morgan stanley global industrials ceos unplugged conference
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Innovation and Growth at 3M
George W. BuckleyChairman, President and Chief Executive Officer2007 Morgan Stanley Global IndustrialsCEOs Unplugged ConferenceSeptember 10, 2007
(#)2007 Morgan Stanley CEOs Unplugged Conference
Forward-Looking StatementsThis 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
Outstanding Second Quarter
EPS*
$1.23$6.1 Billion
Sales
+8% +17.1%
+11.8%ex. pharma
*Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
+23.0%ex. pharma
(#)2007 Morgan Stanley CEOs Unplugged Conference
Working Our Plan
● Reinvigorate R&D11% increase over 2006* ex. pharma
● Accelerate International GrowthBuilding local/regional brandsPursue profitable adjacencies
● Invest in Our Supply ChainKorea - Respiratory facility (July 2007)Poland - Optical facility (June 2007)Canada – CHIM Tapes facility (June 2007)China - Industrial Tapes facility (July 2007) Others largely on-track
● Accelerate Growth in the CoreEight acquisitions YTD in 2007
OHES
*Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
Optical
IndustrialTapes
CHIM Tape
(#)2007 Morgan Stanley CEOs Unplugged Conference
Sales Recap Q2 2007 vs. Q2 2006
*Total Local Currency = Volume + Price + Acquisitions
WW U.S.
Volume - organic 6.9% 2.1% 9.9%
Volume - acquired 2.8% 2.8% 2.8%
Price (0.4%) 1.3% (1.4%)
Total Local Currency* 9.3% 6.2% 11.3%
Divestiture (3.8%) (4.0%) (3.7%)
Translation 2.5% -- 4.1%
Total Sales Growth 8.0% 2.2% 11.7%
Int’l
(#)2007 Morgan Stanley CEOs Unplugged Conference
Balance Sheet & Cash Flow
($ in Millions) Q2 2006 Q1 2007 Q2 2007
Free Cash Flow $539
5.2
$2,557
$3,171
$261
$348
$527
$670(a)
5.0
$2,714
$3,444
$304
$350
$866(a)
$1,164
Net W/C Turns 5.0
Dividends Paid $346
Inventories $2,779
Receivables-Net $3,620
Cap-ex $348
Share Repurchases $1,035
(a) Excludes certain special items that impacted cash flow. Refer to 3M's July 26, 2007 press release for an explanation of these items.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
Great Opportunities Remain For 3M
► Built firm Six Sigma and Lean Processes in manufacturing
► Fundamental principles remain● Protect our premium margins● Defend our premium ROIC● Reemphasize innovation● Leverage central overhead● Adding growth, taxes and supply
chain as new value creators
► Build on 3M’s enduring franchises● Building value and margin for our
customers
(#)Innovation
Comparative Tax Rate (3M at 34% in 2007)
Ingersoll Rand 16% 2150 bpsTyco 21% 1450 bpsITW 31.5% 150 bpsDanaher 27.3% 920 bpsUTX 26.8% 994 bpsJ&J 23.8% 1449 bpsAvery 20.4% 1943 bps3M 34% 0 bps
Tax Rate Margin Advantage
Conclusion; We fight to maintain high margins, and we reduce our competitiveness and growth rates, but waste it all in paying higher taxes
© 3M 2006 All Rights Reserved
Relative Value Of Growth
MMM 5.2GE 11.4
IBM 3.5DHR 5.1
PG 7.2XOM 2.1GM 2.4
WMT 1.6#REF! #REF!#REF! #REF!#REF! #REF!
