Morgan Stanley Global Industrials CEOs Unplugged Conference

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Morgan Stanley Global Industrials CEOs Unplugged Conference

  1. 1. Innovation and Growth at 3M George W. Buckley Chairman, President and Chief Executive Officer 2007 Morgan Stanley Global Industrials CEOs Unplugged Conference September 10, 2007
  2. 2. Forward-Looking Statements This presentation contains forward-looking information (within the meaning of the Private Securities Litigation Reform Act of 1995) about the company’s financial results and estimates, business prospects, and products under development that involve substantial risks and uncertainties. You can identify these statements by the use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Among the factors that could cause actual results to differ materially are the following: (1) worldwide economic conditions; (2) competitive conditions and customer preferences; (3) foreign currency exchange rates and fluctuations in those rates; (4) the timing and acceptance of new product offerings; (5) the availability and cost of purchased components, compounds, raw materials and energy (including oil and natural gas and their derivatives) due to shortages, increased demand or supply interruptions (including those caused by natural and other disasters and other events); (6) the impact of acquisitions, strategic alliances, divestitures, and other unusual events resulting from portfolio management actions and other evolving business strategies, and possible organizational restructuring; (7) generating less productivity improvements than estimated; and (8) legal proceedings, including significant developments that could occur in the legal and regulatory proceedings described in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2006 and its subsequent Quarterly Reports on Form 10- Q (the “Reports”). Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Reports under Part I, Item 1A (Annual Report) and Part II, Item 1A (Quarterly Report), “Risk Factors.” The information contained in this presentation is as of the date indicated. The company assumes no obligation to update any forward-looking statements contained in this presentation as a result of new information or future events or developments. 2007 Morgan Stanley CEOs Unplugged Conference (#)
  3. 3. Outstanding Second Quarter +11.8% +23.0% ex. pharma ex. pharma $1.23 $6.1 Billion +8% +17.1% Sales EPS* *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items. 2007 Morgan Stanley CEOs Unplugged Conference (#)
  4. 4. Working Our Plan Reinvigorate R&D ● 11% increase over 2006* ex. pharma Accelerate International Growth ● Building local/regional brands Pursue profitable adjacencies Invest in Our Supply Chain ● Korea - Respiratory facility (July 2007) Poland - Optical facility (June 2007) Canada – CHIM Tapes facility (June 2007) OHES China - Industrial Tapes facility (July 2007) Optical Others largely on-track CHIM Tape Industrial Tapes Accelerate Growth in the Core ● Eight acquisitions YTD in 2007 *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items. 2007 Morgan Stanley CEOs Unplugged Conference (#)
  5. 5. Sales Recap Q2 2007 vs. Q2 2006 Int’l WW U.S. Volume - organic 6.9% 2.1% 9.9% Volume - acquired 2.8% 2.8% 2.8% Price (0.4%) 1.3% (1.4%) Total Local Currency* 9.3% 6.2% 11.3% Divestiture (3.8%) (4.0%) (3.7%) Translation 2.5% -- 4.1% Total Sales Growth 8.0% 2.2% 11.7% *Total Local Currency = Volume + Price + Acquisitions 2007 Morgan Stanley CEOs Unplugged Conference (#)
