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monsanto 11-08-07-4
1. TERRY CREWS
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
MONSANTO BIENNIAL
U.S. INVESTOR DAY
NOVEMBER 8, 2007
1
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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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