0.0
2.0
4.0
6.0
8.0
10.0
12.0
MMM GE IBM DHR PG XOM GM WMT
Company Ticker
Rel
ativ
e Va
lue
of G
rowth
► Ratio of value creation from 100 bps of growth to 100 bps of margin► 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
Source:HBR April 2005
(#)2007 Morgan Stanley CEOs Unplugged Conference
● Build where we’re strong● Get scale & relative share● Fill in the “white spaces”● Define markets broadly● Become important to
customers● Dual branding● Local acquisitions● Private labeling
● Imagine, dream and invent● Beat competitors to the
future● Plan for cannibalization● Licensing as a route● Avoid NIH syndrome
Start By Growing The Current Core
Invent a New Future
Build Broad LongTerm Competencies
● Develop broad based long-term capabilities● Acquire supporting core technology ● Build volume and scale
● Constant reinvention● Localization and
differentiation● Key customer partnerships
Grow the Current Core
Extend The Core
(#)2007 Morgan Stanley CEOs Unplugged Conference
● Go “local” in brands and manufacturing
● BRICP emphasis● Gulf and LA● Eastern Europe● Growth everywhere
● Follow Mega Trends ● Seeded by small M&A● Targeted areas
● RFID/Wireless/GPS● Minerals extraction● Oil & Gas● Food safety
● Follows core strategy● Supports adjacencies● Mostly tuck-ins● Technology, capacity,
distribution and local brands
● Defend and extend the core
● Build scale and relative share
● Localization● Disruptive technologies● Build long term
competencies
And Then Extend It With Simple Concepts
Grow the Current Core
Grow the Current Core
Build New Business via EBOs
Build New Business via EBOs
MarketExpansion
Complementary Acquisitions
Complementary Acquisitions
International Growth
International Growth
Customer Focus Critical on All Four FrontsCustomer Focus Critical on All Four Fronts
(#)2007 Morgan Stanley CEOs Unplugged Conference
First You Must Create the Environment for Growth
Operational Excellence
Product Innovation
● Lean Methods● Six Sigma● Systemic Supply
Chain Improvements
● IT Systems● Better S&OP
Process
● Stimulating a creative environment
● Foster Imagination● Increased R&D spend
in the core● Technology Focus● See it through the
customers’ eyes● Mix in a little magic
● Market Expansion● White space fill in● Geographic expansion● Adjacencies and EBOs
Products Efficiency
Customers
Profitable Growth
(#)2007 Morgan Stanley CEOs Unplugged Conference
Our Foundational Beliefs on Competitiveness
It’s not just about efficiency or just about invention
● We compete on six platforms● Low cost is the ultimate competitive
deadly weapon● Scale and relative share are vital for
efficiency and competitiveness ● Follow the customer value chain● Pristine service and brands can
overcome price in some markets
People
Cost
Marketing & Brands
Service
Technology
Distribution
6σ & LeanGlobal sourcingLow Factory costsTaxes
Secure the bestSecure the broadest
Build on a firm foundationDifferentiation
OTIF fill ratesQualitySpeed to market
Inspire and guideDevelop leadershipContinuing education
Build on our enduring franchisesSecondary for local
(#)2007 Morgan Stanley CEOs Unplugged Conference
3M’s Convoluted Supply ChainPlant A
Six OwnersPlant B
Four Owners
Plant C
Eight Owners
Plant D
Four Owners
• Any plant may have up to eight “owners” in 40 combinations
• Lead owner varies plant to plant
• Under absorbed costs in one business impacts another
Raw Material In
Distribution Center
(#)2007 Morgan Stanley CEOs Unplugged Conference
And Here’s What We Are Beginning To DoPlant A
Six OwnersPlant B
Four Owners
Plant C
Eight Owners
Plant D
Four Owners
Distribution Center
(#)2007 Morgan Stanley CEOs Unplugged Conference
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006Sustain Strategic Growth Optical
Historical Capital Spending
Since 2000, Optical spending equaled all other growth capital combined
Growth Capital increase almost all Optical Films53% Decline in
Capital Spending
(#)2007 Morgan Stanley CEOs Unplugged Conference
Supply Chain – Focused FactoriesPlant A
Six Product Lines
Plant CEight Product Lines
Plant BFour Product Lines
RawMaterial In
DistributionCenter
Plant DFour Product Lines
(#)2007 Morgan Stanley CEOs Unplugged Conference
Supply Chain – Focused FactoriesPlant A
Six Product Lines Plant CEight Product Lines
Plant BFour Product Lines
RawMaterial In
DistributionCenterFocused Factory
Plant DFour Product Lines
(#)2007 Morgan Stanley CEOs Unplugged Conference
Stretched Supply Chains Drive Working Capital Use
United States65% Product Source35% Consumption
International35% Product Source65% Consumption
(#)2007 Morgan Stanley CEOs Unplugged Conference
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 peopleGet scientists and engineers back in the business of inventing new products
● At the “receiving end” of the pipe; Sell and market betterPut more feet of the street, and more advertising and merchandisingBring increased competency and professionalism to marketingStop unnecessary complexity in SKUs and specificationsAcquire local brands to penetrate distribution faster
● The pipe itselfProvide a large enough diameter pipe: CapacityKeep the pipe as short and simple as possible
● Stop the pipe leakingPrice giveawaysMarket share loss
(#)2007 Morgan Stanley CEOs Unplugged Conference
CANADA
USA
MEXICO
Capacity And Supply Chain Improvements In Progress
Filtrete Mfg.