  6. 6. Balance Sheet & Cash Flow Q2 2006 Q1 2007 Q2 2007 ($ in Millions) $866(a) $670(a) Free Cash Flow $539 Net W/C Turns 5.0 5.0 5.2 Inventories $2,779 $2,714 $2,557 Receivables-Net $3,620 $3,444 $3,171 Cap-ex $348 $304 $261 Dividends Paid $346 $350 $348 Share Repurchases $1,035 $1,164 $527 Excludes certain special items that impacted cash flow. Refer to 3M's July 26, 2007 press release for an explanation of these items. (a) Note: Refer to 3M’s July 26, 2007 press release for a complete discussion of net working capital turns and free cash flow (non-GAAP measures). 2007 Morgan Stanley CEOs Unplugged Conference (#)
  7. 7. Great Opportunities Remain For 3M Comparative Tax Rate (3M at 34% in 2007) Margin Built firm Six Sigma and Lean Tax Rate ► Advantage Processes in manufacturing Ingersoll Rand 16% 2150 bps Tyco 21% 1450 bps ITW 31.5% 150 bps Danaher 27.3% 920 bps UTX 26.8% 994 bps Fundamental principles remain ► J&J 23.8% 1449 bps Avery 20.4% 1943 bps 3M 34% 0 bps ● Protect our premium margins Conclusion; We fight to maintain high margins, and we reduce our competitiveness and growth rates, but waste it all in paying higher taxes ● Defend our premium ROIC Innovation (#) Relative Value Of Growth ● Reemphasize innovation MMM 5.2 ● Leverage central overhead GE 11.4 12.0 IBM 3.5 DHR 5.1 PG 7.2 e tiv a e f ro th 10.0 XOM 2.1 R la eV lu o G w GM 2.4 WMT 1.6 8.0 #REF! #REF! #REF! #REF! #REF! #REF! 6.0 ● Adding growth, taxes and supply 4.0 2.0 chain as new value creators 0.0 MMM GE IBM DHR PG XOM GM WMT Company Ticker ► Ratio of value creation from 100 bps of growth to 100 bps of margin Build on 3M’s enduring franchises ► Acquisitions add value by blending the value lost from margin dilution ► and the value added from incremental growth and mass Value Of Growth Vastly Exceeds Value Of Margin Expansion For 3M ● Building value and margin for our Source:HBR April 2005 © 3M 2006 All Rights Reserved customers 2007 Morgan Stanley CEOs Unplugged Conference
  8. 8. Start By Growing The Current Core Grow the Current Core Invent a Extend The Core ● Constant reinvention New Future ● Localization and differentiation ● Imagine, dream and invent ● Build where we’re strong ● Key customer partnerships ● Beat competitors to the ● Get scale & relative share future ● Fill in the “white spaces” ● Plan for cannibalization Build Broad Long ● Define markets broadly ● Licensing as a route Term Competencies ● Become important to ● Avoid NIH syndrome customers ● Dual branding ● Local acquisitions ● Develop broad based long-term capabilities ● Private labeling ● Acquire supporting core technology ● Build volume and scale 2007 Morgan Stanley CEOs Unplugged Conference (#)
  9. 9. And Then Extend It With Simple Concepts Market Expansion Grow the Current Complementary Build New International Grow the Current Complementary Build New International Core Acquisitions Business via EBOs Growth Core Acquisitions Business via EBOs Growth ● Defend and extend the ● Follows core strategy ● Follow Mega Trends ● Go “local” in brands core and manufacturing ● Supports adjacencies ● Seeded by small M&A ● Build scale and relative ● BRICP emphasis ● Mostly tuck-ins ● Targeted areas share ● Gulf and LA ● Technology, capacity, ● RFID/Wireless/GPS ● Localization distribution and local ● Eastern Europe ● Minerals extraction brands ● Disruptive technologies ● Growth everywhere ● Oil & Gas ● Build long term ● Food safety competencies Customer Focus Critical on All Four Fronts 2007 Morgan Stanley CEOs Unplugged Conference (#)
  10. 10. First You Must Create the Environment for Growth Profitable Growth Products Efficiency ● Stimulating a creative ● Lean Methods environment ● Six Sigma ● Foster Imagination ● Systemic Supply ● Increased R&D spend Chain in the core Product Operational Improvements Innovation Excellence ● Technology Focus ● IT Systems ● See it through the ● Better S&OP customers’ eyes Process ● Mix in a little magic ● Market Expansion ● White space fill in Customers ● Geographic expansion ● Adjacencies and EBOs 2007 Morgan Stanley CEOs Unplugged Conference (#)
