6 Prudential's "Inside Our Best Ideas" Conference

Growth & Customer Engagement

George W. Buckley
Chairman, President and Chief Executive Officer
September 28th, 2006

© 3M 2006 All Rights Reserved

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,” 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 the outcome of pending Congressional action concerning asbestos-related litigation and other
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, 2005 (the “Report”). Changes in
such assumptions or factors could produce significantly different results. A further description of these
factors is located in the Report under Part I, Item 1A, “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.


Topics We Will Address Today

Historical performance
1

Describing 3M’s strategy for growth through Customer
2

Value Enhancement

Continued commitment to operational excellence
3

Summary – bringing it all together
4

Plans to Drive Higher Earnings & P/E

Historical Performance


Total LC Growth, Margins, EPS & ROIC
10.0% 24%
pts
Total LC Growth Operating Margin
+6.9
%
4.8
= 22%
8.0%
GR
CA
6.0% 20%
18%
4.0%
16%
2.0%
14%
0.0%
2001 2002 2003 2004 2005 1H06 2001 2002 2003 2004 2005 1H06
-2.0%

25%
$5.00
ROIC %
EPS %
= 18 pts
6.8
23%
$4.00 R
CAG +
$3.00 21%

$2.00 19%

$1.00 17%
$0.00
15%
2001 2002 2003 2004 2005 1H06
2001 2002 2003 2004 2005 1H06

Leveraging Volume, Productivity, Mix and Fixed Costs to Maximize Profitability


Productivity - Cost Out & Leverage
> 55,000 total employees trained
► $3.0 10.0%
Overhead Cost Leverage
in Six Sigma $2.5 8.0%

$ Billions
$2.0
6.0%

> 20,000 projects closed $1.5
► 2.1% of margin 4.0%
$1.0
2.0%

>15,000 projects underway
$0.5
► $0.0 0.0%

globally 2001 2005
Overhead Cost % to Sales

Lean methods being added to
► $325
$304
Sales/Employee (000’s)
the Six Sigma toolbox $300 $292

$275 $264
Systemic areas of supply chain
► $250
$232
and working capital our next $225 $212

target area $200
2001 2002 2003 2004 2005

Initiatives Contributed > $400MM Per Year Improvement

Gradually Improving Our Sales Mix

Margin > Corp. Avg. Margin < Corp. Avg.

2005
2001
70%

30%
38%
$6B Sales
$6B Sales

$10B Sales $15B Sales
62%
~11% CAGR


Embracing Our Customers


Customer Value Enhancement

3M’s Value Proposition to Customers

Innovative and
Practical Solutions
from a Diversified Technology Company


3M’s Exceptional Value Drives Share Gain

Value
Flexibility

Competition over-
3M
pricing and under
delivering
Price
3M
3M Market Share
Secondary
Competitors Gains Through CVE
Brands

Customer Perceived Value


3M Creates Customer Value in Three Dimensions by Leveraging
Our Innovation Engine

Enhancing Our Customers’ Competitiveness
►
1
By using innovation to provide performance-differentiated products
●
By making our customers more efficient in their competitive battle
●
Building Our Customers’ Business Returns
►
2
By providing generally better selling margins for customers
●
By using our Six Sigma skills and technologists to solve their problems
●
Leveraging Our Power Brands for Customer Value Creation
►
3
By providing better brand recognition
●


Communicating Our Value Position
>200 Six Sigma Projects
at the Customer
50 Million Web 15,000 Sales and
Contacts Marketing Professionals

7,000 Design for
Thousands of
Customers Six Sigma Trained
Annual Customer
Lab Visits

160 Customer
1,700 Technical
Contact Employees
Service Employees
2,200 Customer
Service Employees

Innovative Two-Way Process for Addressing Customer Needs

3M Solves Customer Needs in Multiple Markets
3M Technology Platforms Markets

Adhesives Architecture & Const.
Abrasives Auto. & Aerospace
Ceramics Electronics Manuf.
Electronic packaging Graphic arts
Micro replication Health care
Optics Home and Leisure
Specialty materials Industrial OEM
Non-woven Materials Consumer & Office
Polymer melting Safety & Security
Telecoms and Utilities


Customer Value Enhancement;
Making Customers More Efficient

Transforming Orthodontics
Significantly reduces treatment time

Reducing Capital Needs In The
Power Industry
2-3x kVA transmission with same infrastructure

