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Increasing Investment in Priority Growth Platforms 2018 Investor Day Mike Roman Chief Executive Officer November 15, 2018 Today’s meeting highlights • Our 3M Value Model positions us to win • Four strategic priorities delivering value for our customers and shareholders • Portfolio management … more to do • Transformation … enhancing customer experience • Innovation … accelerating priority growth platforms • People and culture … developing and advancing • Balanced and disciplined capital allocation • Announcing new 2019 – 2023 financial objectives; previewing 2019 outlook 15 November© 3M 2018. All Rights Reserved. 2 Agenda 2018 Investor Day | Nov 15, 2018 The 3M Value Model Priorities Financial objectives 15 November© 3M 2018. All Rights Reserved. 3 The 3M Value Model VVision i s i o n Strengths Technology Manufacturing Global Capabilities Brand Priorities Portfolio Transformation Innovation People and Culture VValues a l u e s 15 November© 3M 2018. All Rights Reserved. 4 Our vision Vision Strengths Priorities Values 15 November© 3M 2018. All Rights Reserved. 5 Our strengths: the power of 3M Customer Insights Fundamental Strengths Customer First Customer Inspired Innovation Unique and differentiated value End-user focused Technology Manufacturing Global Capabilities Brand Vision Strengths Priorities Values 15 November© 3M 2018. All Rights Reserved. 6 Our priorities Delivering on our commitments for growth, value, and returns Portfolio Transformation Innovation People & Culture Fully leveraging our 3M Activating our Realizing the full potential Developing our people and value model transformation advantages of our innovation model advancing our culture Vision Strengths Priorities Values 15 November© 3M 2018. All Rights Reserved. 7 Our values Leadership Behaviors Play to win Prioritize and execute Foster collaboration and teamwork Develop others and self Innovate • Inclusion Act with integrity and transparency • Diversity Code of Conduct: Be 3M • Sustainability Be good • Respect, encourage, challenge Be honest Be fair Be loyal Be accurate Be respectful Vision Strengths Priorities Values 15 November© 3M 2018. All Rights Reserved. 8 Increasing customer value and shareholder returns Top priorities to delivering our overall plan and in 2019 Portfolio Transformation 15 November© 3M 2018. All Rights Reserved. 9 Portfolio 15 November© 3M 2018. All Rights Reserved. 10 Identified opportunities to strengthen portfolio in 2012 2012 Portfolio Framework Strategicattractiveness Financial attractiveness Push Forward Heartland Strategic Review 15 November© 3M 2018. All Rights Reserved. 11 Rigorous process for evaluation of strategic options Status Quo A Continue to execute according to the current plan Invest • Combined business for greater customer B Accelerate investment for growth relevance, going from 40 to 23 divisions C Fix • Completed 10+ divestitures, representing $1.1 Aggressive changes to improve performance billion in revenue and $2.1 billion in proceeds Combine • Fixed or exited multiple products globally or in D Implement reorganization options specific regions of the world Harvest or Shutdown • Reshaped and repositioned our Electronics & E Maximize value on path to close Energy and Safety & Graphics businesses Divest or Spin F Proceed with valuation and separation 15 November© 3M 2018. All Rights Reserved. 12 Sharper focus on strategic and financial attractiveness Key pillars of the portfolio prioritization model Strategic attractiveness Financial attractiveness Technology that enhances the core and can be advanced by 3M • Market size • Market growth Businesses that benefit from or Market • Market profitability enhance 3M’s manufacturing strength attractiveness Businesses with global potential that benefit from or enhance 3M’s local • Growth sales and operations • Profitability Financial • ROIC Enhances or is enhanced by performance global 3M brand strength 15 November© 3M 2018. All Rights Reserved. 13 Continuing to evolve our portfolio prioritization model 2018 Portfolio Framework Clear view of our “Heartland” Additional opportunities in “Push Forward” Strategicattractiveness Financial attractiveness Push Forward Heartland 15 November© 3M 2018. All Rights Reserved. 14 Fully leveraging our 3M Value Model Reshaping our portfolio through three key actions Heartland and Push Forward M&A Review Prioritizing investments Creating differentiated value Maximizing value from all businesses • Grow our Heartland businesses • Add businesses where we create • Redesign and optimize global faster than their markets unique value from our business models Fundamental Strengths • Invest to increase scale and • Increase value through divestitures accelerate growth in our Push • Add businesses that create or and other strategic options Forward businesses extend market leadership • Add businesses that enable priority growth platforms 15 November© 3M 2018. All Rights Reserved. 