  11. 11. Our Foundational Beliefs on Competitiveness 6σ & Lean Cost Global sourcing It’s not just about efficiency or just about Low Factory costs invention Taxes ● We compete on six platforms Build on our enduring Marketing franchises & Brands ● Low cost is the ultimate competitive Secondary for local deadly weapon Secure the best Distribution Secure the broadest ● Scale and relative share are vital for efficiency and competitiveness Build on a firm foundation Technology ● Follow the customer value chain Differentiation OTIF fill rates ● Pristine service and brands can Quality Service overcome price in some markets Speed to market Inspire and guide Develop leadership People Continuing education 2007 Morgan Stanley CEOs Unplugged Conference (#)
  12. 12. 3M’s Convoluted Supply Chain • Any plant may have up to eight Plant A Plant B “owners” in 40 combinations Six Owners Four Owners • Lead owner varies plant to plant • Under absorbed costs in one business impacts another Raw Material In Distribution Center Plant D Plant C Four Owners Eight Owners 2007 Morgan Stanley CEOs Unplugged Conference (#)
  13. 13. And Here’s What We Are Beginning To Do Plant A Plant B Six Owners Four Owners Distribution Center Plant D Plant C Four Owners Eight Owners 2007 Morgan Stanley CEOs Unplugged Conference (#)
  14. 14. Historical Capital Spending $1,600 Growth Capital increase 53% Decline in almost all Optical Films Capital Spending $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Sustain Strategic Growth Optical Since 2000, Optical spending equaled all other growth capital combined 2007 Morgan Stanley CEOs Unplugged Conference (#)
  15. 15. Supply Chain – Focused Factories Plant C Plant A Eight Product Lines Six Product Lines Raw Distribution Material In Center Plant B Plant D Four Product Lines Four Product Lines 2007 Morgan Stanley CEOs Unplugged Conference (#)
  16. 16. Supply Chain – Focused Factories Plant A Six Product Lines Plant C Eight Product Lines Raw Distribution Focused Factory Material In Center Plant B Plant D Four Product Lines Four Product Lines 2007 Morgan Stanley CEOs Unplugged Conference (#)
  17. 17. Stretched Supply Chains Drive Working Capital Use United States 65% Product Source 35% Consumption International 35% Product Source 65% Consumption 2007 Morgan Stanley CEOs Unplugged Conference (#)
  18. 18. Reducing To Its Simplest Form, What Must We Do? ● Growth is a pipeline; repair the inputs and outputs and clear the pipe of pluggage ● At the “sending end” of the pipe: Invent more things Prioritize R&D spending, focus and inspire our people Get scientists and engineers back in the business of inventing new products ● At the “receiving end” of the pipe; Sell and market better Put more feet of the street, and more advertising and merchandising Bring increased competency and professionalism to marketing Stop unnecessary complexity in SKUs and specifications Acquire local brands to penetrate distribution faster ● The pipe itself Provide a large enough diameter pipe: Capacity Keep the pipe as short and simple as possible ● Stop the pipe leaking Price giveaways Market share loss 2007 Morgan Stanley CEOs Unplugged Conference (#)
  19. 19. Capacity And Supply Chain Improvements In Progress CANADA CHIM Tape Medical: M6 Solvent Coater-Brookings, SD USA Northridge DDSD Packaging Line Automotive Acrylic Tape- MEXICO Aberdeen, SD Polyester Greenville, NC CHIM: LFBMF Lines, D11 MOF Line Aberdeen, SD Filtrete Mfg. Decatur, AL 2007 Morgan Stanley CEOs Unplugged Conference (#)
  20. 20. Capacity And Supply Chain Improvements In Progress RUSSIA OHES Manufacturing POLAND CHINA KOREA INDIA Optical Suzhou LCD II Tapes CHJ III Mfg Industrial Tapes Medical Mfg. GuangZhou 2007 Morgan Stanley CEOs Unplugged Conference (#)
