© 3M 2007. All Rights Reserved. 2007 3M Investor Conference George Buckley Chairman of the Board, President, and CEO 3M Company October 9, 2007 Continuing On the Path to Higher Growth
© 3M 2007. All Rights Reserved. 2007 3M Investor Conference
George BuckleyChairman of the Board, President, and CEO3M Company
October 9, 2007
ContinuingOn the Path to
Higher Growth
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2007 3M Investor Conference
Higher Growth Is Fundamental To Our Long Term Success
1. Rebuilding R&D to improve new product flow and impact
2. Complement the core through acquisitions
3. Financing the growth through supply chain re-engineering
4. Developing a more entrepreneurial and responsive culture
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2007 3M Investor Conference
What Has Changed Since 18 Months Ago?Early analysis quickly identified:-
The causes of slow growthThe way to accelerate it
Eighteen months ago, we told you what we were planning to do and, since then, we’ve been simply executing
We’re building the plants, doing the acquisitions, investing in R&D and fixing the things which were broken and selling those we don’t need or want
What is clearer to us now?The vital importance of the supply chain initiativeThe vital importance of 3M’s traditional coreThe power of 3M’s enduring franchises .. And how to secure themThe fact we cannot rely only on big bets (e.g., Aldara) for growthThe fact we can finely balance growth, ROIC and margin
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2007 3M Investor Conference
Operational ExcellenceGrowthProtect and
Grow the CoreAdjacencyBuild Out
1. New Technology 2. New Products
4. Breakthrough Opportunities
(BTO’s)6. Go to Market
3. Solve Low Turns Inventory
4. Service & Quality Revolution 5. Sourcing5. Localized, Simplified
Supply Chains
1. Factory Cost Reduction
2. Control Price Leakage
6. Lean Six Sigma
3. M&A
Organizational excellence within a growth culture essential
Growth Inspired by Our Customers, Balanced with Operational Excellence
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2007 3M Investor Conference
The Dynamics of GrowthMany companies covet growth and believe it to be the best value creatorCompanies that participate in broad markets will always, in the absence of something special, tend to the mean growth rate. Growth above market is not a rightA company cannot sustain higher growth rates than the market unless it does at least one of three things:
Creates new markets at growth rates consistent with their long term growth expectations. Saturation always happensPenetrates new segments, e.g. international or the pyramid’s lower levelsMoves to markets where the average growth rate is higher
Sustained growth above the average is therefore a very challenging goal for corporations to achieve
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2007 3M Investor Conference
Why Growth Naturally Runs Out; Market Saturation
9%
91%
3M ShareBalance
17%
83%
3M ShareBalance
13%
87%
3M ShareBalance
24%
76%
3M ShareBalance
34%
66%
3M ShareBalance
Assume we grow at ≈ three times (10%) the market rate; here’s what happens
Year 0 Year 5 Year 10
Year 15 Year 20
Market Grows @ 3%
Market Grows @ 3%
Market Grows @ 3%
Market Grows @ 3%
Market Grows @ 3%
Market twice the size
growing @ 10%
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2007 3M Investor Conference
Essentials of 3M’s Growth PlanRebuilding & extending the core; lowest risk and fastest results
Protect and defend the core; inventing a new futureFixing chronic capacity issuesBroaden the product portfolio to become more important to customers
Invest in the futureR&D spending increases, protecting our flanks and reengaging the labs Acquisitions, Break Through Opportunities (BTOs) and “feet on the street”
Improving supply chain speed and efficiencyShortening most of our supply chainsDriving growth by going “local” with regional brands and manufacturingReleasing working capital and lowering entropy costs and effective tax rate
Experiment with new marketsEmerging Business Opportunities (EBOs) and other adjacencies
Greater emphasis on International markets growth
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2007 3M Investor Conference
• Seeded by small M&A• Mega Trends • Track and Trace• Minerals extraction• Oil & Gas• Food safety
Grow the Current Core Business
Build New Businesses
StrategicThrust
Complementary Acquisitions
International Growth
• Defend and extend the core• Build scale• Build relative share• Localization• Disruptive technologies• Build long term competency
• Follows core strategy• Supports adjacencies• Mostly tuck-ins• Occasional transformation
• BRICP• No country left behind
A Visual Of Our Basic Strategy
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2007 3M Investor Conference
Core Growth Remains The First Mission
• Imagine, dream and invent• Beat competitors to the future• Plan for cannibalization• Licensing • Avoid NIH syndrome
Invent a New Future
Build Broad LongTerm Competencies
• Develop broad based long-term capabilities• Acquire supporting technology with quality brands• Build volume and scale
• Constant reinvention• Localization• Differentiation• Build key partnerships
Grow the Current Core
Extend The Core
