monsanto 12-02-08


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monsanto 12-02-08

  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. STRATEGIC OUTLOOK Monsanto’s Growth Opportunity Lies at the Intersection of Demand, Innovation and Execution Monsanto’s Simple Philosophy on Opportunity: YIELD More demand requires more INNOVATION More yield requires more GROWTH More innovation delivers more 3
  4. 4. STRATEGIC OUTLOOK Increasing Protein Demand, Coupled with Boost from Biofuels, Creates Sustained Long-Term Grain Demand; Near-Term Inventories Re-Build STATE OF AGRICULTURE: STRETCHING SUPPLY Yield Always Matters WORLD CORN STOCKS-TO-USE RATIO1 ► GLOBAL CORN STOCKS ESTIMATED AT 50 DAYS 120% 900 STOCKS-TO-USE RATIO ► Global corn ending stocks- 800 100% to-use ratio projected to be M METRIC TONS 700 14 percent for 2008/09 80% 600 60% ► Stocks-to-use are below the 500 nearly 50-year average of 40% 24 percent and at ratio not 400 seen for almost 35 years 20% 300 0% 200 ► Largest corn crops on 1964/1965 1968/1969 1970/1971 1972/1973 1974/1975 1976/1977 1978/1979 1980/1981 1982/1983 1984/1985 1986/1987 1988/1989 1990/1991 1992/1993 1994/1995 1996/1997 1998/1999 2000/2001 2002/2003 2004/2005 2005/2006 1966-1967 2008/2009P record were produced in 2007 and 2008 1986/1987 2008/2009 1964/1965 ► Production needs to be GLOBAL CORN STOCKS-TO-USE1 sustained at 4% above this year’s crop, and demand GLOBAL CORN CONSUMPTION1 unchanged, to return to 24 percent 1. USDA PSD View database query for global corn 4
  5. 5. STRATEGIC OUTLOOK Global Corn Production Per Acre Is Sub-Optimized Today, Creating an Opportunity for Innovation GLOBAL CORN PRODUCTION1: YIELD CORE PRODUCTIVITY MEASURES AND EVALUATION Boosting yield-per- acre can make a meaningful CANADA difference in EU 27 3M ACRES supply-demand 136 BU/AC 500M BUSHELS 27M ACRES 90% HYBRID environment U.S. 99 BU/AC CHINA 2B BUSHELS • If India, Mexico 90M ACRES 151 BU/AC 67M ACRES MEXICO 13B BUSHELS 83 BU/AC and Brazil moved 6B BUSHELS 18M ACRES 25% HYBRID to 100 bushel per INDIA 48 BU/AC BRAZIL 900M BUSHELS acre yields, they 20M ACRES 36M ACRES 45% HYBRID 75% HYBRID 32 BU/AC could produce 58 BU/AC 700M BUSHELS 2B BUSHELS nearly 4 billion additional ARGENTINA bushels of corn 10M ACRES 111 BU/AC 900M BUSHELS annually – equal to total world Optimization of yield per acre corn exports in 2007 Poor/Subsistence Sub-Optimized Optimized 5 1. Source is USDA FAS and internal estimates.
