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Transcript of monsanto 06_25_08
THIRD-QUARTER 2008
FINANCIAL RESULTS
June 25, 2008
Forward-Looking Statements
2
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; 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.
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.
© 2008 Monsanto Company
Non-GAAP Financial Information
This presentation may use the non-GAAP financial measures of “free cash flow,” and earnings per share (EPS) on
an ongoing basis. We define free cash flow as the total of cash flows from operating activities and investing
activities. A non-GAAP EPS financial measure, which we refer to as on-going EPS, excludes certain after-tax items
that we do not consider part of ongoing operations, which are identified in the reconciliation. ROC means net
income (without the effect of certain items) exclusive of after-tax interest expenses, divided by the average of the
beginning year and ending year net capital employed, as defined in the reconciliation. Our presentation of non-
GAAP financial measures is intended to supplement investors’ understanding of our operating performance. These
non-GAAP financial measures are not intended to replace net income (loss), cash flows, financial position, or
comprehensive income (loss), as determined in accordance with accounting principles generally accepted in the
United States. Furthermore, these non-GAAP financial measures may not be comparable to similar measures used
by other companies. The non-GAAP financial measures used in this presentation are reconciled to the most
directly comparable financial measures calculated and presented in accordance with GAAP, which can be found at
the end of this presentation.
3
Ongoing and As-Reported Earnings
PERFORMANCE SUMMARY
Third Quarter
2008
Third
Quarter 2007
Nine Months
2008
Nine Months
2007
Diluted Earnings
Per Share$1.45 $1.03 $3.93 $2.17
Solutia Claim
Settlement- - ($0.23) -
Loss (Income) From
Discontinued
Operations- $(0.01) - $0.01
Diluted Earnings
Per Share on an
Ongoing Basis$1.45 $1.02 $3.70 $2.18
4
Third
Quarter
2008
Third
Quarter
2007
Change
Nine
Months
2008
Nine
Months
2007
Change
NET SALES $3,588M $2,842M 26% $9,466M $6,990M 35%
GROSS
PROFIT$1,969M $1,503M 31% $5,253M $3,633M 45%
NET INCOME $811M $570M 42% $2,196M $1,203M 83%
DILUTED
EPS ON AS-
REPORTED
BASIS
$1.45 $1.03 41% $3.93 $2.17 81%
FREE CASH
FLOW$675M $(321)M NM
PERFORMANCE SUMMARY
Third-Quarter Financial Summary
5
$1.30
$0.80
$1.04
$2.00
~$3.40
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
$2.00
$2.25
$2.50
$2.75
$3.00
$3.25
$3.50
2004 2005 2006 2007 2008F
FINANCIAL REVIEW
EARNINGS PER SHARE GROWTH
PROGRESSION OF ONGOING EPS (2004-2008F)
30% 25% 54% ~70%
Note: EPS figures reflect the stock split effective July 28, 2006
2008F ONGOING EPS GUIDANCE:
~70% GROWTH
CASH FLOW PROJECTIONS
2007-2008F
Guidance previously
set as $3.15 to $3.25
per share
Earnings Growth of Approximately 70 Percent and Increased
Cash from Operations Reflect Strong Growth Drivers
($1,402)
($509)
$2,600
$1,854
($1,100)($950)
($2,000)
($1,500)
($1,000)
($500)
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
6
2007 2008F
Cash Flows from Operations
Capital Expenditures
Cash Used in Investing,
Excluding Capital Expenditures
(in $
mill
ions)
7
Plan to Continue to Target 1-2 Share Point Gains in Key Countries in 2009; U.S. Targets 2+ Share Gain
U.S. AND INTERNATIONAL CORN
U.S.