CHIM TapeMedical: M6 Solvent
Coater-Brookings, SD
Automotive Acrylic Tape-Aberdeen, SD
CHIM: LFBMF Lines, Aberdeen, SD
Northridge DDSD Packaging Line
PolyesterGreenville, NC
D11 MOF LineDecatur, AL
(#)2007 Morgan Stanley CEOs Unplugged Conference
RUSSIA
Tapes
Optical
POLANDManufacturing
KOREAINDIA
CHINA
Industrial Tapes
OHES
Suzhou LCD II
CHJ III Mfg
Medical Mfg. GuangZhou
Capacity And Supply Chain Improvements In Progress
(#)2007 Morgan Stanley CEOs Unplugged Conference
3M Market Dynamics and Defense
The objective is to bulwark and defend the markets that we created, not just to grow
Shouldn’t we exit the Scotch Tape
market? It’s commoditized! Push into upper
middle level market
Competitors push into the lower market … we refuse to defend
(#)2007 Morgan Stanley CEOs Unplugged Conference
Differentiated Brands & Technology to Grow Category
Selective privatelabeling or
manufacturing JVs to support partnership
customers
Principal brands and differentiated
features
Secondary Brands &
Technologies
Industrial Consumer
Diamond Grade™
High Intensity Grade
Engineering Grade
(#)2007 Morgan Stanley CEOs Unplugged Conference
● Go “local” in brands and manufacturing
● BRICP emphasis● Gulf and LA● Eastern Europe● Growth everywhere
● Follow Mega Trends ● Seeded by small M&A● Targeted areas
● RFID/Wireless/GPS● Minerals extraction● Oil & Gas● Food safety
● Follows core strategy● Supports adjacencies● Mostly tuck-ins● Technology, capacity,
distribution and local brands
● Defend and extend the core
● Build scale and relative share
● Localization● Disruptive technologies● Build long term
competencies
And Then Extend It With Simple Concepts
Grow the Current Core
Grow the Current Core
Build New Business via EBOs
Build New Business via EBOs
MarketExpansion
Complementary Acquisitions
Complementary Acquisitions
International Growth
International Growth
Customer Focus Critical on All Four FrontsCustomer Focus Critical on All Four Fronts
(#)2007 Morgan Stanley CEOs Unplugged Conference
AcquisitionsHigher organic growth results from more frequent acquisitions
Base
Growth
Acquisitions
Acquisitions are not only about bulk, but can be 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
(#)2007 Morgan Stanley CEOs Unplugged Conference
High Jump
HornellCUNO
Gen'l Ind'l Diamond
Omni
Mercury
Info-XSiemen's
Interconnect Interchemall Dom
0%
5%
10%
15%
20%
2004 2005 2006
Targ
et G
row
th R
ate
%Thoughtful Acquisitions Help Drive Core Growth
3M Historical Growth ~4%
Less than $100MM Greater than $100MM
(#)2007 Morgan Stanley CEOs Unplugged Conference
Brontes Technologies
(#)2007 Morgan Stanley CEOs Unplugged Conference
Track & Trace Has Broad-Based Opportunities
Existing and Potential 3M Solution Spaces
How Am I?