  6. 6. FINANCIAL OUTLOOK Yield and Innovation Create the Runway of Growth to 2012 for Seeds & Traits and for Monsanto as a Whole GROSS PROFIT COMMITMENT: 2009 OUTLOOK 2003-2012F $9.5- ►Order pace for U.S. $9.75B DEKALB corn within $10,000 SEEDS & GENOMICS GROSS PROFIT band of prior two years AG PRODUCTIVITY GROSS PROFIT $7.2- ►Order pace for $8,000 $7.4B GP (in millions) branded U.S. soybean exceeds pace of the two previous seasons ~2.25X $6,000 2007 ►Latin America strong BASELINE $4.2B in the first quarter for $4.20- both seed and traits $4,000 $4.40 and Roundup; ONGOING monitoring credit for EPS second season in Brazil $2,000 ►Roundup pricing and volumes on track with $0 $2.3-$2.4B gross profit 2003 2004 2005 2006 2007 2008 2009F 2012F estimates for this BASELINE business 6
  7. 7. CORN SEED & TRAITS Corn Gross Profit Builds on Expanding Leadership in Branded Corn Seed, Launch of SmartStax and International Traits 2012 MILESTONE TARGETS CORN SEED & TRAITS ► Grow U.S. DEKALB corn share to 30-34 GROSS PROFIT PROGRESSION share points; grow ASI to ~15 share points ► Grow international branded corn share in key countries by 1-2 share points $ in millions $4,500- $4,600 annually $2,800 ► Launch SmartStax in the U.S. in 2010; $2,174 $1,721 target market of 60-65M1 acres ► Launch YieldGard Corn Borer/ Roundup Ready corn in Argentina in 2007 2008 2009F 2012F 2009; target market of 7M1 acres GLOBAL GROSS PROFIT SPLIT ► Launch YieldGard Corn Borer in Brazil in 2009; target market of 15-20M1 acres ► Advance drought-tolerant corn I 30% 30% U.S. through Phase 4 Intl. 70% 70% 2012F 2008 7 1. Target market defined as acres where technology is applicable, not necessarily a projection of acres penetrated by 2012.
  8. 8. CORN SEED Preliminary Yield Trial Results Reinforce Yield Advantage of DEKALB Seed in the U.S. 2008 PRELIMINARY U.S. COMPETITIVE CORN YIELD COMPARISON: DEKALB 215 210 DEKALB GEOGRAPHY: U.S. (APPROXIMATE DIFFERENCES) 205 207 COMPETITORS Grow 2 Share 2009 200 OBJECTIVE: Points 199 195 198 2008 PERFORMANCE UPDATE BUSHELS/ACRE 196 190 193 • In > 12,800 comparisons, 191 190 189 189 185 DEKALB out-yields 184 competitive best by 180 182 9.8 bu/acre on average 175 • On 60 percent of the 170 171 acres planted, DEKALB 165 has 8-12 bu/acre 160 advantage 155 Source: Preliminary 2008 150 Monsanto and third party 100 RM 105 RM 110 RM 115 RM 90/95 RM head-to-head comparisons Overall RELATIVE MATURITIES (DAYS)► of 5 leading DEKALB hybrids within each RM zone COMPARISONS: >840 >2,550 >670 >4,370 >4,350 >12,800 to national competitor products containing similar APPROXIMATE BU/AC crop protection traits within 2 12.4 11.4 1.0 11.0 8.4 9.8 ADVANTAGE: RM days as of November 14, 2008. Weighted average calculated to 15% moisture. 8
  9. 9. SOYBEAN SEED & TRAITS Launch of Roundup Ready 2 Yield Soybeans Key to Long- Term Growth of Leading Soybean Platform 2012 MILESTONE TARGETS SOYBEAN SEED & TRAITS ► Controlled commercial release of GROSS PROFIT PROGRESSION Roundup Ready 2 Yield on 1-2M acres in the U.S. in 2009 $ in millions ► Large-scale launch of Roundup ~$1,200 Ready 2 Yield on 5-6M acres in 2010; $725 ~$700 $588 target market of 45-55M1 acres ► Grow Asgrow brand to 25 share points in the U.S. by 2012 2007 2008 2009F 2012F GLOBAL GROSS PROFIT SPLIT ► Increase Brazil Roundup Ready soybean penetration to 80 percent by 2012 in anticipation of launch of 15% insect-protected Roundup Ready 2 20% Yield soybeans U.S. Intl. 80% 85% 2012F 2008 9 1. Target market defined as acres where technology is applicable, not necessarily a projection of acres penetrated by 2012.