• Build first where we’re strong• Build scale & relative share• Fill product “white spaces”• Be important to customers• Use dual branding• International localization• Local acquisitions• Private labeling
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2007 3M Investor Conference
We Made Solid Progress in 2007Reinvigorating R&D
11% increase over 2006*Building on EBOsNew product vitality index up from 20% to 24%
Accelerated International GrowthBuilding local/regional brandsPursued profitable adjacencies
Invest in a better Supply Chain28% increase in Capex over 2006Improving local source of supply
• Korea – New respiratory facility • Poland – New optical facility • Canada – New CHIM tape facility • China – New Industrial tapes facility
Seed Further Growth in the Core via acquisitions15 acquisitions YTD
*ex-pharma, Brontes in 2006
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2007 3M Investor Conference
Capital Spending 2001-2007
Building the capital assets to drive growth
2001 2002 2003
Supply Chain
Growth/Strategic
+25% CAGR
2005 2006
Optical and Film
Sustain
2007E
-20%CAGR
2004
© 3M 2007. All Rights Reserved. 2007 3M Investor Conference
Elements of Growth
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2007 3M Investor Conference
Voice of The Market
Technology-enabled solutions
3M Technology Capability
3M’s Core Strength: Connecting Technology to Markets
NPI
Ab
Bi
Ac
Ce
Ad
Dd
Am
Di
An
Do
As
Ec
Em
Fc
Fe
Fs
Fi
Im
Fl
In
Is
Lm
Md
Me
Mf
Mi
Mo
Mr
Pe
Nt
Nw
Rp
Se
Po
Pm
Wo
Vp
Su
Sm
Op
Pd
Pr
Pp
Tt
We
© 3M 2007. All Rights Reserved.
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2007 3M Investor Conference
3M’s Multiple Technology Platforms
AbAbrasives
BiBiotech
AcAcoustics
CeCeramics
AdAdhesives
DdDrug
Delivery
AmAdvancedMaterials
DiDisplay
AnAnalytical
DoDental &
Orthodontic Materials
AsApplicationSoftware
EcEnergy
Components
EmElectronicMaterials
FcFlexible
Converting & Packaging
FeFlexible
Electronics
FsFiltration,
Separation, Purification
FiFilms
ImImaging
FlFluoro-
materials
InInspection &
Measure-ment
IsIntegrated Systems Design
LmLight Mgmt
MdMedical
Data Mgmt
MeMetal Matrix Composites
MfMechanical Fasteners
MiMicrobial
Detection & Control
MoMolding
MrMicro-
replication
PePredictive
Engineering & Modeling
NtNano-
technology
NwNonwoven Materials
RpRadiation Processing
SeSensors
PoPorous
Materials & Membranes
PmPolymer
Melt Processing
WoWound Mgmt
VpVapor
Processing
SuSurface
Modification
SmSpecialty Materials
OpOpto-
electronics
PdParticle & Dispersion Processing
PrProcess
Design & Control
PpPrecision
Processing
TtTrack and
Trace
WeAccelerated Weathering
Investmentpriority
Successful new product growth builds on uncommon connections
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FROM
Traditional mineral materials and market focus; metal finishing and wood-working
2003 OI Margin = 12%2003 ROIC = 16%2003 Growth Rate ≈ 1%
The Oldest Can Be Forever New - Abrasive Reinvention
Cubitron™
Trizact™ Super Abrasives Hook-it™
Synthetic materials and specialized applications; aerospace, healthcare, composites2012 OI Margin = 25%2012 ROIC = 45%2007 Growth Rate = 7.8%
Movement to higher growth, higher profit market zones
TO
Sandblaster™
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2007 3M Investor Conference
3M’s Platforms Broadly Supported by Nanotechnology
Reinventing material science through nanotechnology
CeCeramics
AdAdhesives
AmAdvancedMaterials
FiFilms
NwNonwoven Materials
MrMicro-
replication
Nanotechnology
NanofabricationNanocatalysisNanocompositesNanoprocessing
Nanomaterialhardcoats
Drug DeliveryFiltrationDental restorativesWindow Film
Zirconia cubes10nm
Silica spheres75 nm
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2007 3M Investor Conference
Rekindling the Spirit of InnovationBroad patent portfolio140 Technology Platform Experts identified and recognizedSubject Matter Expert roster published and available across 3M
Technology leadership
“Tech Time” with GeorgeMonthly meetings with CTOR&D executive leadership within every Big BTop scientist (T6/T7) advisory board
Executive support
Strengthening the innovation culture2003 R&D opinion survey highlighted job fears, time pressures, and emphasis on formal processes (e.g., Six Sigma)2007 survey shows a committed technical community, encouraged tocollaborate, freedom to focus on new ideas
Continued recognition for innovationInnovation Funding grants (e.g., Genesis, Alpha)Circle of Technical Excellence and Carlton Society recognition
3M Culture
Technical Community is getting re-engaged
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2007 3M Investor Conference
Stepping Up The Pace In New Products – Our Vitality Index
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
2005 2006 2007Estimate
2008Forecast
2009Forecast
2009 Launches2008 Launches2007 Launches2006 Launches2005 Launches2004 Launches2003 Launches2002 Launches2001 Launches
2005 Launches
($MM)
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2007 3M Investor Conference
Stepping Up The Pace In New Products – Our Vitality Index
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
2005 2006 2007Estimate
2008Forecast
2009Forecast
2009 Launches2008 Launches2007 Launches2006 Launches2005 Launches2004 Launches2003 Launches2002 Launches2001 Launches
2006 Launches
($MM)
© 3M 2007. All Rights Reserved.
