Patrick D. Campbell Senior Vice President and Chief Financial Officer

Accelerating Growth To
Enhance Shareholder Value

Patrick D. Campbell
Sr. Vice President And
Chief Financial Officer

3M Investor Meeting 2006 © 3M 2006 All Rights Reserved

The Principal Questions We Will Answer Today

Can we accelerate growth?

Are our current margins sustainable?

How will our more aggressive growth plans
impact ROIC?

How will we deploy the balance sheet?

Plans to Drive Higher Earnings & P/E

Historical Performance


Total LC Growth, Organic LC Growth, OI & Margins
$19,000
$20,000
Total LC Growth Organic LC Growth
$18,400
$19,000
%
.8 %
=4 .8
$17,800
=3
R
$18,000
GR
AG $17,200
CA
C
$17,000 $16,600
$16,000
$16,000
2001 2002 2003 2004 2005
2001 2002 2003 2004 2005

$5,000
24%
Operating Income Operating Margin
$4,400
ts
22%
6% p
6.4
=1
$3,800
GR
CA 20%
$3,200

18%
$2,600

16%
$2,000
2001 2002 2003 2004 2005
2001 2002 2003 2004 2005

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


EPS, EP, Free Cash Flow & ROIC
$2,000
$4.00
EPS Econ Profit ($MM)
$3.50 %
% 6
8
=2
$1,500
=1
GR
R
$3.00 AG CA
C
$1,000
$2.50

$2.00 $500
2001 2002 2003 2004 2005 2001 2002 2003 2004 2005

25%
$4,000 ROIC %
FCF
pt s
2%
=1 6. 2
$3,000 AG R
C
20%
$2,000

$1,000 15%
2001 2002 2003 2004 2005 2001 2002 2003 2004 2005

Profitability & Asset Efficiency Improving Economic Profit & ROIC


Organic LC & EPS Growth
LC & EPS Targets

Organic LC Growth EPS Growth
12% 24%
22%
10% 20%
21% 21%
21%
18%
8%
16%
8.1% 18%
6% 14%
12% 14%
5.5%
4% 10%
4.5%
4.1%
8%
2%
6%
1.2%
0% 4%
2002 2003 2004 2005 Q1 '06 2002 2003 2004 2005 Q1 '06

Consistently Achieving Financial Goals While
Growth Has Been Inconsistent

Operating & Incremental Margins
3M Peer Average

Operating Margins Incremental Margins
>100%
25% 80%
70%
20%
60%
50%
15%
40% 44%
43%
10% 37%
30%
29%
20% 25%
5% 21%
16% 15%
10%
5%
0% 0%
2001 2002 2003 2004 2005 2002 2003 2004 2005 '01 - '05 Incr.
Chg.
*Peers include Avery Dennison, Danaher, Dentsply, DuPont, Eaton, Ecolab, Emerson, GE,
Honeywell, ITW, J&J, P&G, SPX, Textron, Tyco, UTX. Source: Factset and Company Filings

What Matters is the Conversion of Volume to Profit


How We Achieved These Results

Volume

Mix

Productivity
– Cost out
– Overhead cost management


Improving Sales Mix
Margin > Corp. Avg. Margin < Corp. Avg.

2005
2001
70%
38% 30%
$6B Sales $6B Sales

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

High Margin Sales Growth + Productivity Gains =
Quality Earnings Growth

Productivity - Cost Out & Leverage
3M’s Six Sigma Journey
2001 2002 2003 2004 2005
Six Sigma Learn and Accelerate
DMAIC DMAIC in 3 M DNA
Build Critical Impact
Mass

Learn & Build Accelerate Impact
DFSS
Indirect Costs Critical Mass

Sourcing Add Portfolio Management and Lean
eP3
• Globally, >40,000 salaried employees trained globally in the Six Sigma way
of doing business.
GBP
• More than 20,000 proje cts closed
• Over 16,000+ DMAIC projects underway globally
2001 2002 2003 2004 2005
• 480+ customer projects in place globally

$325
$3.0 10.0%
Sales/Employee $311
Overhead Cost Leverage
$2.5 $297
8.0% $300
$2.0
$ Billions

$277
6.0%
$275
$1.5
2.1% of margin $255
4.0%
$250
$1.0
$234
2.0%
$0.5
$225
$0.0 0.0%
2001 2005 $200
Overhead Cost % to Sales 2001 2002 2003 2004 2005

Initiatives Contributed > $400MM Per Year Improvement


We have built an enviable competitive and
financial position but…..

We need to accelerate growth!


