Morgan Stanley Global Chemicals & Ag Conference KERRY PREETE

Transcription

1 Morgan Stanley Global Chemicals & Ag Conference KERRY PREETE Executive Vice-President, Global Strategy November 12, 2014

2 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 forwardlooking 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 and the previously announced SEC investigation; developments related to foreign currencies and economies; successful operation of recent acquisitions; fluctuations in commodity prices; compliance with regulations affecting the company s manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the recent increases in and expected higher levels of indebtedness; the company's ability 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. 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 Monsanto Company 2

3 Non-GAAP Financial Information This presentation may use the non-gaap financial measures of free cash flow, earnings per share (EPS) on an ongoing basis, EBIT and EBITDA on an ongoing basis, EBITDA on an as reported basis, and net debt. 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 ongoing EPS, excludes certain after-tax items that we do not consider part of ongoing operations, which are identified in the reconciliation. EBIT is defined as earnings (loss) before interest and taxes, ongoing EBITDA is defined as earnings (loss) before interest, taxes, depreciation and amortization and excludes certain after-tax items that we do not consider part of ongoing operations, as defined in the reconciliation, and as reported EBITDA is defined as earnings (loss) before interest, taxes, depreciation and amortization. Earnings (loss) is intended to mean net income (loss) attributable to Monsanto Company as presented in the Statements of Consolidated Operations under GAAP. Net debt is defined as the sum of both short-term debt and long-term debt, less cash and cash equivalents. Our presentation of non-gaap financial measures is intended to supplement investors understanding of our operating performance, not replace net income (loss) attributable to Monsanto Company, cash flows, financial position, or comprehensive income (loss), as determined in accordance with GAAP. 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. FISCAL YEAR: References to year, or to fiscal year, are on a fiscal year basis and refer to the 12-month period ending August 31. 3

4 Mega-Trends Matter: Demand-Driven Global Need for Grain Sets Important Runway for Ag Sector CORN DEMAND MOMENTUM EX: GLOBAL CORN DEMAND ESTIMATES ( F) 1 SOY DEMAND MOMENTUM EX: GLOBAL SOYBEAN DEMAND ESTIMATES ( F) 1 CORN DEMAND (IN BILLION BUSHELS) Actual Forecast CORN DEMAND ~500M bushels / yr increase over next 5 years based on conservative estimates SOY DEMAND (IN BILLION BUSHELS) Actual Forecast SOY DEMAND ~200M bushels / yr increase over next 5 years based on conservative estimates ADD L CORN PRODUCTION (YIELD VS ACRES %) LAST 5 YEARS ~40% YIELD ~60% ACRES NEXT 5 YEARS ~95% YIELD ~5% ACRES ADD L SOY PRODUCTION (YIELD VS ACRES %) LAST 5 YEARS ~15% YIELD ~85% ACRES NEXT 5 YEARS ~85% YIELD ~15% ACRES 1. USDA historical data, future forecast and projections represent Monsanto internal estimates 4

5 Innovation Differentiates Monsanto: Combination of Innovation and Portfolio Strength Supports Growth in Variable Environment CORN & SOYBEAN PRICE FUTURES CBOT Corn Futures CBOT Soy Futures Agriculture may be commodity oriented, but Monsanto is differentiated by innovation Some of the fastest adoption rates on new technologies have occurred in declining and volatile Ag environments CBOT FUTURES (USB/BU) 1 $18.00 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 US Roundup Ready Soybeans Brazil Roundup Ready Soybeans US Roundup Ready 2 Yield >43M Acres in 5 years INTACTA RR2 PRO Launch Over the past five years: Corn commodity price has swung more than 100 percent...while Monsanto has delivered consistent, strong business growth 1. CBOT $4.00 $2.00 $ US First Generation Traits Argentina First Generation Traits US Reduced Refuge Family >42M Acres in 4 years

