The comments were made by Hugh Grant, company chairman, president and chief executive officer at the Eighth Annual Agricultural Forum, held in the US, who underscored the company's expectation of compounded annual earnings-per-share (EPS) growth of 10 per cent in 2005 and 2006. He said he believed the growth will be driven by the company's corn business and its next generation of biotechnology traits.
As a part of the business update, Grant confirmed the company's EPS guidance for fiscal year 2004, expected in the range of $1.40 to $1.50 on an ongoing basis and said that favourable timing associated with increasing sales of Monsanto's seed and trait products resulted in the decision to shift the quarterly EPS guidance outlook.
"As our seeds and traits business increasingly takes the lead in our portfolio, the growth it delivers will propel the growth for all of Monsanto," said Grant. "Success in seeds and traits requires experience, access and execution, and Monsanto has the base and the strategy to lead this area of growth for the agricultural industry."
Grant also focused on Monsanto's seeds and traits strategy, explaining that the company has built its strategy on three successive rounds of seed and trait innovation. The first round was dominated by significant advancement in seed breeding and first-generation biotech products - like Monsanto's portfolio of insect-protected and herbicide-tolerant crops.
With growth continuing in this first round, Monsanto has already reported seeing initial business growth in the second round - a period of innovation which the company says has been focused on second-generation biotech offerings and an increased emphasis on multiple stacked traits.
"Monsanto is already moving to second-generation products that give us a tremendous competitive advantage as other companies bring 'me-too' products to the market," said Grant.
Grant cited an "intensity index" of US biotech traits that shows significant penetration of multiple Monsanto traits for key crops on each acre planted with biotech crops. For 2004, the projected intensity index for corn is 1.2 - meaning Monsanto believes there are approximately 1.2 Monsanto traits per acres - with continued growth in 2005 and 2006 as a result of the introduction of second-generation traits and increased penetration of stacked traits.
"Concepts that were just drawing board ideas a few years ago are already being tested in the field," he said. "For instance, last year, Monsanto had good early field success with drought-tolerant corn that could eventually help farmers maintain yields in times of significant water shortage."
Grant also provided an update on Monsanto's initiatives in Brazil, where progress is being made on a value-capture system for Roundup Ready soybeans for the 2004 season.
"We've been able to check off a few of the first key milestones, including developing a grain-based value-capture concept and signing contracts with the major global grain handlers," said Grant. "But, there are still some important steps - including completing enrollment of local elevators and processors - before the system is fully instituted."
Even if all of the milestones are successfully completed in the Brazil value-capture system, Grant indicated that the company expects the initial start-up costs associated with this programme to offset any potential additional earnings for Monsanto in 2004.