Relative Value Of Growth
For Different Companies
MMM 5.2
GE 11.4
12.0
IBM 3.5
DHR 5.1
PG 7.2
10.0
rowth

XOM 2.1
GM 2.4
Relative Value of G

W MT 1.6
8.0
#REF! #REF!
#REF! #REF!
#REF! #REF!
6.0

4.0

2.0

0.0
MMM GE IBM DHR PG XOM GM WMT
Company Ticker

Growth 5X
1% pt. LT sustainable growth rate = $10B
Margin
1% pt. more sustainable margin = $2B
Gordon Growth Model = FCF/(WACC – Growth)

Expanding Our Long Term Growth Rate
Creates More Value Than Margin Expansion
Source: HBR April 2005

Modifying Our Focus – Growth And Productivity
Future
Past

Productivity Growth

Need to accelerate focus on growth and leverage our
investment in productivity tools to maintain momentum
Going Forward Equal Emphasis will be placed on
Achievement of Both Top and Bottom Lines

What’s Changed
Change in senior leadership compensation
program
– ’04 - 60% Economic Profit Growth/40% Working Capital
– ’05 - 60% Economic Profit Growth/20% Working
Capital/20% Organic Growth vs. IPI
– ’06 - 60% Economic Profit Growth/40% Organic
Growth vs. IPI

New compensation plans for businesses and sales
organization
Leadership alignment with technical community

Summary Target Growth Picture

3% - 5% sales growth in market
adjacencies, acquisitions and
5% - 8% sales growth in
EBOs, 20% incremental margin;
traditional 3M core; 40%
using new or primary brands
incremental leverage;
using primary brands

International expansion
occurs in all three
dimensions.
Traction and momentum
2% - 4% sales growth in will occur at different rates.
subsidiary markets, at
peer margins; using
secondary brands


Growing The Traditional Businesses

using primary brands International expansion
occurs in all three
dimensions.
Traction and momentum
will occur at different rates.

Leveraging Growth in the Core


Growing The Traditional Businesses
12%
10% +
10%

8%
5%-8%
LC
6%
Growth
4%

2%

0%
LC Growth OI Growth

Leveraging Existing Asset Base to Drive Operating Income


Near-Term Organic Local Currency
Growth Target
Organic
LC* Target Last 4 Qtr. Avg.
5-8% 4.2%
Industrial and Transportation
Business
6-8% 4.0%
Health Care Business (ex. Pharma)
8%+ 6.7%
Display and Graphics
5-8% 5.7%
Consumer and Office
8%+ 10.0%
Safety, Security and Protection
Services
5-8% 7.1%
Electro and Communications
5-8% 5.6%
3M

*Local Currency Sales Growth = Volume + Price

Strong Contributions Across the Portfolio


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 100%+ 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


Productivity Continues
3M’s Six Sigma Journey
2001 2002 2003 2004 2005 2006
Learn and Accelerate
DMAIC DMAIC in 3 M DNA
Six Sigma + LEAN Build Critical Impact
Mass
Learn & Build
Accelerate Impact
DFSS Critical Mass
Indirect Costs
Lean
Add Portfolio Management and Lean

Sourcing eP3 • Globally, >40,000 salar ied employees tr ained globally in the Six Sigma way
of doing business.
• Mor e than 20,000 pr ojects closed
GBP • Over 16,000+ DMAIC pr ojects under way globally
• 480+ customer pr ojects in place globally
2001 2002 2003 2004 2005 2006 2007 2008
$3.0 10.0%
Overhead Cost Leverage
$2.5 8.0%
1% more margin
$2.0
$ Billions

2.1% margin 6.0%
$1.5
4.0%
$1.0

2.0%
$0.5

$0.0 0.0%
2001 2005 2008
Overhead Cost % to Sales

Productivity Continues Through Cost Out & Leverage

Growth And Leverage In Traditional Core
$10.0 28.0%

24.0%
$9.0

20.0%
$8.0
$ Billions

16.0%

Pe nt
rce
$7.0
GR
2% C A 12.0%
10% -1
$6.0
8.0%

$5.0
4.0%

$4.0 0.0%
2006e 2007e 2008e

Op. Inc. Operating Margin ROIC

Assumptions: LC grow th of 6.5%; incremental margin of 40%

Continued Growth and Leverage in the Traditional Businesses

Building Scale To Create Additional Value
incremental leverage

occurs in all three
dimensions.
2% - 4% sales growth in Traction and momentum
subsidiary markets, at will occur at different rates.
peer margins; using
secondary brands

Building Scale to Become More Important in Our Markets
and More Vital to Our Customers


Using Brands/Technology
to Grow Our Market Position
Industrial Consumer
Use principal
brands and
differentiated
technology
or features
Diamond Grade™

Use
Secondary
Brands /
Technologies
High Intensity Grade

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


Future Opportunities to Use Dual Brands/Technology
to Grow Our Market Position
3M ESPE Traffic Safety Systems Commercial Care
Use principal brands and
differentiated technology
or features 3M ScotchBrite™
Stamark™ Purple
Pavement Scouring
Marking
Impregum Pad
Tape
Penta Soft

Use Durable Liquid Niagara™
Secondary Markings
Scouring
Brands / (thermoplastic,
Pad
epoxy)
Technologies
Express
Garant

Selective private
labeling or 3M All Private
Weather Label
manufacturing JVs to Paint
support partnership Scouring
Pads
customers
Palgat Plus