Improving Safety With Less
Investment
Eliminates need for additional lighting

Enhancing Security Systems

Customer Value Enhancement;
Enhancing Competitiveness Through Superior Products

Enhancing Display Performance

Uniform brightness plus significant power
reduction

Building Premium Margin In DIY

Improves performance and productivity for
professionals and DIY’ers

Improving Physicians' Analysis

Ambient noise reduction/18x amplification


3M’s Subsidiary Network: A Platform For
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
Zimbabwe
Manufacturing/Converting
Technical Capabilities


3M - LG.Philips (LPL) Global Collaboration
Business Partnership
• 3M Korea Supports LPL Business on a Global Basis
• Simultaneous Investment in Poland
• Total Solution Provider with 3M Technology Platforms
• Exchange Business/ Technology Roadmap
• Executive Engagement for Strategic Collaborations

Technical Partnership Borderless Customer Success
• Timely Technical Service Supports on Site • Dedicated Technical & Business Teams Support
• Quality Engineers on LPL Sites LPL Global Operations in Korea, China & Poland
• Quarterly Lab-to-Lab Meetings • 3M Korea Transnational Account Team Supports
• Collaboration for New Product Development 3M China & 3M Poland teams and LPL Global
• Testing, Optical Simulation & Design Supports Suppliers
• Annual Technical Fair at LG


But Sustainable Growth Is The Biggest
Single Assured Value Creator

So How Do We Intend To Grow?


First You Must Create the Environment for Growth

Profitable
Efficiency
Products Growth

• Stimulating a
• Lean Methods
creative
• Six Sigma
environment
• Foster Imagination • Systemic
Product Operational Supply Chain
• Increased R&D
Innovation Excellence Improvements
spend in the core
• IT Systems
• Technology Focus
• Better S&OP
• See it through the
Process
customers’ eyes
• Market Expansion
• Mix in a little magic
• White space fill in
• Geographic expansion
Customers
• Adjacencies and EBOs

Start By Growing The Current Core

Grow the
Current Core
Invent a
Extend The Core New Future
Build key customer partnerships
Customization as tool
Constant reinvention; drill down Imagine, dream and invent
Build first where we’re strong Localization and differentiation Beat competitors to the future
Get scale & build relative share
Plan for cannibalization
Fill in the product “white spaces”
Licensing as a route
Build Broad Long
Become important to customers
Avoid NIH syndrome
Use dual branding Term Competencies
International product localization
Local acquisitions
Private labeling
Develop broad based long-term capabilities
Acquire supporting core technology with quality brands
Build volume and scale


And Then Extend It With Simple Concepts
Market
Expansion

Grow the Current Complementary Build New International
Core Business Acquisitions Business via EBOs Growth

Defend and extend the core Follows core BRICP
Adjacency Mega Trends
strategy
Build scale Eastern Europe
Seeded by small M&A
Supports
Build relative share Western Europe
Electronics and software
adjacencies
Emphasize localization Japan
Targeted areas
Mostly tuck-ins
Disruptive technologies Australasia
RFID/Wireless/GPS
Build long term competency Growth everywhere
Minerals extraction
Oil & Gas
Food safety

Customer Focus Critical on All Four Fronts

Growth Needs To Be Built On A Firm Foundation
How We Compete ……. Six Competitive Platforms
1 Cost .. The ultimate competitive deadly weapon
1.

Technology and innovation … Being better than the competition
2
2.

Distribution ... Securing the best in the world
3
3.

Customer service … Built on a foundation of high quality
4.
4

Marketing and brand management … just being better
5.
5

People … Leading, training and motivating our people better
6.
6


Using Differentiated Brands & Technology to Grow Our Market
Industrial Consumer
Principal
brands and
differentiated
features
Diamond Grade™

Use
Secondary
Brands /
Technologies
High Intensity Grade

Selective private
labeling or
manufacturing JVs to
support partnership
customers
Engineering Grade


Leveraging Brands and Improving our Presence

Expanding with Acquisitions and
EBOs
Traditional 3M Primary
Customer Segment 3% - 5% growth
20% leverage
5% - 8% growth
40% incremental margin

Add Secondary
Customer Segment No Participation in Low
Value Added Price
2 %- 4% growth at
Focused Segments
15% peer margins

International Expansion Occurs in All Three Dimensions

Near-Term Organic Local Currency
Growth Targets
Organic
LC* Target Last 4 Qtr. Avg.
Industrial and Transportation Business 5-8% 4.1%

Health Care Business (ex. Pharma) 6-8% 6.7%
Display and Graphics 8%+ 8.8%
Consumer and Office 5-8% 5.0%
Safety, Security and Protection 8%+ 10.4%
Services
Electro and Communications 5-8% 8.0%
3M 5-8% 5.9%