6 Monsanto s 5-Year Growth: With Strong Core Business and Expanding Drivers, Monsanto Targets At Least Double Ongoing EPS By FY19 5-YEAR GROWTH TARGET Given strength of business and compelling line of sight, Monsanto sees sustained opportunity for long-term growth KEY FACTORS: CORE BUSINESS GROWTH Strong embedded growth is expected to deliver more than $4 billion of total gross-profit growth from core seeds-and-traits engine alone NEW PLATFORM OPPORTUNITY Opportunity for growth on top of core from transformational new platforms: Expect The Climate Corporation platform to emerge as meaningful contributor to earnings and growth in 5-year horizon ONGOING EPS $10.00 $8.00 $6.00 $4.00 $2.00 $2.39 ONGOING EPS FY2010-FY2019F FY2010-FY2014 During first half of decade Monsanto delivered strong mid-teens-plus ongoing EPS CAGR $5.23 growth LONG-TERM GROWTH: FY2014-FY2019F Monsanto growth strategy provides opportunity to at least double ongoing EPS over 5-year period 2X CAPITAL STRUCTURE OPPORTUNITY $0.00 FY2010 FY2014 FY2019F Strong cash generation and capital structure, along with growth from core and new platforms, create shareowner value 6

7 Monsanto is Positioned for Growth: With Strong Core Engine, Monsanto is Focused on Growth in Near-Term and Over Five-Year Horizon GROSS PROFIT $11,000 $10,000 $9,000 $8,000 $7,000 $7B $6,000 FY2014 SEEDS & GENOMICS GP GROSS PROFIT PROFILE: FY2014-FY2019F BLOCKBUSTER SOYBEAN UPGRADES CORE ENGINE CATEGORIES: >$4B EXPECTED TOTAL GP GROWTH KEY $1B+ PLATFORMS Backing the growth in the core seedsand-traits engine are 3 key platforms expected to deliver $1B+ each EXPANDING CORN FOOTPRINT & LEVERAGE GLOBAL GERMPLASM UPGRADES COMPLEMENTARY GROWTH IN SEEDS & TRAIT SOYBEANS CORN OTHER CROPS FY2019F TOTAL CORE GROSS-PROFIT GROWTH GROWTH SUMMARY: Growth from key platforms anchors 2015 priorities and creates momentum for Monsanto s fiveyear growth horizon: Soybeans continue to drive growth, led by Intacta RR2 PRO as Decade of the Soybean emerges as differentiating platform As our largest international business, global corn platform continues to drive expansion and annual growth Focus on aggressive expansion of base in The Climate Corporation platform sets longterm opportunity Strategic management of Ag Productivity business continues 7

8 Key Milestones in FY15: Monsanto s Key Business Drivers Provide Platform for Growth Over Five-Year Horizon KEY BUSINESS DRIVERS 5-YEAR OPPORTUNITY: GROWTH DRIVERS THROUGH FY2019 FY2015 PRIORITIES BLOCKBUSTER SOYBEAN UPGRADES INTACTA RR2 PRO LATIN AMERICA ROUNDUP READY XTEND CROP SYSTEM GLOBAL GERMPLASM UPGRADES MIX UPGRADE GLOBAL CORN FOOTPRINT EXPANSION MARKET EXPANSION FOOTPRINT GROWTH COST IMPROVEMENT COMPLEMENTARY SEED & TRAIT NEW PLATFORMS AG PRODUCTIVITY CONTRIBUTION $1B+ SOYBEAN GP PLATFORM In next 5 years, >$1B opportunity from soybean platforms led by Intacta RR2 PRO and continued upgrades from Roundup Ready 2 Xtend $1B+ CORN GERMPLASM GP PLATFORM Ability to upgrade global portfolio every year in every key corn-growing region drives reliable portfolio mix uplift annually and important cumulative growth factor $1B+ CORN FOOTPRINT GP PLATFORM Global opportunity drives growth through operational efficiency, volume opportunity via market expansion and footprint growth, along with further penetration of trait portfolio Growth in complementary seed platforms including cotton, canola and vegetables rounds out core 1B-ACRE PRECISION AG OPPORTUNITY The Climate Corporation platform can be deployed globally and across crops, accessing market opportunity of >1B acres Roundup strategy provides steady-range contribution while supporting key seed-and-trait franchise INTACTA RR2 PRO RAMP UP On track for 10-12M acres in FY15 setting up tipping point for continued penetration of key long-term platform GLOBAL MIX UPGRADE AND FOOTPRINT EXPANSION Portfolio upgrade in place, delivering similar percent of new products and expected germplasm mix benefit Performance advantage expected to continue to drive footprint expansion Modest, steady contribution in vegetables, cotton and other crops Aggressive growth in active user base in The Climate Corporation and initial step in value ladder Continued strategic management of Ag Productivity as market normalizes CORN SOYBEANS OTHER 8