Where Am I? Sensor Networks SensorsTempVibrationHumidityLightContaminants
Who Am I?RFIDBarCodeDatabase
Tracking Software RFID NetworkWireless LocationRTLSGPS Road Tolling
Improve and Advantage Me!Location-Based ServicesSupply Chain OptimizationCompetitive “Superiority”in Order Fulfillment
Supply ChainDistribution
(#)2007 Morgan Stanley CEOs Unplugged Conference
Electrical Power Transmission
(#)2007 Morgan Stanley CEOs Unplugged Conference
New Consumer Products
(#)2007 Morgan Stanley CEOs Unplugged Conference
● Go “local” in brands and manufacturing
● BRICP emphasis● Gulf and LA● Eastern Europe● Growth everywhere
● Follow Mega Trends ● Seeded by small M&A● Targeted areas
● RFID/Wireless/GPS● Minerals extraction● Oil & Gas● Food safety
● Follows core strategy● Supports adjacencies● Mostly tuck-ins● Technology, capacity,
distribution and local brands
● Defend and extend the core
● Build scale and relative share
● Localization● Disruptive technologies● Build long term
competencies
And Then Extend It With Simple Concepts
Grow the Current Core
Grow the Current Core
Build New Business via EBOs
Build New Business via EBOs
MarketExpansion
Complementary Acquisitions
Complementary Acquisitions
International Growth
International Growth
Customer Focus Critical on All Four FrontsCustomer Focus Critical on All Four Fronts
(#)2007 Morgan Stanley CEOs Unplugged Conference
3M’s Subsidiary Network: A Platform For Growth
KeySales & MarketingManufacturing/ConvertingTechnical Capabilities
Canada
Puerto Rico
Trinidad& Tobago
Brazil
Uruguay Argentina
Venezuela
Chile
Peru
Colombia
Ecuador
Panama
Jamaica
Costa RicaEl Salvador
Guatemala
Dominican Republic
Mexico
UAE
Switzerland
Austria
Greece
Italy
Pakistan
SaudiArabia
Lebanon
Kuwait
Egypt
KenyaSouth Africa
Morocco
Tunisia
China
Korea
Japan
Taiwan
Hong Kong
Vietnam
Philippines
Thailand
India
Malaysia
Indonesia
New ZealandAustralia
Singapore
Sri Lanka
France
Germany
United Kingdom
Ireland
Belgium
Netherlands
Denmark
Norway
Sweden Finland
Spain
Portugal
Poland
CzechRepublic
Hungary
Russia
Turkey
Romania
UkraineEast
Israel
(#)2007 Morgan Stanley CEOs Unplugged Conference
International Sales Growth(Billions)
$7.8$8.2
$8.9$8.5
$8.9
$10.7
$12.1$12.9
$14.1
5.0
7.0
9.0
11.0
13.0
1998 1999 2000 2001 2002 2003 2004 2005 2006
$15.0
Summary- Bringing it all Together
(#)2007 Morgan Stanley CEOs Unplugged Conference
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 lossesTrim non-essential corporate services
(#)2007 Morgan Stanley CEOs Unplugged Conference
Coordinated Value Creation StrategyStrategy ► Review business units by key
metrics including growth and capital efficiency
Near TermTactics
► Put ongoing review metrics in place► Divestiture of Pharmaceuticals► Examine others for divestiture
► Work in high growth spaces with reasonable EPS targets. Value creation orientation. Less margin obsessive
Strategy Strategy ► Increase leverage on the balance sheet. Be willing, if necessary, to dip below AA rating to A
► Use cash flow for investment, acquisitions and increased share buybacks
Near TermTactics
Near TermTactics
► Safety & Protection► Display & Graphics (Optics & Films)► Track & Trace (RFID/Wireless/GPS)► Wider Consumer Offerings► Medical, Dental & Orthodontics
Near TermTactics
► Focus on adjacent segments with higher growth, cost and revenue synergies
Strategy ► Focus on mega trends, scale and relative share in core business
Selected Divestitures
Organic Growth
Capital StrategyAcquisitions
(#)2007 Morgan Stanley CEOs Unplugged Conference
Cash Back to ShareholdersFor The Period 2001-06:
● $8.9 billion in share repurchases
● $6.7 billion in dividends paid
● Dividend CAGR of 9%
● No equity dilution policy
● Returned ~103% of reported net income via dividends and share repurchases
0
500
1000
1500
2000
2500
2001 2002 2003 2004 2005 2006
Stock Repurchases $'000s
600
800
1000
1200
1400
2001 2002 2003 2004 2005 2006
Dividends $'000s
(#)2007 Morgan Stanley CEOs Unplugged Conference
3M’s Summary Longer Term Strategy
● Technology lattice protects the downsides and ensures upsides
● Investment through the economic cycles● Driving growth as a way of doing business