2007 NATIONAL
BRAND SHARE:23%
PRE-SEASON
SHARE
ESTIMATE:
1-2 share
CURRENT
SHARE
ESTIMATE:
2-3 share
FY09 TARGET: 2+ share
ARGENTINA
2007 TOTAL
BRAND SHARE:40%
PRE-SEASON
SHARE
ESTIMATE:
1-2 share
CURRENT
SHARE
ESTIMATE:
5 share
FY09 TARGET: 1-2 share
BRAZIL
2007 TOTAL
BRAND SHARE:40%
PRE-SEASON
SHARE
ESTIMATE:
Flat
CURRENT
SHARE
ESTIMATE:
Held Share
FY09 TARGET: 1-2 share
EU27
2007 BRAND
SHARE:13%
PRE-SEASON
SHARE
ESTIMATE:
1-2 share
CURRENT
SHARE
ESTIMATE:
0.5 share
FY09 TARGET: 1-2 share
INDIA
2007 BRAND
SHARE:39%
PRE-SEASON
SHARE
ESTIMATE:
1-2 share
CURRENT
SHARE
ESTIMATE:
Flat
FY09 TARGET: 1-2 share
INTERNATIONAL CORN BRAND PERFORMANCE:
LEADING MARKET INDICATORS OF MONSANTO BRAND SHARE PERFORMANCE – 2008
2009 OUTLOOK
• All three of Monsanto’s channels should have triple penetration above 50% in seed portfolios for 2009
• DEKALB and ASI should be in the range of 65%triple availability in 2009
• Monsanto targeting to capture 100% of its share of 45-55M acre triple-stack opportunity in 2009
2008 2009F 2008 2009F 2008 2009F
DEKALB Brand ASI Brands All Licensees
Triple-Stack Ramp Up Continues for 2009, With Leading
Brands Targeting 65% in Portfolio Mix
U.S. CORN
0%
10%
20%
30%
40%
50%
60%
70%
62%
65%
57%
65%+
50%+
TR
IP
LE
S
TA
CK
A
S P
ER
CE
NT
O
F
PO
RT
FO
LIO
V
OL
UM
E
2009 U.S. CORN TRIPLE-TRAIT FORECAST
PRODUCTION PLAN BY STRATEGIC CHANNEL
43%
8
SOYBEANS
Soybean Value Upgraded as Stacks of Roundup Ready 2 Yield, Modified Oil Traits and Insect Protection Emerge
MULTIPLE STACKS IN SOYBEANS BY 2012
BRAZIL SOYBEAN
MARKET
VALUE
• Insect-protected
Roundup Ready
2 Yield being
prepared for
launch
•$2.50-$3.00+
per acre for
Roundup
tolerance plus
7-11% yield
•Insecticide
replacement
CROP: Soybeans
OBJECTIVE:Growth via new traits
2008 STATUS
• Roundup Ready
soybeans at 96%
penetration in U.S.,
55% in Brazil
• Roundup Ready 2 Yield
approved in U.S.,
Canada and Japan; key
export approvals
pending from China,
Mexico and Europe
2012 OUTLOOK
• Five trait stacks in
soybeans feasible, with
Roundup Ready 2 Yield
as base trait for all
MODIFIED OIL
TRAITS
U.S. SOYBEANS:
60-70M ACRES
BRAZIL SOYBEANS: 50-
60M ACRES
ROUNDUP READY 2
YIELD AND INSECT
PROTECTED
ROUNDUP READY
U.S. SOYBEAN
MARKET
VALUE
• Roundup Ready
2 Yield in
market for 2+
years
• Vistive III and
other modified
oil traits being
launched
• $17-19/acre
for Roundup
tolerance
plus 7-11%
yield
• Oil premium
9
ROUNDUP
READY 2 YIELD
COMPETITIVE
PLATFORM
10
USES OF CASH
Leadership and Innovation Underscored by Strong Cash Generation for Investment in Next Wave of Growth
American Seeds, Inc. (FY2005-FY2007)
Seminis (FY2005)
Delta & Pine Land (net of Stoneville and
Nexgen divestitures) (FY2007)
USES OF CASH
CUMULATIVE: FY2005-FY2007
FY2007
Capital spending focused on corn seed production expansion
FY2007
Dividend increased 38% to 55
cents/share
($100)
($950)
$2,600
($1,500)
($1,000)
($500)
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
($1000)
FY08F ESTIMATED USES OF CASH
ESTIMATED $2.6B CASH GENERATED BY
OPERATIONS
FY2008F
Estimated $2.6B of Operating Cash Flows generated
FY2008F
CAPEX:
Year two of $610M corn seed expansion project; year one of $196M glyphosate expansion