9 The Opportunity in Soybeans: With Rapid Upgrade Cycle Driving Most Significant New Driver, Soybeans Expected as $1B+ Platform $1B+ PLATFORMS WHAT DRIVES GROWTH? BLOCKBUSTER SOYBEAN UPGRADES 1. Roundup Ready 2 Yield expansion and licensing 2. Intacta RR2 PRO ramp up to 100M-acre opportunity 3. Roundup Ready Xtend platform targeting majority of 200M acre opportunity FY 15 OPERATIONAL DRIVERS Q1 HIGHLIGHTS On track for 10-12M acres of penetration across South America Market research across 4,000 Groundbreakers growers, who cover ~40% of Brazil acres, indicates intentions to plant ~25% of their farms to Intacta RR2 PRO ~90%+ of sales expected to come from certified seed purchases ACRES (IN MILLIONS) FASTEST RAMP OF ANY SOYBEAN TRAIT With early view on supply availability, targeting step up of 3 to 4 times FY14 acres across Latin America Twice the level of U.S. Genuity Roundup Ready 2 Yield Soybeans INTACTA RR2 PRO U.S. Genuity Roundup Ready 2 Yield Soybeans Intacta RR2 PRO Soybeans 10-12M ACRES Year TRAIT PENETRATION STARTING WITH PRODUCT LAUNCH 9

10 Roundup Ready Xtend Crop System: Broad Integrated Soybean Agronomic System Targets Markets of Almost 200 Million Acres Globally $1B+ PLATFORMS BLOCKBUSTER SOYBEAN UPGRADES U.S. TRAIT LICENSING PROFILE ROUNDUP READY XTEND CROP SYSTEM MARKET OPPORTUNITY: PROGRESS MILESTONES: REGULATORY STATUS: Majority of 200M ACRES N. AND S. AMERICA SOY ACRES Targeting seed companies with total market share access representing: >90% OF U.S. SOYBEAN ACRES With commercial licensing structure for the Roundup Ready Xtend crop system. Many are actively breeding products for commercial introduction establishing the soybean weed-control system of choice THREE SOURCES OF VALUE IN ROUNDUP READY XTEND CROP SYSTEM Innovative Traits in Leading Germplasm Enhanced Chemistry Options Greater Flexibility, Weed Control and Yield Potential 10

11 Global Corn Portfolio Upgrades: New Products Drive Annual Portfolio Upgrades Across Largest Global Platform $1B+ PLATFORMS GLOBAL GERMPLASM UPGRADES FY14 EXAMPLE: ACTUAL U.S. DEKALB COMPOSITION WHAT DRIVES GROWTH? 60.0% Industry-leading breeding program allows Monsanto to upgrade its seed portfolio every year in every key corn-growing region creating a steady mix uplift in the biggest global business WHAT ARE THE NEXT MILESTONES? Into FY15, portfolio mix continues to be one of the largest drivers of global growth: As in FY14, on track for upgrade of significant portion of global portfolio, with higher-value new products driving realized price-mix lift in portfolio 2015 Priorities: Keep business in touch with grower customers and the critical operational decisions they make, as seed is important Mix drives the portfolio and Monsanto is on track to introduce a similar percent of new better-performing products to the portfolio Offer even more product choices to ensure customers have the right portfolio choice to meet their agronomic and economic needs VOLUME (IN SEED UNITS) VOLUME (IN SEED UNITS) 40.0% 20.0% 0.0% 60.0% 40.0% 20.0% 0.0% MATURE HYBRIDS 4+ YEARS IN MATURE HYBRIDS 4+ YEARS IN PROVEN HYBRIDS 3-4 YEARS IN CORE HYBRIDS 2-3 YEARS IN EXAMPLE: U.S. DEKALB OUTLOOK PROVEN HYBRIDS 3-4 YEARS IN CORE HYBRIDS 2-3 YEARS IN NEW HYBRIDS FIRST-YEAR INTRODUCTIONS NEW HYBRIDS FIRST-YEAR INTRODUCTIONS In FY14, new offerings represented strong portion of volume in DEKALB portfolio in FY15, delivering a similar percent of new products creating primary source of portfolio refresh, new value creation and sustained mix uplift 11