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2007 3M Investor Conference
Stepping Up The Pace In New Products – Our Vitality Index
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
2005 2006 2007Estimate
2008Forecast
2009Forecast
2009 Launches2008 Launches2007 Launches2006 Launches2005 Launches2004 Launches2003 Launches2002 Launches2001 Launches
2007 Launches
($MM)
2007 new products expected to deliver ~33% more than historical average
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2007 3M Investor Conference
2008 Launches
Stepping Up The Pace In New Products – Our Vitality Index
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
2005 2006 2007Estimate
2008Forecast
2009Forecast
2009 Launches2008 Launches2007 Launches2006 Launches2005 Launches2004 Launches2003 Launches2002 Launches2001 Launches
2008 Launches
($MM)
2007 new products expected to deliver ~33% more than historical average
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2007 3M Investor Conference
Stepping Up The Pace In New Products – Our Vitality Index
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
2005 2006 2007Estimate
2008Forecast
2009Forecast
2009 Launches2008 Launches2007 Launches2006 Launches2005 Launches2004 Launches2003 Launches2002 Launches2001 Launches
2007 new products expected to deliver ~33% more than historical average
75% of new product 2009 sales expected
from products already launched 2009 Launches
($MM)
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2007 3M Investor Conference
Towards More Impactful New Product LaunchesTools & training developed for successful launch execution; ~90%adoption rateTrained 8,000 people globally on commercialization; established Marketing UniversityEstablished a commercialization community for best practices with 15,000 membersIntense focus on top 2006 and 2007 new product introductions (NPI)
Becoming more effective in new product introductions1H2006 1H2007
~45%
Top Product Launches
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2007 3M Investor Conference
The 3M Growth Strategy Is Taking Hold3M
LC
Rev
enue
Gro
wth
2%
5% 6%
1%
6%
03-05
8%
06-07 YTD
Acquisition
OrganicOil and Housing
Headwinds Plus a Slowing GDP in US and Asia
Increasing growth, without favorable economic conditions
© 3M 2007. All Rights Reserved. 2007 3M Investor Conference
New Product Success Ensures Long-Term Market Sustainability
Just Some of 3M’s NewPlatforms
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2007 3M Investor Conference
Light Extraction PSA for OLED
OLED Glass(n=1.51)
Visible Light PhotonsITOAnode
Organic Layer
Injected Hole
Injected Electron
OLED Glass(n=1.51)
Visible Light PhotonsOLED Glass(n=1.51)
Visible Light PhotonsITOAnode
Organic LayerAl/Cathode
Injected Hole
Injected Electron
FunctionalPSA
Protective film
A Great New Emerging Platform: Optically Clear Adhesives (OCA)
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2007 3M Investor Conference
High Performance Window Film
• Film offers IR reflectivity and the nanomaterial hardcoat absorbs IR resulting in rejection of up to 97% of the sun’s IR energy
• Tiered global launch with a new businessmodel to meet service expectations – met 100% of sales forecast in 1st year
• Established a technology platform to launch subsequent products (Prestige Safety – 2007).