Organic Sales Growth
EPS Growth
Investment Returns
2X IPI ≈ 8% and up
12 -15%
20%+►Drill into the core. Move towards
scale where markets are large
► Innovation remains vital
►Move towards higher relative share in smaller markets
►Heavy up on globalization
►Accelerated M&A to improve core growth and fill gaps
►Careful tradeoffs of share and growth
►Building brands and technology
2007 Morgan Stanley CEOs Unplugged Conference© 3M 2007. All Rights Reserved.
Operating Income ($ in millions)
$2,823
$2,473
$2,000
$2,500
$3,000
YTD '06 YTD '07
Sales ($ in millions)
$12,079
$10,894$10,000
$11,500
$13,000
YTD '06 YTD '07
Pharma
Earnings Per Share (US dollars)
$2.50
$2.12$1.75
$2.25
$2.75
YTD '06 YTD '07
Return on Invested Capital
22.7%22.6%
15.0%
20.0%
25.0%
YTD '06 YTD '07
Year-To-Date Highlights*
+7.1%+8.9%
+10 bps
$389
+10.9%ex. pharma
$0.10
+17.9%ex. pharma
+12.6%
$120
+14.2%ex. pharma
Margin (ex pharma) 22.7% 23.4%LC Growth 8.8% 8.4%
*Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
+80 bpsex. pharma
$913
$237
$1,006
$288
$0
$400
$800
$1,200+10.2%
Segment Highlights* – Display & GraphicsQ2 Drivers
• Local currency growth of 8.8%• Optical films business leads with strong double digit
sales and profit growth• Commercial graphics and traffic safety continue
track record of delivering consistent performance• LCD industry continues to remain healthy• Solid YTD operating income performance with
operating income up over 10% and margins over 30%
Other Highlights• LCD Poland facility online (June 2007)• DBEF manufacturing capacity additions for LCD TV
industry on track• LCD industry accelerates back-half of year as TV
becomes bigger piece of mix• New service business for vehicle registration & road
maintenance$529
$1,832
$583
$1,927
$0
$700
$1,400
$2,100
+10.2%
+21.5%
+5.2%
Operating Income MarginsQ2 ’06 Q2 ‘0726.0% 28.7%
Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07Sales Operating Income
YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07Sales Operating Income
Operating Income Margins
YTD ’06 YTD ‘0728.9% 30.3%
*Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
Second Quarter
Year-to-Date
$320
$1,662
$361
$1,804
$0
$600
$1,200
$1,800 +8.5%
Segment Highlights* – Industrial & Transportation
$700
$3,334
$772
$3,589
$0
$1,200
$2,400
$3,600
+10.4%
+12.5%
+7.6%
Operating Income MarginsQ2 ’06 Q2 ‘0719.3% 20.0%
Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07Sales Operating Income
YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07Sales Operating Income
Operating Income Margins
YTD ’06 YTD ‘0721.0% 21.5%
Q2 Drivers• Local currency growth of 5.6% including 1.0% from
acquisitions• Continued growth leadership by industrial adhesives
and tapes, automotive aftermarket, energy and advanced materials and abrasives businesses
• Good solid performance in auto OEM market• Broad based geographic performance with growth led
by Europe and Latin America Canada regions• Good operational discipline with double digit operating
income increase of 12.5% in Q206 and 10.4% YTD
Other Highlights• Organic new products and complimentary gap fill
acquisitions• Continued emerging market penetration, particularly
BRICP countries• Driving 3M technologies into oil and gas market to
meet needs of major energy customers • Weak US auto OEM & residential housing market
*Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
Second Quarter
Year-to-Date
$769
$135
$832
$164$0
$300
$600
$900 +8.2%
Segment Highlights – Consumer & Office
$285
$1,510
$341
$1,646
$0
$600
$1,200
$1,800
+19.6%
+21.3%
+9.0%
Operating Income MarginsQ2 ’06 Q2 ‘0717.6% 19.7%
Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07Sales Operating Income
YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07Sales Operating Income
Operating Income Margins
YTD ’06 YTD ‘0718.9% 20.7%
Q2 Drivers• Local currency growth of 6.1% including 1.3% from
Nylonge acquisition• Sales and profit growth led by office retail channel• Solid growth in DIY and consumer mass retail
channels• Double-digit international growth rates• Outstanding Q2 and YTD operating leverage with
profits up 21.3% and 19.6% respectively
