monsanto 09-18-07
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HUGH GRANTCHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BANK OF AMERICA 37TH ANNUAL INVESTMENT CONFERENCE
September 18, 2007
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Forward-Looking Statements
Certain statements contained in this presentation are "forward-looking statements," 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 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 periodic report to the SEC. 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.
TrademarksTrademarks owned by Monsanto Company and its wholly-owned subsidiaries are italicized in this presentation. All other trademarks are the property of their respective owners.
© 2007 Monsanto Company
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Market Forces Are Changing Agricultural Production Trends Globally
OVERVIEW
Brazil exploits land availability advantage to become commodity soy producer to meet demand from China
Expanding ethanol and export demands favor U.S. as low-cost corn producer;
vegetable consumption continues to grow
U.S. ramps up production of corn; Soy crop becomes increasingly focused on higher-value segments over commodities
Argentina leverages geographic proximity to
supply corn to Latin America
Growing wealth and population in Asia creates new demand for imported grain and vegetables
Biggest increases in cotton acreage come in
Asia, with U.S. focused on quality and consistency of
supply
MACRO PRODUCTION TRENDS OVER THE NEXT DECADE: CORN, SOYBEANS, COTTON, VEGETABLES
Biodiesel drives oilseed demand in Europe
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44%
46%
48%
50%
52%
54%
CURRENT LEVEL
GROSS MARGIN ‘PULL’
2003 2004 2005 2006 2007F 2008F 2009F 2010F
GROSS MARGIN OPPORTUNITYGROSS PROFIT AS A PERCENT OF SALES MONSANTO’S OPPORTUNITY
Delta between 2006 gross margin and a 52-54% trajectory reflects continued growth opportunity for seeds and traits
FACTOR
U.S. corn
International corn
Global biotech traits
Cotton platform
Seminis
R&D pipeline
Monsanto Uniquely Positioned to Maximize Growth in Shifting Ag Market
OVERVIEW
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U.S. CORN
By Delivering Better Yielding Products, DEKALB Has More than Doubled Share in Six Years
U.S
. SH
AR
E
DEKALB U.S. CORN SHARE EVOLUTION: 2001-2007F
23-24%
19%16%14%13%
12%10%
2007 STATUS
• Share gain of 4-5 points expected for 2007 season
• Farmers continue to cite DEKALB’s superior yield as primary driver
• Continue to plan for 1-2 point share gains per year in DEKALB through end of decade
TRAIT CATEGORYMONSANTO
TRAIT OFFERING
2007 FORECAST TRAIT ACRES
CIRCA JUNE 2007
UPDATEDEND-OF-DECADE ACRE
OPPORTUNITYCIRCA 2007
(IN MILLIONS OF ACRES)
GLYPHOSATE-TOLERANT CORN
Roundup Ready Corn 2
YieldGardCorn Borer
YieldGardRootworm
117-120M 185-205M
55-56M 80M
CORN-BORER CONTROL 41-42M 60-70M
ROOTWORM CONTROL 21-22M 45-55M
25%
20%
15%
10%
5%
0%2001 2002 2003 2004 2005 2006 2007F
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PRODUCT CONCEPT
First-Ever Eight-Gene Stack Leapfrogs Competitive Products, Boosting Performance, Creating New Value for Farmers
SmartStaxAnatomy of first-ever eight-way gene platform
TRAIT STATUS
YieldGard VT Triple PRO Pending Regulatory Review
COMPONENTS
COMPONENTS
YieldGard VT Rootworm/RR22ND-GENERATION ROOTWORM CONTROL 1 Below-Ground Insect Control
PRIMARY: ROOTWORM Commercial
Roundup Ready 2 TechnologyVIA YIELDGARD VT ROOTWORM/RR2 1 Weed Control
MODE: GLYPHOSATE Commercial
Herculex XTRA
YieldGard VT PRO2ND-GENERATION YIELDGARD CORN
BORER 2 Above-Ground Insect ControlPRIMARY: CORN BORER
PHASE IVPending Regulatory Review
Commercial
Commercial
Commercial
• Application for EPA registration to be submitted
• On track for end-of-decade commercialization in U.S., with global roll-out following
Herculex I
Herculex RW
Liberty Link 1 Weed ControlMODE: GLUFOSINATE
SmartStaxIndustry-Standard Trait
Platform1
Multiple modes of action for above- and below-ground insect
and weed control
GENES FUNCTION
1Above-Ground Insect
ControlPRIMARY: CORN BORER
2Below-Ground Insect
ControlPRIMARY: ROOTWORM
SmartStax is in proof-of-concept testing, establishing:
Feasibility of full trait integrationViability of enhanced performance for insect and weed control
1. This product has not been registered by the U.S. Environmental Protection Agency. It is a violation of federal law to promote or sell an unregistered pesticide.