  10. 10. COTTON SEED & TRAITS Cotton Seed and Traits Focused on Continued Upgrade to Second Generation Technology in U.S. and India COTTON SEED & TRAITS 2012 MILESTONE TARGETS GROSS PROFIT PROGRESSION ► Expand second-generation trait penetration in U.S. Deltapine brand $ in millions ~$500 ► Expand Bollgard II acres in India; currently 25 percent penetrated in 18- $313 ~$300 $267 20M acre opportunity ► Grow U.S. Deltapine brand share from current share of 41 percent to 2007 2008 2009F 2012F ~50 percent by 2012 GLOBAL GROSS PROFIT SPLIT ► Grow Brazil branded cotton share by 10 points to 31 percent; grow India to 12 percent share 30% 45% U.S. 55% Intl. 70% 2012F 2008 10
  11. 11. VEGETABLE SEEDS Vegetable Platform Focused on Execution and Growth To Generate 65 Percent Margins by 2012 2012 MILESTONE TARGETS VEGETABLE SEEDS ► Integrate De Ruiter protected culture GROSS PROFIT PROGRESSION seeds ► Continue margin expansion toward $ in millions goal of 65 percent by 2012 ~$750 Price existing products to value ~500 $394 $267 Launch new products with increased value Expand high-margin protected- 2007 2008 2009F 2012F culture segment GLOBAL GROSS PROFIT SPLIT ► Accelerate new product launches via use of molecular markers 20% 20% U.S. Intl. 80% 80% 2012F 2008 11
  12. 12. ROUNDUP Increased 2009 and 2012 Targets for Roundup Reflect Sustainability Even As Supply-Demand Comes Into Balance ROUNDUP AND OTHER GLYPHOSATE-BASED HERBICIDES: Roundup and Other BRANDED AND NON-BRANDED TRENDS – 2004-2008 Glyphosate-Based Herbicides 300 Branded 2009 Forecast Non-Branded GROSS PROFIT TARGET: $2.3-$2.4B 250 Global Volume (in gallons) Above BRANDED PRICE BAND (PER GALLON FORECAST): $16-$18 200 2012 Forecast GROSS PROFIT TARGET: $1.9B 150 BRANDED PRICE BAND $16-$18 (PER GALLON FORECAST): 100 50 0 2004 2005 2006 2007 2008 GLOBAL VOLUME 209M 215M 235M 252M 257M (GALLONS): BRANDED PRICE BAND $11-$13 $11-$13 $11-$13 >$11-$13 ~$20 (PER GALLON): TOTAL ROUNDUP AND OTHER GLYPHOSATE-BASED $703M $637M $648M $854M $2.0B HERBICIDES GROSS PROFIT: 12
  13. 13. USES OF CASH Over 70% of the $2.8 Billion of Operating Cash Generated Invested in Acquisitions, Technology and Capital in FY08 USES OF CASH PERCENT OF $2.8B OPERATING CASH USED BY CATEGORY: FY2008 2% Cash Generation 13% $772M FY2008 Free Cash Flow: 37% FY2009 Free Cash ~$1.8B Flow Forecast1: 15% CASH PRIORITIES • Bolster direct returns to shareowners • Support commercial growth through capital spending • Invest in future growth through 33% technology collaborations Acquisitions and • Expand the core through strategic Technology Collaborations acquisitions Capital Spending Dividends Share Repurchase 1. Estimate does not contemplate strategic acquisitions. Other 13
  14. 14. R&D PIPELINE R&D Engine Is Poised to Launch Average of One Game- Changing Technology Every Other Year Through Mid-Decade R&D PIPELINE: ADVANCED GAME-CHANGING TECHNOLOGIES 2008 2009 2010 2011 2012 TO MID-DECADE Roundup Drought- Nitrogen- SmartStax Ready 2 Yield Tolerant Corn Utilization Soybeans Family1 Corn Family1 • Second-gen soybean • All-in-one corn trait • Value likely in improved • Targets ways to use trait platform platform yield under stress and nitrogen more efficiently potential for water • China import approval • On track for 2010 launch replacement received September – Submitted for 2008 regulatory review and refuge reduction • On track for 2009 release; 2010 full launch SUPERIOR, NE - FIELD TRIALS – 2007 FARM PROGRESS SHOW – 2007 WITH GENE CONTROL HYBRID FARM PROGRESS SHOW – 2007 (94 BU/AC) (76 BU/AC) 1. Part of the Monsanto-BASF Yield and Stress R&D Collaboration 14