FY2008F
ACQUISITIONS:
• De Ruiter Seeds
• Cristiani
• AgroesteFY2008F
Other Investments
FY2008
$433M of dividends &
share repurchases through Q3
$1,160
$266
$545
$639
$3,161
Acquisitions
Capital Spending
Share Repurchases
Dividends
Technology Investments
($433)
FY2008F FREE CASH FLOW = $550M
(in $
mill
ions)
11
U.S. CORN TRAIT PRICING
Monsanto’s Pricing Model Aimed at Total Value Created; Shared with Farmer
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 2009, at seeding rate of 2.7 acres per unit
4. Subtracts costs farmers would have spent had they not used a trait package
YieldGard VT TriplePRICING TO VALUE EXAMPLE: 2009
Improved Yield1
IMPROVED YIELD
(BU/AC):15-20
UPDATE: 3 YEAR COMMODITY PRICE: $4.00
$60-$80
Indirect Benefits2
INDIRECT BENEFITS: $5
Incremental Value Created
( + )$65-$85
PRICING APPROACH
UPDATE: Per-Acre Trait Cost3: $29-$49
UPDATE: Replacement Value4 ($11-$19)
Incremental Farmer Cost: $18-$30
Incremental Value Shared: 65-70%
Improved Yield
UPDATE: Yield-advantage value at 3 yearaverage commodity price
• One year back, current year and forward year
• Value shared with farmers
Indirect Benefits
Quantified benefits, such as convenience and peace of mind
• Value shared with farmers
Replacement Value
Factors costs farmers would have incurred for substitute insect and weed control
• 100% of replacement value is captured
PRICING APPROACH
Percentage of incremental value shared ultimately determined by market research, pricing simulations and focus groups to assess:
• Market Share Implications
• Trait Penetration Effect
• Competitive Reaction
12
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 yield 7 to 11 percent higher than Roundup Ready soybeans based on 73 Monsanto field trials from 2004-2007
9%
7%
9%
7%
11%
0%
2%
4%
6%
8%
10%
12%
2004 2005 2006 2007
% Y
ield
In
cre
as
e o
ve
r R
ou
nd
up
Re
ad
y
Near-Isoline Comparisons:
Roundup Ready 2 Yield vs. Roundup Ready
4 YEAR
AVERAGE
ROUNDUP READY 2 YIELD SOYBEANS:
SECOND-GENERATION WEED CONTROL OPPORTUNITY
U.S. SOYBEANS
2007 U.S. AVERAGE
YIELD PER ACRE:41.6 bu
AVERAGE ANNUAL
GAIN OVER 30
YEARS:
0.5 bu/ac
ROUNDUP READY 2 YIELD
TARGETED YIELD
IMPROVEMENT:7-11%
YIELD
Roundup Ready 2 Yield has potential to deliver up to 10 years
of breeding gains with a single trait
2008 Again Projects Double-Digit Earnings Growth,
Strong Cash Generation and Improved Margins
FINANCIAL OUTLOOK
2007 2008F
EARNINGS
ONGOING EARNINGS PER SHARE
$2.0054% GROWTH
FROM 2006
~$3.40~70% GROWTH
FROM 2007
Gross Profit as a Percent of Sales 50%54%; two years ahead of
2010 target of 52-54%
Seeds & Traits Gross Profit $3.0B $3.7B
Roundup and All Other Glyphosate-based Herbicides Gross Profit
$854M $1.9B
All Other Ag Productivity Gross Profit $418M ~$400M
CASH MANAGEMENT AND SPENDING
FREE CASH FLOW $(57)M ~$550M
Capital Expenditures $509M ~$950M
SG&A as a Percent of Sales 22% ~20%
R&D as a Percent of Sales 9% ~9%
Receivables as a Percent of Sales 18% Mid Teens
Inventories as a Percent of Sales 20% ~20%
13
GLOBAL VOLUME
(GALLONS):209M 215M 235M 252M 255M
BRANDED PRICE BAND
(PER GALLON):$11-$13 $11-$13 $11-$13 >$11-$13 >$16-$18