SMARTSTAX CORN PLANTED IN WESTERN IOWA, SHOWING FULL, HEALTHY EARS AND STRONG, HEALTHY ROOTS
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Expansion of Corn Market Share Sets Stage for Corn Traits Internationally
Global Biotech Traits
SITUATION:
• “Footprint” established by Monsanto’s corn market share growth globally establishes the base to launch traits as they earn regulatory approvals
OUTLOOK:
• Corn traits outside U.S. have significant opportunity for penetration
51%
13%
39%
40%
30%
SEED MARKET SHARE
OUTLOOKYIELDGARDROOTWORM
YIELDGARDCORN BORER
ROUNDUP READY CORN 2
15M
-
5M
-
5M
5M
• YGCB and RR are commercial on small acres, moving to stacks
• YGCB planting on small acres in 7 countries in 2007
• YGCB and RR received approvals for field trials
• YGCB/RR stacked product approved; potential FY2009 launch
• YGCB received initial regulatory approval
60-65M
6M
24M
6M
9M
15-20M
40-45MTotal
International Markets
4MSouth Africa
8MEurope(EU27)
6MIndia
7MArgentina
15-20MBrazil
INTERNATIONAL MARKET OPPORTUNITY: CORN1
3%BIOTECH ACRES PLANTED 2007
REMAINING AVAILABLE ACRES
16-18% 0%
INTERNATIONAL CORN
YGCB=YieldGard Corn BorerYGRW=YieldGard RootwormRR = Roundup Ready Corn 2
1. Market Opportunity reflects total acres where technology is applicable, not necessarily acres projected for penetration by 2010.
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KEY MARKET ACRES U.S. BRAZIL ARGENTINA
AVAILABLE MARKET 70M 50-60M 35M
PERCENT PENETRATED 0% 0% 0%ROUNDUP RREADY2YIELDSOYBEANS
Roundup RReady2Yield Soybeans Signal Emerging Platform of New Stacked Soybean Products
GLOBAL BIOTECH TRAITS
R&D PipelineHIT Project ROUNDUP RREADY2YIELD
SOYBEANSSITUATION:
• Value created through yield gains will be shared with farmer as has been Monsanto’s historical practice
• Roundup Ready2Yield will become preferred platform for host of new soybean traits for yield, quality and ease of farming
• To be stacked with insect traits protection for exclusive Latin American marketRETAIL VALUE/ACRE: >$10 - <$30/acre
2007 STATUS: Phase IV
• Roundup RReady2Yield soybeans have completed regulatory process in the United States and Canada
• Three years of field comparisons show a yield advantage of 7-to-11 percent compared with its first-generation Roundup Ready counterpart
VALUE CONSIDERATIONS:
P R O J E C T
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Cotton Breeding Is Today Where Corn Was In Late 1990s; Huge Opportunity to Bolster Yield Ahead
COTTON PLATFORM
COTTONTREND
Cotton must become more profitable for farmers –boosting yields is keyNEED
Boost yield returns per acre
SOLUTIONS
MOLECULAR BREEDING FOCUS IN PROCESS
U.S. (9)
Testing ProgramsBreeding Programs
Winter Nurseries
Costa Rica
Brazil
South Africa
India (3)
Greece
Australia
COTTON BREEDING STATUS: 2007
RESOURCES CAPABILITIES OUTLOOK
World’s largest private cotton breeding program
• ‘Jumpstart’ of up to 3 years over corn in 1990s because infrastructure is in place:
• Labs, IT and markers are ready to go; “Plug-and-Play” opportunity
• Largest marker collection in the world
Zeroing in on drought, fiber quality, lint yield and disease resistanceNew, novel targets: Diverse germplasm base can lead to genetic pairings that greatly benefit farmers
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Four Growth Drivers Enrich Seminis Gross Profit Contribution Through 2012
SEMINIS
SeminisSITUATION:
• In 2006, narrowed commercial and research focus to 25 crops that generate the most profit
• Began application of breeding technology, with a target of 1,000+ markers each for 9 crops by 2009
OUTLOOK:
• Through end of decade, Seminis grows through current offerings – via price and improved market share mix –and pipeline opportunity – with new product launches
SEMINIS GROWTH DRIVERS