15 Balanced capital allocation plan First priority is investing in innovation and organic growth Growth investments Dividend Flexible deployment ~30% ~30% ~40% R&D 60 years Acquisitions ~6% to sales Consecutive annual increases Highest priority for flexible deployment Cap-ex 100+ years 5.0% – 5.5% to sales Paid dividends without interruption Share repurchase Expected to grow in-line with Maintain minimum earnings over time repurchase threshold Based on relative value; influenced by other demands on capital Note: capital allocation percentages based on mid-point of 2019 – 2023 plan 15 November© 3M 2018. All Rights Reserved. 16 Delivering maximum value from increased M&A investments Building on our success since 2012… • Highest priorities in Health Care, Industrial, and Safety & Graphics; actively exploring opportunities across all five business groups 12 Acquisitions: $7.7B • Acquisitions that enable priority growth platforms “Fewer, larger” acquisitions • Leveraging our Fundamental Strengths to continue exceeding expectations delivering differentiated growth and value • Utilizing our integration management and Lean Proven value creation through Six Sigma to maximize value and returns integration management 15 November© 3M 2018. All Rights Reserved. 17 Creating value through ongoing review of our portfolio Exploring broader range of Divesting businesses to improve New global business models to strategic options focus and value maximize value Health Information Systems Communication Markets Closure and Masking Systems • Explored possible divestiture or spin • Explored how to maximize value with • Explored how to maximize value • Decided to keep and increase a strong business that was not well • Decided to implement new global investments to accelerate growth aligned to our fundamental strengths business model focused on and value • Decided to divest maximizing cash flow 15 November© 3M 2018. All Rights Reserved. 18 Portfolio management enables the 3M Value Model Great progress … … more to do Realigned and consolidated businesses to increase customer relevance Realigning resources to our highest priority, most attractive businesses Prioritized resources for businesses and markets that best leverage our Fundamental Strengths Increasing our investment in M&A to Acquired businesses that leverage our accelerate growth, value and returns market leadership, strengths and value from integration into global 3M Executing portfolio actions to maximize Acted to maximize value of strategic review value across review businesses businesses, including through divestitures 15 November© 3M 2018. All Rights Reserved. 19 Transformation 15 November© 3M 2018. All Rights Reserved. 20 Activating our transformation advantages Well positioned to accelerate value creation Accomplishments What’s next Successfully deployed ERP Enhance customer service system in Europe and U.S. Increase value creation Simplified, standardized and redesigned business processes Leverage ERP capabilities Streamlined end-to-end Streamline deployments engagement with customers Utilize data and analytics Created value through new service models 15 November© 3M 2018. All Rights Reserved. 21 Improving operating income margin in West Europe Deliver 20% operating income in 2020 enabled by Business Transformation Leveraging a strong foundation Regionalization of Europe • Global Service Center • Reduced number of regional • Marketing Sales Operations operating units by half • Supply Chain Center of Expertise • Better leverage scale of operations Streamlined engagement with our customers Building a healthier portfolio Optimizing footprint • Exited 2% to 3% of West • Reduced number of Europe revenues manufacturing locations by 1/3 • Redeployment of resources to • Investing in disruptive higher value portfolio manufacturing technology 15 November© 3M 2018. All Rights Reserved. 22 Delivering even more value 200-300 bps margin improvement by 2023 • New product innovation • Business Transformation • Footprint optimization • Disruptive technology • Lean Six Sigma 15 November© 3M 2018. All Rights Reserved. 23 Innovation 15 November© 3M 2018. All Rights Reserved. 24 Proven ability to extend innovation value over the long-term Disruptive innovation at origin Long-term value creation through new product platforms & line extensions Adhesives and tapes Acrylic foam tape Laminating adhesives Skin-friendly silicone tapes Optically clear adhesives Nonwovens Thinsulate™ thermal Acoustic insulation Filtrete™ filters Biopharmaceutical insulation filtration Multi-layer optical films Notebook display Brightness enhancement film Solar films Automotive glass films High performance fluids Precision cleaning
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