*Local Currency Sales Growth = Volume + Price

Strong Contributions Across the Portfolio


M&A Strategy
Strategic Intent Economic Needs
► Fits tightly defined strategic needs in the core ► Margin dilutive acquisitions will
or near adjacencies contribute to positive value creation
through higher growth
► Majority will be bolt-on acquisitions placed in
markets we understand ► Price will always be a factor

► Channels of distribution will be familiar ► Tail liabilities will be scrutinized

► The acquisition may bring technology, market ► EPS accretive or neutral end of year 1
access or scale exc. purchase accounting
► International acquisitions will mostly be aimed ► Majority of acquisitions will be EP
at gaining market access accretive by the end of year 3
► While top brands are preferred, some will be
appropriately chosen secondary brands


Stepped Up M & A Activity in 2006
Display & Graphics Healthcare
Electro &
Communications

Acquired Annual Sales of $350MM- $400MM
Safety, Security, & Protection Svcs
at an Investment of $500MM-$600MM

Industrial & Transportation

Consumer & Office


EBO Adjacencies
“EBOs” are Emerging Business Opportunities used to drive faster growth
Concept
Enhanced focus on emerging business opportunities with high growth
►

Concept used where capability exists with ready adjacencies but no current focus
►

Methodology
Initial EBO Candidates Collect all related activities into a single entity
►
► “Housed” in a Segment
Filtration
1
►
► Leader reports directly to the EVP
Track & Trace
2
►
► Acquisitions and additional resources provide
support
Energy & minerals extraction
3
►
► Growth and speed are the focus
Food Safety
4


The Opportunity of International Growth
International growth rates 2X – 3X US
►

61% of 3M sales are outside the
►
United States today, ≈ 70% in 2011
Focus is on BRICP; double investments there
►

China growing ≈ 35% CAGR, expecting
►
circa $1Bn sales in 2006
India growing at 40%+ CAGR
►

Double digit growth rates in E. Europe and LA
►

W. Europe grows faster on localization strategies
►

Acquire local brands and manufacturing as well as
►
organic expansion


Summary- Bringing it all Together


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
► Medical, Dental & Orthodontics
Tactics ►Divestiture of Pharmaceuticals
Tactics
► Display & Graphics (Optics & Films)
►Examine others for divestiture
► Track & Trace (RFID/Wireless/GPS)
► Wider Offerings; White Space

Organic Selected
Growth Divestiture

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 share buybacks
with higher growth, cost and Tactics
Tactics revenue synergies


Increasing Shareholder Value At Peer Margins
1.4 9.0%
$10.0 28%

8.0%
1.2
24%
$9.0
7.0%
= 2.1% margin
1.0
20%
6.0%
$8.0

0.8
16%
$ B illio n s

$ B illio n s
5.0%

P e rc e n t

P e rc e n t
AGR
3% C
$7.0
11-1 = 1% more margin 4.0%
0.6
12%

$6.0 3.0%
0.4
8%
2.0%
$5.0
4% 0.2
1.0%

$4.0 0% 0.0 0.0%
2006e 2007e 2008e 2001 2005 2008e

Op. Inc. Traditional Op. Inc. Subsidiary Op. Inc. Margin ROIC Overhead Cost % to Sales

Assumptions: traditional business LC growth of 6.5%; incremental margin of 40%; additional growth of 0% ’06; 1.5% ’07; 2.0% ’08 at 15% op. inc.

Additional Growth at Peer Margins = Greater Shareholder Value

Balanced Model Approach To Increase
Shareholder Value
Investing in traditional core markets
►
1
● Local-currency growth of 5% to 8%
● Operating income growth 10%+
Intelligently pursuing additional growth elsewhere in the pyramid
►
2

● Additional local-currency growth of 2% to 4%
● At peer margins – as a minimum
M&A strategy to improve core growth and fill gaps
3
►
● Aligned with strategic intent
Increased share repurchase authorization
►
4

Higher Growth - Higher Earnings - Higher P/E

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
► Move towards higher relative share
in smaller markets
► Heavy up on globalization

► Technology remains part of who
we are
Investment
Organic Sales EPS
► Careful tradeoffs of share and Returns
Growth Growth
growth to maintain value creation
momentum ►Technology lattice protects the downsides and
ensures upsides
► Building on brands, technology, ►Investment through the economic cycles
people, service & distribution ►Driving growth as a way of doing business


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