Gain, Total Market Expands TARGET: LEAD Monsanto’s Royalty Grow the value of the corn franchise Revenue Stream 2010F 2005 32% 50% 50% 68% OTHER DUPONT & SYNGENTA 16
  17. 17. GROW Direct Participation in Cotton Opens New Avenues for Market Penetration TARGET: GROW Emergent Cotton Grow the branded & licensed cotton seed Seed Brand market share MONSANTO COTTON SHARE GROWTH Breeding gains will build on 2005 market share 30% growth with 1-to-2 points 25% of annual market share gains forecast 20% Stoneville and Nexgen 15% brands also to lead SUSTAINABLE 10% 1-2 POINT SHARE GAIN WITH launch of EMERGENT & COTTON Bollgard II/Roundup 5% STATES Ready Flex stack 0% 2004 2005 2006F 2007F EMERGENT 17
  18. 18. GROW Experience Curve Allows Monsanto to Stage Largest Trait Launch in Biotech History TARGET: GROW Roundup Ready Grow the branded & licensed cotton seed Flex Cotton market share Value reflects greater U.S. MONSANTO COTTON TRAIT ACRES convenience and enhanced weed control; STACKED 15 PENETRATION lifts value of the TREND Roundup Ready trait 12 Anticipated largest trait 9 launch ever with 2-3 6 million acres, pending final approvals 3 80-90% of Roundup 0 Ready Flex to be stacked 1998 1999 2000 2001 2002 2003 2004 2005 with Bollgard II BOLLGARD & STACKED ROUNDUP Broad introduction led BOLLGARD II READY by Emergent and Cotton States 18
  19. 19. LEAD Monsanto’s Stacked Cotton Traits Have Been Established to Remain the Technology of Choice TARGET: LEAD Expanding Cotton Trait Monsanto’s combination of germplasm Penetration and stacked traits is platform of choice 2006F 2008F 2010F 2-3M 7M 6M TOTAL ROUNDUP TOTAL ROUNDUP TOTAL ROUNDUP READY FLEX/ READY FLEX/ READY FLEX/ BOLLGARD II ACRES BOLLGARD II ACRES BOLLGARD II ACRES ACRES = 8-10 M ACRES = 8-10 M ACRES = 8-10 M MONSANTO STACKED REMAINING AVAILABLE MARKET COTTON TRAITS 19
  20. 20. LEAD Second-Generation Roundup RReady2Yield Soybeans Enhances Weed Control, Offers Disease Insurance TARGET: LEAD Roundup RReady2Yield Monsanto’s combination of germplasm Soybeans and stacked traits is platform of choice HISTORICAL SOY YIELD GAINS Return value to farmer by bringing new technology Yield improvement of 45 3 - 4+ bushels per acre y = 0.4246x - 811.11 in 2004 field trials BUSHELS/ACRE 40 Flexibility by providing 35 wider window of 30 application 25 Research under way 20 on potential for 1970 1980 1990 2000 additional insurance for Asian soybean rust Provides the platform for future soy technologies 20
  21. 21. GROW Vistive Brand Branches Out With More Acres, More Seeds, More Processors TARGET: GROW Vistive Low Linolenic Successfully launch and grow new products that Soybeans serve the farmer, processor and consumer markets Available market 5M acres, 100K In 2006, additional brands and varieties will acres planted in expand the maturity zones and geographic reach 2005, growing to of Vistive 500K in 2006 One seed variety in 2005 growing to 10+ in 2006, 4 2005 processors in 2006, from two in prior 2006 year 800+ Farmers in Eastern and Northeastern Iowa Oil sold out from planted Vistive soybeans this year 2005; to be in consumer products in late 2005 21
  22. 22. LEAD First-Generation Vistive Soybeans Initiate Value Creation Across the Food Chain TARGET: LEAD Vistive Family New traits are commercialized annually of Traits DEMAND CREATION SUPPLY MANAGEMENT FARM FOOD CRUSHING CONSUMER AG INPUTS PRODUCTION MANUFACTURE REFINING DEMAND (SEED) (GRAIN) (PRODUCTS) (OIL) (FOOD) • Crop Yield • Stronger Brands • Great Taste • Agronomic Performance • Category Expansion • Improved Health • Germplasm Choice • Quality Assurance • Product Convenience • Income Opportunity • Raw Material Supply • Economical Price Monsanto Food Quality Traits Deliver Value Across the Food Supply Chain 22
  23. 23. LEAD Growth Still Considerable for Biotech Traits in United States, Particularly as Corn Market Expands TARGET: LEAD Market Opportunity Monsanto’s combination of germplasm and stacked traits is platform of choice KEY MARKET: UNITED STATES SOYBEANS COTTON CORN Roundup Roundup Roundup Bollgard I Roundup YieldGard YieldGard Ready Ready Ready and II Ready Corn Borer Rootworm Flex AVAILABLE 70M 10-15M 0M 6-8M 50M 30M-40M 15-20M MARKET AS REPORTED 2003 2010 70M 0M1 10-15M 6-8M 60M 50M-60M 25-30M AVAILABLE MARKET UPDATED FORECAST BIOTECH ACRES PLANTED 2005 REMAINING AVAILABLE MARKET 1. Roundup Ready market cannibalized by Roundup Ready Flex cotton 23
  24. 24. OVERVIEW Two-Step, Two-Horizon Strategy Creates a Line of Sight for Success through 2010 TARGET: NORTH AMERICA 2006 2007 2008 2009 2010 GROW Grow Current Portfolio Grow Globally LEAD Grow the Pipeline Lead through Innovation Lead in an Increasingly Competitive Market Lead in New Market Opportunities 24

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