Other Highlights• Invigorating existing categories with higher-value
innovative products• Introducing products that change consumer behavior
and solve everyday problems• Increased investment in Q3 and Q4 for sales and
marketing activities for back-to-school and holiday season
• Improving international penetration • Slow U.S. residential housing construction persists
Second Quarter
Year-to-Date
$139
$662
$169
$799
$0
$300
$600
$900 +20.7%
Segment Highlights* – Safety, Security & Protection
$297
$1,301
$350
$1,557
$0
$600
$1,200
$1,800
+18.1%
+21.9%
+19.7%
Operating Income MarginsQ2 ’06 Q2 ‘0721.0% 21.2%
Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07Sales Operating Income
YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07Sales Operating Income
Operating Income Margins
YTD ’06 YTD ‘0722.8% 22.5%
Q2 Drivers• Local currency growth of 16.7%• Acquisitions added 11.6%; primarily Security Printing
Systems Ltd. and E. Wood• Growth led by respiratory protection, corrosion protection
and building and commercial services• Industrial mineral up 5% sequentially; down 13% YOY • Europe delivers strong growth and profits• Operating income up 22%• Consistent 20%+ operating margins
Other Highlights• Korea respiratory facility opening effective July 11, 2007• Continued global demand for personal protective
equipment particularly disposable respiratory protection• Driving growth in passports, document readers and
access control in security market• International commercial construction drives increased
demand for fire protection and window films
*Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
Second Quarter
Year-to-Date
$114
$670
$132
$693
$0
$300
$600
$900+3.4%
Segment Highlights* – Electro & Communications
$234
$1,315
$262
$1,361
$0
$500
$1,000
$1,500
+12.0%
+15.7%
+3.5%
Operating Income MarginsQ2 ’06 Q2 ‘0717.1% 19.1%
Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07Sales Operating Income
YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07Sales Operating Income
Operating Income Margins
YTD ’06 YTD ‘0717.8% 19.3%
Q2 Drivers• Local currency growth of 1.2%; 2.2% from acquisitions• Double-digit sales and profit growth in electrical markets
for insulating, protecting and sensing• Double-digit sales and profit growth in communications
markets• Weakness in consumer electronic applications• Productivity focus continues to drive double-digit profits
growth• Q2 and YTD margins more than 19.0%
Other Highlights• Strong bench-to-bench relationships with big global
customers • Steady flow of new products into adjacent markets• Continued penetration in consumer electronics and
other electronic devices
Second Quarter
Year-to-Date
*Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.
$546 $448
$1,950
$1,577
$120
$389
$0
$700
$1,400
$2,100
$210 $277
$988
$804
$60
$196
$0
$350
$700
$1,050
Pharma
+2.9%
(3.8%)
Segment Highlights* – Health CareQ2 Drivers
• Local currency growth of 19.5% including 4.4% from acquisitions
• Sales growth was broad-based across Drug Delivery, Dental, Medical and Health Info Systems
• Geographic growth led by Europe and US • Excellent operating income performance up 32.3%,
ex. pharma• Pharma divestiture reduced reported sales and
operating income by 24.2% and 29.4%, respectively
Other Highlights• Technology leadership in medical, dental, health
information management and drug delivery industries• Strategic focus in medical on infection prevention,
acute/chronic wound care management• Dental launched Pro TempTM malleable materials for
temporary crowns • Product and technology gap fill acquisitions help build
scale and market leadership in medical and dental• Emerging market penetration
23.1%ex. pharma
21.9%ex. pharma
(1.1%)
32.3%ex. pharma
Q2 ‘06 Q2 ‘07 Q2 ‘06 Q2 ‘07Sales Operating Income
Operating Income Margins
(ex. Pharma)YTD ’06 YTD ‘07
28.4% 28.0%
Operating Income Margins
(ex. Pharma)Q2 ’06 Q2 ‘0726.1% 28.1%
23.7%ex. pharma
YTD ‘06 YTD ‘07 YTD ‘06 YTD ‘07Sales Operating Income
(0.8%)
Second Quarter
Year-to-Date
*Excludes special items. Refer to 3M’s July 26, 2007 press release for a complete list and explanation of these items.