Prestige and Crystalline Window Films Film + Nanomaterials
LinerPSAHPWF 875
Nanomaterialhardcoat
Superior heat rejection with low reflectivity and high visible light transmission
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2007 3M Investor Conference
New Consumer Products Inspired by Non-Woven Technology
• New performance attributes• Natural materials• Sustainable and renewable
• New performance attributes• Natural materials• Sustainable and renewable
Non-woven
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2007 3M Investor Conference
Benefits- Increases throughput- Reduces down-time- Improves quality- Long lasting - Lower overall cost
3M™ Trizact™ Cloth Belts
Microreplication Drives Abrasives - 3M™ Trizact™ Belts
3M™ Trizact™ Diamond Cloth Belts
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2007 3M Investor Conference
Low thermal expansionHighly conductive
Light weight like aluminum
Strong like steel
Aluminum-oxide fibersAluminum-oxide fibers
Metal matrix(inorganic)
Metal matrix(inorganic)
Key Features:Capable of carrying 2-3x the current of conventional, steel core conductors
Compatible with existing structures
Less sag
Almost no corrosion due to:Chemically compatible materials Environmental stability
Key Features:Capable of carrying 2-3x the current of conventional, steel core conductors
Compatible with existing structures
Less sag
Almost no corrosion due to:Chemically compatible materials Environmental stability
Advanced Materials Provides Basis for 3M Aluminum Composite Conductor Composite (ACCR)
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2007 3M Investor Conference
• Stronger, Lighter, More Versatile
• Processing Advances and Capacity
• Building Blocks for Composites, Cements, Insulation, Oil and Gas Fluids
EnhancedOil & Gas
Production
Advances in Ceramics Produce High Strength Glass Bubbles
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So What Makes 3M So Resilient?
3M’s Enduring Franchises
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2007 3M Investor Conference
First, What Not To Do…Growth First Requires Plugging The Leaky Bucket
The objective is to bulwark and defend the markets that we created, not just to grow
Push into upper middle level market
Competitors push into the lower market … we refuse to defend
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2007 3M Investor Conference
Then What To Do…The Enduring Franchises of 3M
What similarities do Scotch tape, Post it Notes, Scotch-Brite, Trizact and many other 3M “franchise” products have?
3M usually invented the basic technologyThey serve all market segments from the bottom to the topCustomers make more money on them than we doAs the market commoditized, 3M served all segments as and when they gradually emerged, steadily building market competence and influenceThey were built up over many yearsIn developed markets they almost always began at the top and spread to the bottom of the market tier
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2007 3M Investor Conference
A Good Example — The “Scotch Tape” Market Pyramid
Several critical elements sustain enduring market success
Scotch Tape Success:Services all market segmentsGreat aesthetic designSuperb management of price and value laddering World class service delivery Outstanding account managementWorld’s leading brandConsumer friendly technologiesCustomers make higher profits than 3M
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2007 3M Investor Conference
Traffic Safety – Sustaining the Enduring Film Franchise
Traffic Safety Division remains globally pre-eminent in traffic signage
Engineering Grade ™
Diamond Grade ™
High Intensity Grade ™
Traffic Safety sustained the film franchise:
Moved the Engineering
Grade™ film down the
pyramid
Launched new,
innovative products for
the top of the pyramid
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2007 3M Investor Conference
Different Strategies for Different Situations
One size does not fit all
Type
of m
arke
t Dev
elop
edD
evel
opin
g
Franchise strength
Emerging Developed
Extend the coreExpand the base
Build a presenceCreate a presence
Paint Application Solutions
Scotch-Brite™Natural Fiber
Wipes Medical Tian Tu (Second
Way) China Brand
Post-it® Notes
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2007 3M Investor Conference
How We Think About Successful FranchisesWhere 3M typically wins: Business Success Factors
Market size Margin
Use of multiple technologies
Market structure Growth
Our best businesses fit with the majority of these factors
Small<$1B
Moderate$1-10B
Large>$10B
<10%
10-15%
>15%
<5%
5-10%
>10%
Discrete
Well-defined overlaps
Highlyinterrelated
Low
Medium
High High
Notregulated
Low
Level of regulation
Global adaptability
Single country
Trans-national
Global
Moderate$1-10B
Discrete
>15% High High
Trans-national
5-10%
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2007 3M Investor Conference
Adhesives Films CeramicsMicro-replicationNonwovensAdvanced
materials
Tapes Automotive aftermarket Office Display Safety Dental
3M franchises
3M Technologies
Enduring franchisesEnduring franchisesare the majority of salesare the majority of sales
Technologies provide the foundation
3M’s Enduring Franchises Span the Company
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2007 3M Investor Conference
But Franchises Must Be Constantly Refreshed
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