Four growth drivers build on the strength of the existing business and begin to leverage the capability Monsanto brings to Seminis to generate growth through the end of the decade
PRICEIncrease price of existing portfolio and new products launched on basis of value created and shared with the grower
MARKET SHARE MIX
Increase share in higher value segments via shifts to protected culture and disease resistance products post 2010
NEW PRODUCT LAUNCHES
Develop and launch products into high value segments with a focus on disease resistance, protected cultures and yield
PIPELINE ACCELERATION
Accelerate pipeline product launches through the use of new molecular breeding tools
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R&D PIPELINE
Pipeline Has Some Likely Blockbusters and Some Hidden Gems
ANNUAL R&D CYCLE: SEEDS & TRAITS BIOTECH TRAIT PIPELINESOYBEANS ARE EMERGING FROM CORN’S SHADOW
Roundup RReady2Yield creates platform for futureFirst product developed exclusively for an ex-US market will be in soybeansSoybeans could be a 3+ stack by middle of next decade
COTTON POTENTIAL TO BE UNLOCKED
Second-generation stacked products to accelerate globallyCotton could be a 3+ stack by middle of next decade
YIELD AND STRESS POTENTIAL EXPLODING
Drought tolerance in corn expected to be first of a rapid series of blockbuster traits
At a greater pace than ever before, new breeding tools are being applied across all platforms and resulting in breakthrough products
BREEDING PIPELINEBREEDING ENGINE FIRING ON ALL CYLINDERS
Q1 Q4
Q3Q2
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KEY MARKET ACRES U.S. BRAZIL ARGENTINA EUROPE
AVAILABLE MARKET 90M 20-25M 10M
0%
24M
PERCENT PENETRATED 0% 0% 0%Drought-tolerant corn
Family of Drought-Tolerant Corn Products to Create Differentiated Value Across Multiple Market Segments
IRRIGATED DRYLAND STABILITY
Irrigated Non-Irrigated Non-Irrigated
Value is in replacing irrigation, reducing variable costs of irrigation
Value is in improved yields annually, by improving water-use efficiency
Value is in improved yields when moisture is less than optimal
R & D PIPELINE
R&D PipelineHIT Project Drought-tolerant corn
SITUATION:
• Value of trait reflects better yields under moisture-stressed conditions; varies by region
• Value will be specific to variable costs of water use by farmers, not fixed costs of irrigation
• Corn needs 18-to-20 inches of moisture during the growing season
RETAIL VALUE/ACRE: $10 - $30/acreTOTAL ACRE
OPPORTUNITY: 144M-149M acres
2006 STATUS: Phase II• Lead events consistently delivered yield
improvements compared with controls in water stressed conditions, with yield advantage of up to 12 bushels per acre in Chilean locations
• Currently in fifth season of U.S. field testing; significant expansion in number of locations, test environments and germplasm backgrounds
VALUE CONSIDERATIONS:
P R O J E C T
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SEEDS & GENOMICSCAGR 2002-2006: 34%
AGRICULTURAL PRODUCTIVITY CAGR 2002-2006: (8)%
AN
NU
AL
GR
OS
S P
RO
FIT
($
IN
MIL
LIO
NS
)
SUMMARY
Fueled By Seeds-and-Traits Business Performance, Monsanto Has Created an Unparalleled Platform for Continued Growth
KEY INFLECTION POINT: IN 2003-2004, GROSS PROFIT FOR SEEDS & GENOMICS BUSINESS SEGMENT SURPASSED AGRICULTURAL PRODUCTIVITY
Between 2004 and 2006, much of the cash generated from working capital improvements was used to fund key acquisitions
CASH GENERATION AND USES
SOURCES OF CASHCUMULATIVE: 2004-2006
WORKING CAPITAL
NET INCOME
USES OF CASHCUMULATIVE: 2004-2006
ACQUISITIONS
CAPITAL EXPENDITURES
TECHNOLOGY AND OTHER INVESTMENTS
$1.3B$1.2B $1.8B$860M
$270M
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$02002 2003 2004 2005 2006
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