Driving Additional Growth At
Peer Margins
$10.0 28%

24%
$9.0

20%
$8.0
illions

16%

Percent
GR
$7.0
3% C A
$B

11% -1 12%

$6.0
8%

$5.0
4%

$4.0 0%
2006e 2007e 2008e

Op. Inc. Traditional Op. Inc. Subsidiary Op. Inc . Margin ROIC

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

Additional Growth at Peer Margins = Greater Shareholder Value

Capital Expenditures
$1,800
Sub Mkts
$ millions 8%+
$1.7B
5%-8%
$1.5B
$1,500 Traditional
Core

$1,100
$1,200
$938 $943
$900
$677
$600

$300

$0
2003 2004 2005 2006E 2007E 2008E

Capital Expenditures Aimed at Driving Higher Organic Growth

2006 Growth Investments

Dual Brightness Enhancing Films Tegaderm™


Portfolio Management Strategy


Supplementing Growth Through Acquisitions

5% - 8% sales growth in 3% - 5% sales growth in market
traditional 3M core; 40% adjacencies, acquisitions and
incremental leverage EBOs, 20% incremental margin;
using primary brands using new or primary brands

occurs in all three
dimensions.
2% - 4% sales growth in Traction and momentum will
subsidiary markets, at occur at different rates.
peer margins; using
secondary brands


Growth Acquisitions - Screening Criteria

High Growth
Market
Screen Operating
Metrics & Fit
Display & Screen
Valuation
Graphics
Inorganic and
Safety & Double digit growth
Size
Growth Protection Potential for margin
Opportunities improvement
Track & Trace
Potential
Select Healthcare Ability to leverage Mostly Mid-size
across current Targets
segments rather than
customers transformational
Consumer
Integration with Early EPS
Energy
current 3M accretion
innovation
processes


M&A Strategy
Strategic Intent Economic Needs
Will fit tightly defined strategic needs Margin dilutive acquisitions will
in the core or in near adjacencies always contribute to net positive
shareholder value through higher
Majority will be bolt-on acquisitions
growth
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 Will be EPS accretive or neutral
technology, market access or scale end of year 1 excluding purchase
accounting
Acquisitions will have an ethical fit
Majority of acquisitions will be
Some acquisitions will be
Economic Profit accretive by the
international, aimed at gaining
end of year 3
market access
While top brands are preferred, some
will be appropriately chosen
secondary brands


Acquisition Multiples
12%
Medical
Dental/Orthodontics
10% Consumer CUNO/Filtration
Auto Aftermarket Track and Trace
Safety/Protection
8% Consumer Electronics
Sales Growth

Energy
Adhesives/Tape Security
Infrastructure
Abrasives
6% International
Chemical
Auto OEM
4%
Pre-Revenue
2% Emerging
Tech/Bus.

0%
Multiples

End Market Growth Rates Will Determine Deal Multiples

Acquisition Profile
$6.0

$4.0 2.5x
Sales

12x
EBITDA
$2.0

$0.0
'08e Acquired Sales '08e Acquired EBITDA '06e - '08e
Cumulative
Purchase
Price
Assumptions: additional 4% grow th through M&A starting in ’07; year 1 op. inc. 0%; 20% EBITDA thereafter.

Business Model Provides Significant Financial Flexibility


Putting It All Together
($ Billions) 2002 2005 2008e
$16.3 $21.2 $25
Traditional Core
--- --- 1
Subsidiary Mkts
--- --- 2
M&A
$16.3 $21.2 $28
Total Revenue
1.7% 5.8% 12%
% Growth

$3.0 $4.9 $6.8
Operating Income
18.7% 22.9% 24%
% to Sales

$2.34 $4.12 $5.85
EPS
17.6% 15.7% 13%
% Increase

18.9% 22.6% 24%
ROIC

Raising the Bar on Growth While Maintaining
Strong Margins and ROIC

Capital Allocation Model – ’06-’08
Debt
Cash Flow
+
From Ops Capacity
~$4B to $6B
~$14B to $15B

Available Cash
~$18B to $21B

Cap Ex Retirement Net Share Repurchase Dividends
M&A
~$4.0B to Benefits ~$1.5B to $2.0B ~$4.5
~$4.0B to $5.0B
$4.5B ~$0.5B to $1.0B (avoid dilution) Continue
Aligned with
Aligned to Fully Opportunistically pursue historical track
strategic intent
higher growth funded status additional shares record

Maintaining Flexibility for Growth

Balanced Model Approach To Increase
Shareholder Value
Investing in traditional markets
– Local-currency growth of 5% to 8%
– Operating income growth 10%+
Aggressively pursuing additional growth elsewhere
in the pyramid
– Additional local-currency growth of 2% to 4%
– At peer margins – minimum
M&A strategy to improve core growth and fill gaps
– Aligned with strategic intent

Higher Growth - Higher Earnings - Higher P/E


Patrick D. Campbell Senior Vice President and Chief Financial Officer

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