Lehman Brothers 2007 Industrial Select Conference

© 3M 2007 All Rights Reserved

George W. Buckley

Chairman, President and Chief Executive OfficerFebruary 6th, 2007


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 December 31, 2005 and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006, June 30, 2006 and September 30, 2006 (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 news release is as of the date indicated. The company assumes no obligation to update any forward-looking statements

contained in this news release as a result of new information or future events or developments.


Topics We Will Address Today

Historical performance1

Describing 3M’s strategy for growth through Customer Value Enhancement

Continued commitment to operational excellence

2

3

4 Summary – bringing it all together

Plans to Drive Higher Earnings & P/EPlans to Drive Higher Earnings & P/E


Historical Performance


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

Total LC Growth, Margins, EPS & ROIC

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2001 2002 2003 2004 2005 2006

Total LC Growth

CAGR = 5.3%

14%

16%

18%

20%

22%

24%

2001 2002 2003 2004 2005 2006

Operating Margin+6.5 pts

15%

17%

19%

21%

23%

25%

2001 2002 2003 2004 2005 2006

ROIC %

+6.7 pts

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

2001 2002 2003 2004 2005 2006

EPS

CAGR = 17.7%


Productivity - Cost Out & Leverage

► > 55,000 total employees trained in Six Sigma

► > 20,000 projects closed► >15,000 projects underway

globally► Lean methods being added to

the Six Sigma toolbox ► Supply chain and working capital

our next target area

Productivity Improvement Remains A Critical FactorProductivity Improvement Remains A Critical Factor

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

2001 20060.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Overhead Cost % to Sales

Overhead Cost Leverage

2.7% of margin

$ B

illio

ns

$311

$212

$232

$264

$292$304

$200

$225

$250

$275

$300

$325

2001 2002 2003 2004 2005 2006

Sales/Employee (000’s)


Embracing Our Customers


Customer Value Enhancement

3M’s Value Proposition to Customers

Innovative and

Practical Solutionsfrom a Diversified Technology Company


Customer Value Enhancement3M’s Exceptional Value Drives Share Gain

Price

Customer Perceived Value

Competitors

3M

Price-Value Flexibility

3M Market Share Gains Through CVE

3M Secondary

Brands

Competition over-pricing and under

delivering


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

► Enhancing Our Customers’ Competitiveness● By using innovation to provide performance-differentiated products● By making our customers more efficient in their competitive battle

► Building Our Customers’ Business Returns● 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● By providing better brand recognition

Customer Value Enhancement

1

3

2


Customer Value EnhancementCommunicating Our Value Position

Customers

50 Million Web Contacts

Thousands of Annual Customer

Lab Visits

1,700 Technical Service Employees

2,200 Customer Service Employees

160 Customer Contact Employees

7,000 Design for Six Sigma Trained

15,000 Sales and Marketing Professionals

>200 Six Sigma Projects at the Customer

Innovative Two-Way Process for Addressing Customer Needs


3M Solves Customer Needs in Multiple Markets

Adhesives

Abrasives

Ceramics

Electronic packaging

Micro replication

Optics

Specialty materials

Non-woven Materials

Polymer melting

3M Technology Platforms

Architecture & Const.

Auto. & Aerospace

Electronics Manuf.

Graphic arts

Health care

Home and Leisure

Industrial OEM

Consumer & Office

Safety & Security

Telecoms and Utilities

Markets


Customer Value Enhancement; Making Customers More Efficient

Transforming OrthodonticsSignificantly reduces treatment time

Reducing Capital Needs In The Power Industry

Improving Safety With Less Investment

Enhancing Security Systems

2-3x kVA transmission with same infrastructure

Eliminates need for additional lighting


Customer Value Enhancement;Enhancing Competitiveness Through Superior Products

Enhancing Display Performance

Uniform brightness plus significant power reduction

Building Premium Margin In DIY

Improving Physicians' Analysis

Improves performance and productivity for professionals and DIYers

Ambient noise reduction/18x amplification


3M’s Subsidiary Network: A Platform For Customer Value Enhancement

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


3M - LG.Philips (LPL) Global Collaboration

Borderless Customer Success• Dedicated Technical & Business Teams Support

LPL Global Operations in Korea, China & Poland• 3M Korea Transnational Account Team Supports

3M China & 3M Poland teams and LPL Global Suppliers

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• Timely Technical Service Supports on Site• Quality Engineers on LPL Sites • Quarterly Lab-to-Lab Meetings• Collaboration for New Product Development• Testing, Optical Simulation & Design Supports• 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

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


Start By Growing The Current Core

Imagine, dream and inventBeat competitors to the futurePlan for cannibalizationLicensing as a routeAvoid NIH syndrome

Invent a New Future

Build Broad LongTerm Competencies

Develop broad based long-term capabilitiesAcquire supporting core technology with quality brandsBuild volume and scale

Build key customer partnershipsCustomization as toolConstant reinvention; drill downLocalization and differentiation

Grow the Current Core

Extend The Core

Build first where we’re strongGet scale & build relative shareFill in the product “white spaces”Become important to customersUse dual brandingInternational product localizationLocal acquisitionsPrivate labeling


Adjacency Mega Trends Seeded by small M&AElectronics and softwareTargeted areas

RFID/Wireless/GPSMinerals extractionOil & GasFood safety

And Then Extend It With Simple Concepts

Grow the Current Core Business

Build New Business via EBOs

MarketExpansion

Complementary Acquisitions

International Growth

Defend and extend the coreBuild scaleBuild relative shareEmphasize localizationDisruptive technologiesBuild long term competency