  21. 21. 3M Market Dynamics and Defense Shouldn’t we exit the Scotch Tape market? It’s Push into upper commoditized! middle level market Competitors push into the lower market … we refuse to defend The objective is to bulwark and defend the markets that we created, not just to grow 2007 Morgan Stanley CEOs Unplugged Conference (#)
  22. 22. Differentiated Brands & Technology to Grow Category Industrial Consumer Principal brands and differentiated features Diamond Grade™ Secondary Brands & Technologies High Intensity Grade Selective private labeling or manufacturing JVs to support partnership customers Engineering Grade 2007 Morgan Stanley CEOs Unplugged Conference (#)
  23. 23. And Then Extend It With Simple Concepts Market Expansion Grow the Current Complementary Build New International Grow the Current Complementary Build New International Core Acquisitions Business via EBOs Growth Core Acquisitions Business via EBOs Growth ● Defend and extend the ● Follows core strategy ● Follow Mega Trends ● Go “local” in brands core and manufacturing ● Supports adjacencies ● Seeded by small M&A ● Build scale and relative ● BRICP emphasis ● Mostly tuck-ins ● Targeted areas share ● Gulf and LA ● Technology, capacity, ● RFID/Wireless/GPS ● Localization distribution and local ● Eastern Europe ● Minerals extraction brands ● Disruptive technologies ● Growth everywhere ● Oil & Gas ● Build long term ● Food safety competencies Customer Focus Critical on All Four Fronts 2007 Morgan Stanley CEOs Unplugged Conference (#)
  24. 24. Acquisitions Higher organic growth results from more frequent acquisitions Acquisitions are not only about bulk, but can be helpful in: Acquisitions 1. Strengthening the base by filling in white spaces 2. May facilitate growth through Growth entry into a new market 3. May provide a key new Base technology or brand 4. Fast capacity acquisition 2007 Morgan Stanley CEOs Unplugged Conference (#)
  25. 25. Thoughtful Acquisitions Help Drive Core Growth High Jump 20% Info-X Siemen's Interchemall Dom Interconnect Target Growth Rate % 15% Mercury CUNO Omni Hornell 10% Gen'l Ind'l Diamond 5% 3M Historical Growth ~4% 0% 2004 2005 2006 Less than $100MM Greater than $100MM 2007 Morgan Stanley CEOs Unplugged Conference (#)
  26. 26. Brontes Technologies 2007 Morgan Stanley CEOs Unplugged Conference (#)
  27. 27. Track & Trace Has Broad-Based Opportunities Existing and Potential 3M Solution Spaces Improve and Advantage Me! Location-Based Services How Am I? Supply Chain Optimization Sensor Networks Competitive “Superiority” Where Am I? Sensors in Order Fulfillment Temp Supply Chain Tracking Software Who Am I? Vibration Distribution RFID Network Humidity RFID Wireless Location Light BarCode RTLS Contaminants Database GPS Road Tolling 2007 Morgan Stanley CEOs Unplugged Conference (#)
  28. 28. Electrical Power Transmission 2007 Morgan Stanley CEOs Unplugged Conference (#)
  29. 29. New Consumer Products 2007 Morgan Stanley CEOs Unplugged Conference (#)
  30. 30. And Then Extend It With Simple Concepts Market Expansion Grow the Current Complementary Build New International Grow the Current Complementary Build New International Core Acquisitions Business via EBOs Growth Core Acquisitions Business via EBOs Growth ● Defend and extend the ● Follows core strategy ● Follow Mega Trends ● Go “local” in brands core and manufacturing ● Supports adjacencies ● Seeded by small M&A ● Build scale and relative ● BRICP emphasis ● Mostly tuck-ins ● Targeted areas share ● Gulf and LA ● Technology, capacity, ● RFID/Wireless/GPS ● Localization distribution and local ● Eastern Europe ● Minerals extraction brands ● Disruptive technologies ● Growth everywhere ● Oil & Gas ● Build long term ● Food safety competencies Customer Focus Critical on All Four Fronts 2007 Morgan Stanley CEOs Unplugged Conference (#)