λ = 0.2
λ = 1
λ = 5
Time
Rela
tive
mar
ket p
ower
N(t) = Noe-λt
λ = decay constantNo = starting point
Moving down the pyramid enables enduring franchises
Industrial
Consumer
Electronics
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2007 3M Investor Conference
Extending Our Optical Franchise
Four market elements; hand helds, monitors, laptops and LCD TVBattery powered devices favor high performance films; high performance films in plug-in devices produce better energy efficiencyUsage changes…. More movie watching on monitors drives recontentingWe anticipate the LCD TV market will follow similar dynamics we’ve seen and experienced in other markets, but played at faster speed than mostThe LCD TV market will exist for many years …. substitution not likely in high volume for many yearsAnd yes, it will see pricing pressure over time, but afterwards, stability and recontenting opportunities emergeTurbulence at the bottom of the market as new players enter and succeed or fail
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2007 3M Investor Conference
DBEF + BEF
DBEF
BEF
Comp BEF
Microreplicated Gain Diffuser
Bead Coated Gain Diffuser
Brightness Gain
Extending Our Optical Franchise
Current 3M product focus
Looking to use film technology leadership and scale to enter all segments
Participation in all segments is essential to maintain leadership
1.6
1.8
1.5
1.2
1.4 -
1.5
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2007 3M Investor Conference
Acquisitions
Higher organic growth results from more frequent acquisitions
Base
Growth
Acquisitions
Acquisitions are not only about bulk, but are helpful in:
1. Strengthening the base by filling in white spaces
2. May facilitate growth through entry into a new market
3. May provide a key new technology or brand
4. Fast capacity acquisition
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2007 3M Investor Conference
The Expanding Impact of M&A
10% Increase in acquisitions in 2007 following 350% increase in 2006
18
4
2005 2006
~20
2007 estimate
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2007 3M Investor Conference
Thoughtful Acquisitions Accelerate Core Growth
Acquisitions Enable Growth Beyond Market Averages
20%
15%
Int’l
US
14%
2006 Acquisitions*
Int’l
US7%
2004-2007 3M Sales CAGR
19%
2007 Acquisitions*
*Note: 1st year projected sales growth
Growth rate
© 3M 2007. All Rights Reserved.
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2007 3M Investor Conference
M&A to Bolster Technology Portfolio: Brontes Technologies
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2007 3M Investor Conference
Building New Businesses Emerging Business Opportunities (EBOs)
~$1B
2007
~$3B
2012
~20%
Sales (MM)
Market Center in SS&PS
Mining & Mineral Extraction
Division in SS&PS
Track & Trace
BU in I&TB
Renewable Energy
BU in I&TBBU in HCBDivision in I&TB
Oil & GasFood SafetyFiltration
• Emphasis on high growth opportunities where technical capability exists
• Consolidate related activities into a single entity to gain economies of scale and focus
• Acquisitions and additional resources provide momentum
Great start: >20% growth in 2007
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2007 3M Investor Conference
- Films capable of concentrating sunlight 500x
- Coatings to reduce dirt build-up- Encapsulation used to limit
moisture and film degradation
Solar
- Ethanol extraction membrane- 50% less energy in distillation
- 2X throughput- Potential for cellulosic and butanol
BioFuels
- Existing coating products to improve hardness and reduce fractures in composite blades
- Protective films for turbine blades
Wind
Renewable Energy EBO
Leveraging 3M capabilities to build businesses
Ab Bi
Ac Ce
Ad Dd
Am Di
An Do
As Ec
Em
Fc
Fe Fs
Fi Im
Fl In
Is
Lm
Md
Me
Mf
Mi
Mo
Mr
Pe
Nt
Nw
Rp
Se
Po
Pm
Wo
Vp
Su
Sm
Op
Pd
Pr
Pp Tt
We
© 3M 2007. All Rights Reserved.
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2007 3M Investor Conference
Solar: Distinct Segments But Common Needs
Environmental Durability: UV Stability, Scratch Resistance, Self Clean, Moisture, Sealing, Cracking, YellowingIncreased Efficiency: Improved materials, capturing more sunlight, heat management, Lower Cost: Improved cost per watt, fabrication/mfg processes, reduced weight
Flat Panel Photovoltaic
(<25 kW)
Concentrating Photovoltaic
(CPV)(25 kW – 30MW)
Solar Thermal(CSP)
(> 50MW)
Thin Film and Next Generation
(various kW)
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2007 3M Investor Conference
IR Reflective FilmsBarrier Films
Structural Tapes, Sealants & Adhesives
Optically Clear UV Stable Fluoropolymer Films
Anti-soil &Hard Coatings
Metallized Mirror Films
Micro-replicatedLens Film
Electrical Foil &Connectors
Wavelength Selective Mirror Films
60 Years of Experience(Weathering Resource Center)
Solar: Strong Capabilities & Technology Base
© 3M 2007. All Rights Reserved. 2007 3M Investor Conference
International OperationsOur Largest Growth Platform
Inge ThulinExecutive Vice President, International Operations
52
© 3M 2007. All Rights Reserved. 2007 3M Investor Conference
International Operations
$13.6B 2006 Sales*$3.7B 2006 OI*62% of 2006 3M Total
65% by 2012
65 Subsidiaries34 Laboratories85 Manufacturing Sites
40,000 Employees99% Local Nationals
Our Largest Growth Platform
$5.4 $6.2$2.0
Latin America/Canada
Europe, MiddleEast & Africa Asia Pacific
*Excludes Pharma and special items.