TOTAL ROUNDUP AND ALL
OTHER GLYPHOSATE-BASED
HERBICIDES GROSS PROFIT:
$703M $637M $648M $854M $1.9B
FINANCIAL OUTLOOK
ROUNDUP
STATUS
• In April, announced 18-month $196M de-bottlenecking plan
• Demand-driven environment is sustainable, with peaks to come before leveling to a projection of $1.8B in gross profit in 2012
• Factors:• $16-$18 branded price band
in FY08
• Single-digit volume growth
• Increased capacity in CY2009-2010 from Monsanto
• Branded Roundup quality needed to service Roundup Ready opportunity
Roundup Gross Profit Opportunity Moves to $1.9 Billion in FY08 as Demand Remains Strong
14
ROUNDUP AND OTHER GLYPHOSATE-BASED HERBICIDES:
BRANDED AND NON-BRANDED TRENDS – 2004-2008
0
50
100
150
200
250
300
2004 2005 2006 2007 2008F
Glo
bal V
olu
me (
in g
allo
ns)
Branded
Non-Branded
FINANCIAL OUTLOOK
Monsanto’s Strategic and Financial Opportunity Lies in
Seeds and Traits
$0
$2,000
$4,000
$6,000
$8,000
$10,000
2007 2008F 2012F
SEEDS & GENOMICS
ROUNDUP AND OTHER GLYPHOSATE-
BASED HERBICIDES
ALL OTHER AGRICULTURAL
PRODUCTIVITY
IN
M
ILL
IO
NS
GROSS PROFIT OUTLOOK BY SEGMENT
2007-2012FGross Profit
2008 STATUS
• New FY2008 targets of $3.7B gross profit for Seeds and Genomics; $1.9B for Roundupand other glyphosate-based herbicides
2012 OUTLOOK
2012F
SEEDS &
GENOMICS$6.5-7.0B
ROUNDUP AND
OTHER
GLYPHOSATE-
BASED
HERBICIDES
$1.8B
ALL OTHER AG
PRODUCTIVITY$350M
15
Reconciliation of Non-GAAP Financial Measures
Reconciliation of Free Cash Flow Fiscal Year2008
ForecastFiscal Year
20079 Months Ended
May 31, 20089 Months Ended
May 31, 2007
Net Cash Provided (Required) by Operations $2,600 $1,854 $1,325 $89
Net Cash Provided (Required) by Investing Activities (2,050) (1,911) (650) (410)
Free Cash Flow $550 ($57) $675 $(321)
Net Cash Provided (Required) by Financing Activities N/A (583) 93 (204)
Effect of Exchange Rate Changes on Cash and Cash Equivalents N/A 46 80 59
Net Increase (Decrease) in Cash and Cash Equivalents N/A ($594) $848 ($466)
$ Millions
$ per shareFiscal Year
2008FFiscal Year
2007Fiscal Year
2006Fiscal Year
2005Fiscal Year
2004
Net Income (Loss) per Share ~$3.63 $1.79 $1.25 $0.47 $0.50
Cumulative Effect of Change in Accounting Principle - - $0.01 -- --
Diluted Earnings (Loss) per Share Before Effect of Accounting Change
~$3.63 $1.79 $1.26 $0.47 $0.50
Solutia Claim Settlement ($0.23)
Tax Charge on Repatriated Earnings -- -- $0.04 -- --
Seminis In-Process R&D -- -- -- $0.38 --
Solutia-Related Charge -- -- -- $0.32 --
Tax Benefit on Loss from European Wheat andBarley Business
-- -- -- $(0.19) --
Restructuring Charges -- Net -- -- -- $0.01 $0.18
Loss (Income) on Discontinued Operations1 -- ($0.13) -- $0.05 --
Impairment of Goodwill -- -- -- -- $0.12
In-Process R & D Write-Off Related to the Delta & Pine Land (D&PL) Acquisition
-- $0.34 -- -- --
Diluted Earnings (Loss) per Share from Ongoing Business ~$3.40 $2.00 $1.30 $1.04 $0.80
Reconciliation of Non-GAAP EPS
16
Note: EPS figures reflect the stock split effective July 28, 2006
1. The operating results of Stoneville and Nexgen have been conformed to discontinued operations for all relevant years presented.