  31. 31. 3M’s Subsidiary Network: A Platform For Growth Poland Switzerland Hungary Norway Ukraine Canada East Czech Trinidad Austria Romania Finland Republic Sweden & Tobago Puerto Rico Russia Germany Dominican Republic Denmark Jamaica Korea Netherlands Belgium Japan Ireland Mexico China United Guatemala Kingdom Hong Kong El Salvador Portugal Taiwan Costa Rica Pakistan Spain Vietnam Panama France UAE Colombia Philippines Morocco Kuwait Indonesia Venezuela Thailand Saudi Tunisia Arabia Ecuador Malaysia Singapore Italy Lebanon Peru Sri New Zealand Greece Australia Lanka Brazil Israel India Turkey Chile Egypt South Africa Key Kenya Uruguay Argentina Sales & Marketing Manufacturing/Converting Technical Capabilities 2007 Morgan Stanley CEOs Unplugged Conference (#)
  32. 32. International Sales Growth (Billions) $15.0 $14.1 $12.9 13.0 $12.1 $10.7 11.0 $8.9 $8.9 9.0 $8.5 $8.2 $7.8 7.0 5.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Morgan Stanley CEOs Unplugged Conference (#)
  33. 33. Summary- Bringing it all Together
  34. 34. 3M’s Strategy Reduces to Five Principal Elements Get our labs back in the business of developing and releasing new ● products faster Better prioritization of what we do, and don’t do, and where we do it Go local (or regional) in brands and sales coverage to drive growth ● ● Get all elements of the supply chain closer to customers to facilitate growth and reduce costs and W/C demands ● Accelerate technological capability, distribution penetration, customer satisfaction and manufacturing capacity through acquisitions Becoming more important to customers Leverage the growth ● Stop price leakage and share losses Trim non-essential corporate services 2007 Morgan Stanley CEOs Unplugged Conference (#)
  35. 35. Coordinated Value Creation Strategy Strategy ► Focus on mega trends, scale and relative ► Review business units by key Strategy share in core business metrics including growth and capital efficiency ► Safety & Protection Near Term ► Put ongoing review metrics in place Near Term ► Display & Graphics (Optics & Films) Tactics ► Divestiture of Pharmaceuticals Tactics ► Track & Trace (RFID/Wireless/GPS) ► Examine others for divestiture ► Wider Consumer Offerings ► Medical, Dental & Orthodontics Organic Selected Growth Divestitures Capital Acquisitions Strategy ► Increase leverage on the balance Strategy Strategy ► Work in high growth spaces with sheet. Be willing, if necessary, to dip reasonable EPS targets. Value creation below AA rating to A orientation. Less margin obsessive ► Use cash flow for investment, Near Term ► Focus on adjacent segments Near Term acquisitions and increased share with higher growth, cost and Tactics Tactics buybacks revenue synergies 2007 Morgan Stanley CEOs Unplugged Conference (#)
  36. 36. Cash Back to Shareholders 2500 For The Period 2001-06: Stock Repurchases $'000s 2000 $8.9 billion in share ● 1500 repurchases 1000 $6.7 billion in dividends paid 500 ● 0 Dividend CAGR of 9% ● 2001 2002 2003 2004 2005 2006 1400 No equity dilution policy ● Dividends $'000s 1200 Returned ~103% of reported ● net income via dividends and 1000 share repurchases 800 600 2001 2002 2003 2004 2005 2006 2007 Morgan Stanley CEOs Unplugged Conference (#)
  37. 37. 3M’s Summary Longer Term Strategy 20%+ ► Drill into the core. Move towards 12 -15% scale where markets are large 2X IPI ≈ 8% and up ► Innovation remains vital ► Move towards higher relative share in smaller markets ► Heavy up on globalization ► Accelerated M&A to improve core Investment Organic Sales EPS growth and fill gaps Returns Growth Growth ► Careful tradeoffs of share and ● Technology lattice protects the downsides and ensures growth upsides ● Investment through the economic cycles ► Building brands and technology ● Driving growth as a way of doing business 2007 Morgan Stanley CEOs Unplugged Conference (#)
  38. 38. 2007 Morgan Stanley CEOs Unplugged Conference © 3M 2007. All Rights Reserved.