12 Expanding Global Corn Footprint: Technology Upgrades Drive Market Expansion, Mix Lift and Volume Growth Opportunity $1B+ PLATFORMS WHAT DRIVES GROWTH? EXPANDING CORN FOOTPRINT New, higher-growth markets drive volume Continued upgrades drive expansion opportunities in existing core markets Expanding footprint allows for continued growth of trait penetration WHAT ARE THE NEXT MILESTONES? Continued focus on new market opportunities, including Eastern Europe, which holds potential to be among the fastest-growing corn regions 2015 Priorities: Opportunity for footprint expansion with continued growth in established markets and further opportunity in newer, emerging markets NEW INTEGRATED TECHNOLOGY CENTER INVESTMENT Recently announced $20M investment in Integrated Technology Centers Expect continued utilization of advancements in Data Science, Genomic Breeding and Predictive Analytics to enhance rate of gain and move more field work more effectively to the lab WESTERN CANADA EMERGING MARKET OPPORTUNITIES EASTERN EUROPE DRIV LEVERAGE Genetic strength in Northern ERS U.S. underscores performance Investments in breeding for early maturities improves economics in growing markets NORTHERN U.S. DAKOTA EFFECT DAKOTA EFFECT DRIVES GROWTH IN NEW MARKETS Yield Improvements As yields improve to levels that make corn more profitable vs. other crops, like wheat and barley, acres convert to corn Macro Factors Environments and infrastructure become more supportive for corn production and transportation to expanding markets Proven Germplasm and Seed 4 Footprint Performance and investments in breeding 2 and capacity enables volume growth through share and market expansion WHEAT ACRES 49 N CORN MARKET EXPANSION EXAMPLE: NORTH & SOUTH DAKOTA 1 CORN ACRES NASS USDA 12

13 The Climate Corporation Platform: 2015 Reflects Opportunity to Accelerate Platform with Increased Investment and Expanded Market Reach CRITICAL PATH PROGRESSION Integrated Strategy is Differentiating Opportunity Moving to only unified offering in the industry, providing integration and simplification, connecting farming in ways it s never been connected previously PRIORITY 1: PRIORITY 2: PRIORITY 3: FOUNDATION ENGAGEMENT CONVERSION Establish Installed Base Cultivate User Engagement Conversion To Premium Offerings In 2014, priority was to establish a user base and enrolled acres that validates interest and platform potential Better-than-expected interest and adoption across the platform 50M acres And 2.5X original targets 30M active acres 1 PREMIUM OFFERINGS Multiple retail, distribution and equipment partners >1M acres in first-year experience like Ground Breakers program 1. Active acres are defined as the acre base by a Climate BASIC user, averaging more than 1 visit per week during the season PRIORITIES STEP UP INVESTMENT TO LEVERAGE HEAD START CULTIVATE ACTIVE ENROLLMENT TO BUILD PLATFORM +50% Increase active acres 1 by 50% FIRST STEPS IN BUILD OF RUNWAY FOR PREMIUM OFFERINGS Establish value ladder of multiple offerings at multiple price points to incentivize trial, build experience and establish value, similar to approach taken in biotech traits Emphasis on entry-level, premium Climate Pro offering in FY

14 Monsanto is Positioned for Growth: With Strong Core Engine, Monsanto is Focused on Growth in Near-Term and Over Five-Year Horizon GROSS PROFIT $11,000 $10,000 $9,000 $8,000 $7,000 $7B $6,000 FY2014 SEEDS & GENOMICS GP GROSS PROFIT PROFILE: FY2014-FY2019F BLOCKBUSTER SOYBEAN UPGRADES CORE ENGINE CATEGORIES: >$4B EXPECTED TOTAL GP GROWTH KEY $1B+ PLATFORMS Backing the growth in the core seedsand-traits engine are 3 key platforms expected to deliver $1B+ each EXPANDING CORN FOOTPRINT & LEVERAGE GLOBAL GERMPLASM UPGRADES COMPLEMENTARY GROWTH IN SEEDS & TRAIT SOYBEANS CORN OTHER CROPS FY2019F TOTAL CORE GROSS-PROFIT GROWTH GROWTH SUMMARY: Growth from key platforms anchors 2015 priorities and creates momentum for Monsanto s fiveyear growth horizon: Soybeans continue to drive growth, led by Intacta RR2 PRO as Decade of the Soybean emerges as differentiating platform As our largest international business, global corn platform continues to drive expansion and annual growth Focus on aggressive expansion of base in The Climate Corporation platform sets longterm opportunity Strategic management of Ag Productivity business continues 14

15 Reconciliation of Non-GAAP Financial Measures RECONCILIATION OF ONGOING EPS Fiscal Year $ Per share Diluted Earnings per Share $ Restructuring Charges, Net -- $0.41 Income on Discontinued Operations $(0.03) $(0.01) Legacy Environmental Settlements $ Diluted Earnings per Share from Ongoing Business $5.23 $