Growth and Leadership Are Top Priorities for the End of the Decade, Monsanto Executives Tell European Investors
Monsanto (NYSE: MON) has a unique window of opportunity to build on its industry leading position and capitalize on emerging growth opportunities between now and the end of the decade, company executives told investors today.
The company's remarks came as part of an investor meeting held in London, which featured presentations by Hugh Grant, chairman, president and chief executive officer; Robb Fraley, executive vice president and chief technology officer; and Terry Crews, executive vice president and chief financial officer.
At the event, Monsanto's management team outlined key factors expected to drive the company's growth through 2010 and confirmed its earnings per share (EPS) and free cash flow guidance for fiscal-year 2007.
"The leadership we enjoy today is not accidental," said Grant. "It represents our strategic decision to orient our business around our seeds and traits platform, and then passionately execute against that strategy literally farm-by-farm and field-by-field.
"While our early investment gave us a head start, it is our performance -- backed by the industry's leading R&D pipeline, and coupled with our principles of relentless innovation, commercial execution and delivery against our commitments -- that will help us build on our leadership in the years ahead," said Grant.
Growth Contributors Expected To Expand Window of Leadership, Deliver Greater Profitability
Monsanto's management team has identified six elements which will contribute to the growth of the company's seeds and traits business between now and 2010. These include: its U.S. and ex-U.S. corn seeds and traits business; its international traits business; its cotton business; its Seminis fruit and vegetable seed business; and its R&D pipeline.
By executing its strategy against these six contributors, Monsanto will not only be able to deliver value to its farmer customers, but expects to grow the profitability of the business, increasing gross profit as a percent of sales from 48 percent today, to a target of 51 to 53 percent by the end of the decade, Grant said.
In outlining the six factors that would drive the company's gross-profit growth through the end of the decade, Monsanto's management team highlighted a number of opportunities and new developments, including:
-- Monsanto's U.S. corn seed and trait market continues to serve as a
centerpiece of growth. With the continued market share growth of
Monsanto's national DEKALB and Asgrow corn seed brands and increased
adoption of Monsanto biotech traits, the U.S. corn market is a margin-
rich business with opportunity for expansion. Notably, Monsanto
continues to expect that its national seed brands can continue to grow
at the rate of 1 to 2 share points per year through the end of the
decade. The company projects a potential U.S. trait market of
approximately 150 million trait acres, which creates the opportunity
to effectively double trait penetration by 2010.
-- Monsanto's breeding pipeline is developing better seed that outyields
competitive offerings. Preliminary harvest results from 2006 testing
indicated that Monsanto's DEKALB branded seed corn demonstrated an 11-
bushel-acre yield advantage when compared with competitive offerings.
The preliminary results, which were realized in the 110-day relative
maturity planting zone, highlight the benefit that Monsanto's seed
products are delivering to farmers in the Central Corn Belt, an area
which generates more than one-third of the nation's grain production.
-- The R&D pipeline is set to deliver further value, reflected in a new
listing of "Top 10" projects. Complementing the "High-Impact
Technologies" (HITs) the company established in fiscal year 2006,
Monsanto unveiled a top-10 listing of products in its R&D pipeline,
reflecting the products in development that are poised to deliver the
most value based on factors such as crop size, market need, uniqueness
of the technology, and the ability to establish new platforms for
-- R&D "HIT" projects are on track and have the company geared up for
larger-acre launches with greater financial benefit to the company.
The progress of the HIT projects is reinforced by 2006 testing, where
Monsanto tested its Roundup RReady2Yield soybean technology with more
than 45 trials, spanning 25 locations on more than 11,000 lines.
During 2006, the company also conducted more than 85,000 drought test
plots to better assess its drought-tolerant technology and its
benefits for corn, cotton and soybean farmers.
-- The tools of molecular breeding will be able to improve the Seminis
vegetable seed platform and its offerings. Using the technology and
tools that were first applied to Monsanto's core row crop business,
scientists are actively developing genetic maps and molecular markers
for nine key vegetable crops. With the ongoing work, Monsanto expects
to develop approximately 1,000 molecular markers for each crop by the
end of the decade -- or a total of 9,000 markers that can be used for
-- The strong business performance, underpinned by financial discipline,
creates a platform for growth and a greater opportunity to return
value to shareowners. In the past three fiscal years, Monsanto
returned three-quarters of free cash generated to shareowners, either
directly through share repurchases and dividends, or by re-investing
in the growth of the business.
Company Reiterates Guidance for Fiscal Year 2007
In the final presentation of the day, Crews reviewed the company's key financial projections. He underscored the opportunity created by a company uniquely positioned for leadership in the seeds-and-traits segment of the agricultural industry.