  39. 39. Year-To-Date Highlights* Operating Income ($ in millions) Sales ($ in millions) Pharma +14.2% +10.9% $3,000 $13,000 ex. pharma ex. pharma +8.9% +7.1% $2,823 $12,079 $120 $2,500 $11,500 $389 $2,473 $10,894 $10,000 $2,000 YTD '06 YTD '07 YTD '06 YTD '07 Margin LC Growth 8.8% 8.4% (ex pharma) 22.7% 23.4% Earnings Per Share (US dollars) Return on Invested Capital +17.9% +80 bps 25.0% $2.75 ex. pharma ex. pharma +10 bps +12.6% 22.7% 22.6% $2.50 20.0% $2.25 $0.10 $2.12 $1.75 15.0% YTD '06 YTD '07 YTD '06 YTD '07 *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
  40. 40. Segment Highlights* – Display & Graphics Second Quarter Q2 Drivers $1,200 • Local currency growth of 8.8% Operating +10.2% Income Margins $1,006 • Optical films business leads with strong double digit Q2 ’06 Q2 ‘07 $800 $913 sales and profit growth 26.0% 28.7% • Commercial graphics and traffic safety continue $400 track record of delivering consistent performance +21.5% $288 • LCD industry continues to remain healthy $237 $0 • Solid YTD operating income performance with Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07 operating income up over 10% and margins over Sales Operating Income 30% Year-to-Date Other Highlights $2,100 +5.2% • LCD Poland facility online (June 2007) Operating Income Margins $1,927 • DBEF manufacturing capacity additions for LCD TV YTD ’06 YTD ‘07 $1,832 industry on track $1,400 28.9% 30.3% • LCD industry accelerates back-half of year as TV becomes bigger piece of mix $700 +10.2% • New service business for vehicle registration & road $583 $529 maintenance $0 YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07 Sales Operating Income *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
  41. 41. Segment Highlights* – Industrial & Transportation Second Quarter Q2 Drivers +8.5% $1,800 Operating • Local currency growth of 5.6% including 1.0% from $1,804 Income Margins acquisitions $1,662 Q2 ’06 Q2 ‘07 $1,200 • Continued growth leadership by industrial adhesives 19.3% 20.0% and tapes, automotive aftermarket, energy and advanced materials and abrasives businesses $600 +12.5% • Good solid performance in auto OEM market $361 $320 • Broad based geographic performance with growth led $0 Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07 by Europe and Latin America Canada regions Sales Operating Income • Good operational discipline with double digit operating income increase of 12.5% in Q206 and 10.4% YTD Year-to-Date +7.6% $3,600 Operating Other Highlights $3,589 Income Margins $3,334 YTD ’06 YTD ‘07 • Organic new products and complimentary gap fill $2,400 acquisitions 21.0% 21.5% • Continued emerging market penetration, particularly BRICP countries $1,200 +10.4% • Driving 3M technologies into oil and gas market to $772 $700 meet needs of major energy customers $0 • Weak US auto OEM & residential housing market YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07 Sales Operating Income *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
  42. 42. Segment Highlights – Consumer & Office Second Quarter Q2 Drivers $900 +8.2% • Local currency growth of 6.1% including 1.3% from Operating Nylonge acquisition $832 Income Margins Q2 ’06 Q2 ‘07 $769 $600 • Sales and profit growth led by office retail channel 17.6% 19.7% • Solid growth in DIY and consumer mass retail channels $300 +21.3% • Double-digit international growth rates $164 $135 $0 • Outstanding Q2 and YTD operating leverage with Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07 profits up 21.3% and 19.6% respectively Sales Operating Income Year-to-Date Other Highlights $1,800 +9.0% Operating • Invigorating existing categories with higher-value Income Margins innovative products $1,646 YTD ’06 YTD ‘07 $1,510 • Introducing products that change consumer behavior $1,200 18.9% 20.7% and solve everyday problems • Increased investment in Q3 and Q4 for sales and $600 marketing activities for back-to-school and holiday +19.6% season $341 $285 • Improving international penetration $0 YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07 • Slow U.S. residential housing construction persists Sales Operating Income