  15. 15. SOYBEAN SEED & TRAITS Roundup Ready 2 Yield Soybeans Is One Of the Most- Anticipated Launches Because of Step-Change In Yield NEW: ROUNDUP READY 2 YIELD SOYBEANS: SECOND-GENERATION WEED CONTROL OPPORTUNITY Near-Isoline Comparisons: 12% Roundup Ready 2 Yield vs. Roundup Ready % Yield Increase over 11% 10% 9% Roundup Ready 9% 8% 7% 7% 6% 4% 2% 0% 2004 2005 2006 2007 4 YEAR AVERAGE Roundup Ready 2 Yield soybeans yield 7 to 11 percent higher than Roundup Ready soybeans based on 73 Monsanto field trials from 2004-2007 Seamless price set at ~$70 per acre for seed, trait and treatment, a $20 per acre premium over first generation Roundup Ready; result of 3-5 bu yield advantage 15
  16. 16. CORN SEED & TRAITS Monsanto’s Leadership Continues With Next Game- Changer in Corn; SmartStax to Reset Trait Platform SMARTSTAX COMMERCIAL OPPORTUNITY LAUNCH TARGET: 2010 TARGET ACRE 60-65M OPPORTUNITY: VALUE PROPOSITION 2008 trials evaluating SmartStax in elite germplasm, quantifying sources of potential on-farm yield advantages: Improved 1-2% consistency: SmartStax STATUS Primary pests Improved • Precedent established with U.S. EPA on consistency: 1-2% dual-mode-of-action traits: Secondary pests REFUGE • YieldGard VT PRO received reduced REDUCTION Reduced refuge 3-6% STRATEGY: refuge in Southern geographies • Bollgard II natural refuge in cotton 5-10% • On track for 2010 launch • COMMERCIAL All components have U.S. approvals TRACK: • Final regulatory package with 5% refuge request submitted in June 2008 16
  17. 17. R&D PIPELINE 2007 Dryland Field Tests of Lead Drought Event Offers Visual Evidence of Increased Yield In Stressed Conditions 2007 FIELD TESTING SHOWS VISUAL R&D Pipeline PROOF OF YIELD IMPROVEMENT Drought-Tolerant Corn Family: SUPERIOR, NE - FIELD TRIALS – 2007 Lead Project HIT Project Phase 3 PROJECT CONCEPT: Drought-tolerance family aimed at providing consistent yield and buffering against effects of water limitations VALUE: LAUNCH-COUNTRY 55M ACRES1: 2020 VALUE2: $300-$500M SOURCES OF VALUE: Improved yield Targeting 6-10% yield 1 CONTROL HYBRID WITH GENE improvement in water-stress environments (76 BU/AC) (94 BU/AC) 1. Acre opportunity reflects acres where technology fits at Water stress exposure during different stages of development Monsanto's 2007 market share in respective crops can have significant effect on corn yield; Monsanto’s lead 2. 2020 value reflects gross sales opportunity in launch country drought-tolerance trait shows a significant yield advantage in year 2020 compared with controls under drought stress 17 PART OF THE MONSANTO BASF YIELD AND STRESS R&D COLLABORATION
  18. 18. SUMMARY Monsanto’s Growth Opportunity Lies at the Intersection of Demand, Innovation and Execution Monsanto’s Simple Philosophy on Opportunity: YIELD More demand requires more INNOVATION More yield requires more GROWTH More innovation delivers more 18