53
© 3M 2007. All Rights Reserved. 2007 3M Investor Conference
$10.2
$11.7$12.2
$13.6
'03 '04 '05 '06
$2.4
$3.2$3.5 $3.7
'03 '04 '05 '06
International Recent Performance
PrioritiesGain share in West Europe and JapanExpand BRICPBig 3M/portfolio managementGrow at more than 2.5X IPILocalization
Revenue*
PrioritiesDecentralized organizationProductivityPrice/margin managementOperational exellence/Lean Six SigmaResource reallocation
Operating Income*
’03-06 CAGR 10% ’03-06 CAGR 15%
*Excludes Pharma and special items.
54
© 3M 2007. All Rights Reserved. 2007 3M Investor Conference
3M’s Subsidiary Network
KeySales & MarketingManufacturing/ConvertingTechnical Capabilities
Venezuela
Panama
El Salvador
Puerto Rico
Trinidad& Tobago
Brazil
UruguayArgentina
Chile
Peru
Colombia
Ecuador
Jamaica
Costa Rica
Guatemala
Dominican Republic
Mexico
Canada
China
Korea
Japan
Taiwan
Hong Kong
Vietnam
Philippines
Thailand
India
Malaysia
Indonesia
New ZealandAustralia
Singapore
Sri Lanka
UAE
Switzerland
Austria
Greece
Italy
Pakistan
Egypt
Kenya
South Africa
Morocco
France
Germany
United Kingdom
Belgium
Netherlands
Denmark
Norway
Sweden Finland
Spain
Portugal
Poland
CzechRepublic
Hungary
Russia
Turkey
RomaniaUkraine
East
Israel
Kazakhstan
55
© 3M 2007. All Rights Reserved. 2007 3M Investor Conference
CanadaCanada
Latin AmericaLatin AmericaMiddle East/Middle East/
AfricaAfrica
West EuropeWest Europe Developed Developed APACAPAC
Developing Developing APACAPAC
Central/EastCentral/EastEuropeEurope
International Growth Dynamics
ForecastedSales
CAGR
Current Sales
56
© 3M 2007. All Rights Reserved. 2007 3M Investor Conference
Cornerstones of International Growth Strategy
Grow the Current Core Business
Build New Businesses
Complementary Acquisitions
International Growth
Grow the Current Core Business
Build New Businesses
Complementary Acquisitions
International Growth
Outpace Local Economy by at Least 2.5X
Portfolio Management and Geographic
ExpansionBrand and Reputation
BuildingR&D & Supply
Chain LocalizationHuman Capital
Planning
Four Cornerstones of the International Growth Plan
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• Customer focused Supply Chain• Capital Center-of-Gravity Shift• Financial Optimization through Strategic Investments• Improve Productivity Levels
• Recruit, Retain, Enable the Best• All Employees Aligned Around Corporate Objectives• Compensation for Performance• Leadership For Growth
• Play the Big 3M• Increase Levels of Customer Intimacy – Key Accounts• Develop and Launch Products to Meet Local Needs• Borderless Customer Success
Managing International Growth
Portfolio ManagementPortfolio Management& Geographic Expansion& Geographic Expansion
Brand and Brand and Reputation BuildingReputation Building
R&D and Supply R&D and Supply Chain LocalizationChain Localization
Human Capital Human Capital PlanningPlanning
• Margin Management• Building strategic and local brands• Government relations• Manage the brand pyramid
Cornerstones
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& Geographic Expansion
Brand & Reputation Building
R&D & Supply Chain Localization
Human Capital Planning
Portfolio Management& Geographic
ExpansionBrand and Reputation
BuildingR&D & Supply Chain
Localization
Four Cornerstones of the International Growth Plan
Human CapitalPlanning
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Developed Countries Most Important Today Developing Countries Accelerating
74%
26%
72%
28%
69%
31%
59%
41%
2004 2005 2007 2012
Developed Developing
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Opportunities in Developing MarketsGrowth in Infrastructure SpendingPopulation growth and desire for basic services will fuel investment in roads, power generation and distribution and other infrastructure.