  43. 43. Segment Highlights* – Safety, Security & Protection Q2 Drivers Second Quarter • Local currency growth of 16.7% $900 +20.7% Operating • Acquisitions added 11.6%; primarily Security Printing Income Margins $799 Q2 ’06 Q2 ‘07 Systems Ltd. and E. Wood $600 $662 21.0% 21.2% • Growth led by respiratory protection, corrosion protection and building and commercial services $300 +21.9% • Industrial mineral up 5% sequentially; down 13% YOY $169 $139 • Europe delivers strong growth and profits $0 Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07 • Operating income up 22% Sales Operating Income • Consistent 20%+ operating margins Year-to-Date Other Highlights $1,800 Operating +19.7% • Korea respiratory facility opening effective July 11, 2007 Income Margins $1,557 YTD ’06 YTD ‘07 • Continued global demand for personal protective $1,200 22.8% 22.5% $1,301 equipment particularly disposable respiratory protection • Driving growth in passports, document readers and access control in security market $600 +18.1% • International commercial construction drives increased $350 $297 demand for fire protection and window films $0 YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07 Sales Operating Income *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
  44. 44. Segment Highlights* – Electro & Communications Second Quarter Q2 Drivers $900 • Local currency growth of 1.2%; 2.2% from acquisitions Operating +3.4% Income Margins • Double-digit sales and profit growth in electrical markets Q2 ’06 Q2 ‘07 $693 $600 for insulating, protecting and sensing $670 17.1% 19.1% • Double-digit sales and profit growth in communications markets $300 +15.7% • Weakness in consumer electronic applications $132 $114 $0 • Productivity focus continues to drive double-digit profits Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07 growth Sales Operating Income • Q2 and YTD margins more than 19.0% Year-to-Date Other Highlights $1,500 Operating +3.5% • Strong bench-to-bench relationships with big global Income Margins $1,361 YTD ’06 YTD ‘07 $1,315 customers $1,000 17.8% 19.3% • Steady flow of new products into adjacent markets • Continued penetration in consumer electronics and other electronic devices $500 +12.0% $262 $234 $0 YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07 Sales Operating Income *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
  45. 45. Segment Highlights* – Health Care Second Quarter Pharma Q2 Drivers Operating $1,050 Income Margins 23.1% (1.1%) • Local currency growth of 19.5% including 4.4% from (ex. Pharma) ex. pharma $196 acquisitions $988 Q2 ’06 Q2 ‘07 26.1% 28.1% • Sales growth was broad-based across Drug Delivery, $700 $804 Dental, Medical and Health Info Systems 32.3% • Geographic growth led by Europe and US ex. pharma $350 +2.9% $60 • Excellent operating income performance up 32.3%, ex. pharma $277 $210 • Pharma divestiture reduced reported sales and $0 Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07 operating income by 24.2% and 29.4%, respectively Operating Income Sales Other Highlights Year-to-Date • Technology leadership in medical, dental, health Operating Income Margins $2,100 information management and drug delivery industries 23.7% (0.8%) (ex. Pharma) ex. pharma $389 • Strategic focus in medical on infection prevention, YTD ’06 YTD ‘07 $1,950 acute/chronic wound care management 28.4% 28.0% $1,400 $1,577 • Dental launched Pro TempTM malleable materials for 21.9% temporary crowns ex. pharma $700 (3.8%) • Product and technology gap fill acquisitions help build $120 scale and market leadership in medical and dental $546 $448 • Emerging market penetration $0 YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07 Operating Income Sales *Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.

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