Crews noted that the company continues to expect that its full-year 2007 EPS guidance, both on a reported and ongoing basis, is expected to be in the range of $1.50 to $1.57. (For a reconciliation of ongoing EPS, see note 1.)
"At Monsanto, guidance is a commitment, not an aspiration," said Crews. "Our projected 15 to 20 percent growth rate for ongoing EPS in 2007 reflects our confidence in the substantial organic growth potential of our seeds and traits, even in a dynamic agricultural market.
"If we accomplish our objectives over the mid-term, we have a unique window of opportunity to extend our leadership and reward our shareowners for their investment in our company."
Crews also underscored that the company still expects guidance for free cash flow for fiscal year 2007 will be in the range of $875 million to $950 million. The company expects net cash provided by operating activities to be in the range of $1.3 billion to $1.4 billion, and net cash required by investing activities to be approximately $500 million for fiscal year 2007. (For a reconciliation of free cash flow, see note 1.)
2006 European Investor Meeting Background
A live webcast of Monsanto's European investor briefing will be available through Monsanto's web site beginning at 3 a.m. Central Standard Time this morning, Friday, Nov. 10, 2006. This webcast is available at: http://www.monsanto.com/monsanto/layout/investor/financial/presentations.asp . Following the live broadcast, a replay of the webcast will be available on the Monsanto web site for two weeks.
Materials related to this investor briefing, including: the presentation agenda, briefing slides, transcripts, and speaker bios will also be available through Monsanto's web site at: http://www.monsanto.com/monsanto/layout/featured/europe_conference/default.asp . To access presentation slides and the simultaneous audio webcast of the presentation, visitors may need to download Windows Media Player(TM) prior to listening to the webcast.
Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality.
Cautionary Statements Regarding Forward-Looking Information:
Certain statements contained in this release 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 and proposed acquisitions, including Delta and Pine Land Company; 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 filings with the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results.
Notes to editors: DEKALB, Asgrow and Roundup RReady2Yield are trademarks of Monsanto Company and its wholly owned subsidiaries.
Selected Financial Information
(Dollars in millions)
1. Ongoing EPS and Free Cash Flow: The presentations of ongoing EPS and
free cash flow are not intended to replace net income (loss), cash
flows, financial position or comprehensive income (loss), and they are
not measures of financial performance as determined in accordance with
generally accepted accounting principles (GAAP) in the United States.
The following tables reconcile EBIT, ongoing EPS and free cash flow to
the respective most directly comparable financial measure calculated
in accordance with GAAP.
Reconciliation of EPS to Ongoing EPS: Ongoing EPS is calculated
excluding certain after-tax items which Monsanto does not consider
part of ongoing operations.
Fiscal Year Fiscal Fiscal
2007 Year Year
Target 2006 2005
Diluted Earnings per Share $1.50 - $1.57 $1.25 $0.47
Tax Charge on Repatriated Earnings - 0.04 -
Loss (Income) on Discontinued
Operations - 0.01 (0.02)
Cumulative Effect of Change in
Accounting Principle - 0.01 -
Solutia-Related Charge - - 0.32
Tax Benefit on Loss from European
Wheat and Barley Business - - (0.19)
Restructuring Charges - Net - - 0.01
Seminis & Stoneville In-Process R&D - - 0.45
Diluted Earnings per Share from
Ongoing Business $1.50 - $1.57 $1.31 $1.04
Reconciliation of Free Cash Flow: Free cash flow represents the total
of cash flows from operating activities and investing activities, as
reflected in the Statements of Consolidated Cash Flows. With respect
to the fiscal year 2007 free cash flow target, Monsanto does not
include any estimates or projections of Net Cash Provided (Required)
by Financing Activities because in order to prepare any such estimate
or projection, Monsanto would need to rely on market factors and
conditions that are outside of its control.
Fiscal Year 12 Months Ended
2007 Aug. 31,
Target 2006 2005
Net Cash Provided by Operating
Activities $1,375 - $1,450 $1,674 $1,737
Net Cash Required by Investing
Activities (500) (625) (1,667)
Free Cash Flow $875 - $950 $1,049 $70
Net Cash Required by Financing
Activities N/A (117) (582)
Effect of Exchange Rate Changes
on Cash and Cash Equivalents N/A 3 -
Net Increase (Decrease) in Cash
and Cash Equivalents N/A $935 $(512)
Cash and Cash Equivalents at
Beginning of Period N/A $525 $1,037
Cash and Cash Equivalents at End
of Period N/A $1,460 $525