Migration of Industrial BusinessWith infrastructure in place and political stability, manufacturing migrates to developing countries in search of lower costs.
Emerging Middle ClassGrowing employment base provides increased income and standard of living.
Increased Health Care SpendingGrowing middle class increases expectations and expenditures on health care services.
3M Portfolio Meets Needs of Developing Markets at Every Step of Their Evolution
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Geographic Expansion: PLUS
The Future Is Here And Now!!!
Vietnam
Indonesia
KazakhstanUkraine
Turkey
UAE (Dubai)
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1960 1970 1980 20101990 2000
Brazil
India
China Poland
Russia
1950
Indonesia Turkey
UAE
Vietnam
Kazakhstan
Ukraine
Investing in our future
Deep Roots in BRIC(P)
Long-Term Focus on Developing Countries Drives Growth
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& Geographic Expansion
Brand & Reputation Building
R&D & Supply Chain Localization
Human Capital Planning
Portfolio Management& Geographic
ExpansionBrand and Reputation
BuildingR&D & Supply Chain
Localization
Four Cornerstones of the International Growth Plan
Human CapitalPlanning
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Strong Brands and Market Positions
Brand Equity and Investment Shared Among BusinessesBrand Equity and Investment Shared Among Businesses
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Strong Brands and Market Positions
Building a Regional Presence Through Acquisitions
NeoplastAbzil Industria
e Comercio
DMS ChileNylonge
Mahindra
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& Geographic Expansion
Brand & Reputation Building
R&D & Supply Chain Localization
Human Capital Planning
Portfolio Management& Geographic
ExpansionBrand and Reputation
BuildingR&D & Supply Chain
Localization
Four Cornerstones of the International Growth Plan
Human CapitalPlanning
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Germany, France, UKCenters of Excellence (CoE): Automotive, Dental, Telecom, Specialty Materials, Polymers, Consumer, Oil & Gas, Drug Delivery
RussiaNew Customer Technical Center – May 2006Focus: Abrasives, AutomotiveConsumer & Office Center of Excellence
LocalizationR&D
PolandOptical Manufacture & TestMedical & Consumer Healthcare Center of Excellence
BrazilNew Customer Technical Center in 2005 Technologies: Bio, NanoSpecialty Mater ials: Hook/Loop, Molding, Non-PVC Films, Acrylic Foam Tape
Europe and Latin America
IndiaCustomer Technical Centers (New Delhi, AOEM Design Studios)Engineering Centers: Automotive, Corrosion Protection, TextilesWater filtration, fire protectionAnalytical development
KoreaAsia Display Tech Center Asia Tape & AdhesivesLabs: Nonwovens, RFID, Electronics, Energy, Nano
JapanSEMS (software)Electronics, AutomotiveTechnologies: Track & Trace, Microreplication, Liquid Filtration
SingaporeSoutheast Asia region: product localization, corporate research lab, medical productdevelopment & regulatoryElectronics, Fine Pitch Flex Circuitry, RFID, Cuno
China New R&D Center – June 2006Global Labs: HV Electrical, SMSAsia Lab: TelecomTechnologies/products: Nonwoven, Reactors, Medical, Corrosion ProtectionDisplay backlight center
Asia
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UKUK
SpainSpainItalyItaly
Poland Poland GermanyGermany
FranceFrance
IndiaIndia
SingaporeSingapore
ChinaChina
KoreaKoreaJapanJapan
MexicoMexico
Brazil Brazil
CanadaCanada
International Supply Chain Footprint - Current
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West EuropeWest Europe
IndiaIndia
SingaporeSingapore
ChinaChina
KoreaKoreaJapanJapan
MexicoMexico
Brazil Brazil
CanadaCanada
Central AmericaCentral America
TurkeyTurkey
RussiaRussiaEstoniaEstonia
Middle EastMiddle East
Poland Poland
VietnamVietnam
IndonesiaIndonesia
Russian Russian FarFar--EastEast
Current Supply Chain
Expanded Supply Chain Footprint
International Supply Chain Footprint - Potential
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& Geographic Expansion
Brand & Reputation Building
R&D & Supply Chain Localization
Human Capital Planning
Portfolio Management& Geographic
ExpansionBrand and Reputation
BuildingR&D & Supply Chain
Localization
Four Cornerstones of the International Growth Plan
Human CapitalPlanning
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Human Capital Planning
Recruit, retain and enable the best employeesSignificantly accelerate knowledge transfer to developing and emerging countriesMove resources from back-office to customer-facing and from foundational businesses to growth opportunities.
5% front-line, 8%+ back-office productivity improvement
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3M International Summary
International growth continues to expand Developed countries will grow through penetration and market share gain Developing countries accelerating
BRICP and PLUS strategySupply chain, brand and product localization
Strategic acquisitions provide locally-relevant brands and product portfolioAll about execution starting with the customer!!!
Growth Possible in All “Corners” of the WorldGrowth Possible in All “Corners” of the World
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Operational Excellence
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Financing Growth Through Supply Chain ImprovementsThe opportunity
3M’s history led to very complex supply chainsAverage time to traverse global supply chain is ~100 daysMultiple plant hops, often backward and forward across continents, is the norm at 3M→ Structure drives up inventory and working capital usage and lowers fill rates → Led to expensive, if flexible, machine tools→ Frequent machine set ups and high excess and obsolete inventory
Air freight, manual intervention and expediting are normalLarge numbers of SKUs complicate the picture, compounded by chronic capacity shortages
Goal: Make it close to where we sell it
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We Are Already Making Strong Progress
China KoreaJapan
India
Italy
PolandRussia
China Suzhou LCD II
UK
Russia Mfg
Taiwan
China Medical Mfg
China CHJ III Mfg
China GuangZhou
Korea OH&ES
Poland Optical
Poland Tapes
India Industrial Tapes
2007
2007
2007
2007
2007
2007
2007
2008
2008
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Average Distance to Customer ~3,000 MilesAverage distance to customer ~30% (or ~1,000 miles)
Capacity Adds are Reducing Distance to CustomerExample: Maintenance Free Respirators and Laminating Adhesives
From US Supplying the World
To Korea for APAC
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Our Emerging Manufacturing Footprint“Super Hub” concept
Large factories ($400Million to >$1B SVOP) and distribution centersAligned to regional and area projected sales growthShared resources and infrastructure among businesses/divisionsLocated in countries with maximum corporate and regional benefits
BenefitsShared infrastructure and resources produces:-
• Lower risk to individual businesses; economies of scale • Faster capital equipment installation and better resource utilization• Regional centers supply chain expertise
Regional ‘ownership’ with increased customer responsivenessPrincipal locations = China, South East Asia and the Middle East
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Globalizing the “Super Hub” concept
Super Hubs would produce at levels similar to Hutchinson facility
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Accelerated GrowthService, higher fill rates
A Huge Prize Remains for Supply Chain Improvements
Accelerate Growth … Drive Productivity … Reinvest
Cost reductionLabor, logistics, shrinkage
Lower InventoryWIP, FG, local sourcing
+1 point minimum,adds ~$100M OI
Minimum +1 turn,adds ~$700M to FCF
+80 to 100 bps gross margin,adds ~$300M to $400M OI/year
2012 Opportunity
$1 Billion-PlusOpportunity
+
+
=
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Summary
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Understanding The State Of Our Portfolio
83%82%Growing > 5%Medical Supplies, Commercial Graphics, Automotive Aftermarket and Abrasives, et. al
On course
16%15%Need modificationIndustrial Minerals, Electronic Interconnect, Filtration, Optical Films
Workable solutions
1%3%Challenged Business or TechnologyPersonal Care, Touch Systems
Reposition
OI%Sales WeightCharacteristicsBusiness Type
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14.4%8.0%8%+Safety, Security and Protection Services
3.1%1.6%4-6%Electro and Communications7.9%5.6%5-8%3M (ex. Pharma)
7.4%6.6%5-8%Consumer and Office5.4%5.2%5-8%Display and Graphics12.3%9.9%8%+Health Care (ex. Pharma)
7.6%4.3%5-8%Industrial and Transportation
Incl. AcquisitionsOrganic LC* Target
Growth Targets
*Local Currency Sales Growth = Volume + Price
Organic LC 6 Qtr. Avg.
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What Have We Left Out?
For every supply chain need there is a corresponding systems need that will be gradually addressed after leaning out the supply chainSelective plant closures and mothballing in high-cost, high-tax areas with no foreseeable fill plan
No big bangs are expected
There will be a few small divestitures where we think we are below critical mass
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3M’s Long Term Business Summary
1. Growth plans in place to deliver >2x IPI
2. Commitment to double-digit earnings growth
3. Maintain >20% ROIC and premium margins
4. Moving into faster-growing market spaces
5. EBOs making good progress
6. Supply chain improvements in place to finance growth
7. Tax opportunities abound
Great opportunities remain for 3M
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Our Principal Mission
Driving Growth