Follows core strategySupports adjacenciesMostly tuck-ins

BRICPEastern EuropeWestern EuropeJapanAustralasiaGrowth everywhere

Customer Focus Critical on All Four FrontsCustomer Focus Critical on All Four Fronts


Growth Needs To Be Built On A Firm Foundation

1. Cost .. The ultimate competitive deadly weapon

2. Technology and innovation … Being better than the competition

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

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

5. Marketing and brand management … just being better

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

How We Compete ……. Six Competitive Platforms

1

2

3

4

5

6


Near Term Actions To Drive Growth

► Capital Investments in the Core● 18 plants or major plant extensions under construction, nine in the Americas, four

in China, one in India, one in Russia, two in Poland and one in Korea● Designed to ease capacity limits on growth; begin to come on line Q3 2006● Investments also designed to relive constrained supply chain

► 2006 Acquisitions● Mostly small tuck-ins● Filling in product white space (Omni) ● Technology enhancements (Biotrace, Brontes and others in train)● Capacity expansions (Nylonge in USA, one in Thailand)● Reinforcing the core (North Star adhesives)● Overseas distribution and market access


China KoreaJapan

TaiwanIndia Singapore

Italy

GermanyUnited Kingdom

BelgiumPoland

Russia

Turkey

Manufacturing Capacity Expansions In Progress

China Medical Mfg

Korea OH&ES

China GuangZhou

China CHJ III Mfg

China Suzhou LCD II

Russia Mfg

Poland Optical

Poland Tapes

India Industrial Tapes


Manufacturing Capacity Expansions In Progress

Brazil

Mexico

Canada

USA

Filtrete ManufacturingJuarez, Mexico

Medical: M6 Solvent Coater – Brookings, SD

DDSD: NorthridgePackaging Line #3

CHIM: LFBMF LinesAberdeen, SD

Automotive Acrylic TapeAberdeen, SD

CHIM LC Tape, Canada

PolyesterGreenville, NC

D11 MOF LineDecatur, AL


M&A Strategy

► Fits tightly defined strategic needs in the core or near adjacencies

► Majority will be bolt-on acquisitions in core markets we understand

► Familiar channels of distribution ► The acquisition may bring technology,

market access, line extensions or scale► International acquisitions will mostly be

aimed at gaining market access ► While top brands are preferred, some will

be appropriately chosen secondary brands

► Margin dilutive acquisitions must contribute to positive value creation through higher growth

► Price will always be a factor► Tail liabilities will be scrutinized► EPS accretive or neutral end of year

1 exc. purchase accounting► Majority of acquisitions will be EP

accretive by the end of year 3

Strategic IntentStrategic Intent Economic NeedEconomic Need


Stepped Up M & A Activity in 2006

Industrial & Transportation

HealthcareDisplay & Graphics

Consumer & Office

Electro & Communications

Safety, Security, & Protection Svcs

Acquired Annual Sales of $500MM- $550MM at an Investment of ~$900MM


Differentiated Brands & Technology to Grow Category

Selective privatelabeling or

manufacturing JVs to support partnership

customers

Principal brands and

differentiated features

Use Secondary

Brands / Technologies

Industrial Consumer

Diamond Grade™

High Intensity Grade

Engineering Grade


Expanding with Acquisitions and EBOs

3% - 5% growth20% leverage

Add Secondary Customer Segment

2 %- 4% growth at 15% peer margins

Traditional 3M Primary Customer Segment

5% - 8% growth40% incremental margin

No Participation in Low Value Added Price Focused Segments

Customer Value EnhancementLeveraging Brands and Improving our Presence

International Expansion Occurs in All Three Dimensions


6 Qtr Average Organic LC Growth

9.1%8%+Safety, Security and Protection Svcs5.7%5 - 8%Electro and Communications5.9%5 – 8%3M Total, ex-Pharma

5.0%5 - 8%Consumer and Office7.8%8%+Display and Graphics6.9%8%+ *Health Care, ex-Pharma4.2%5 - 8%Industrial and Transportation

Near-Term Local Currency Growth Targets

Strong Contributions Across the Portfolio

8.0%6 – 10%3M Total Incl. Acq., ex-Pharma (2007 Guidance)

* Includes approximately $100 million of sales due to pharma supply agreement


EBO Adjacencies in High Growth Spaces

Concept► Enhanced focus on emerging business opportunities with high growth► Concept used where capability exists with ready adjacencies but no current focus

“EBOs” are Emerging Business Opportunities used to drive faster growth

Methodology► Collect all related activities into a single entity► “Housed” in a Segment► Leader reports directly to the EVP► Acquisitions and additional resources provide

support► Growth and speed are the focus

Initial EBO Candidates► Filtration

► Track & Trace

► Energy & minerals extraction

Food Safety

1

2

3

4


Summary- Bringing it all Together


Coordinated Value Creation StrategyStrategy ►Review BUs by key metrics

including growth and capital efficiency

►Work in high growth spaces with EPS targets. Value creation orientation. Less margin obsessive

Strategy ► Increase leverage on the balance sheet. Consider dip below AA rating to A

Near TermTactics

►Put review metrics in place►Divestiture of Pharmaceuticals►Examining others for divestiture

►Use cash flow for investment, acquisitions and share buybacks

Near TermTactics

Near TermTactics

►Safety & Protection►Medical, Dental & Orthodontics►Display & Graphics (Optics & Films)►Track & Trace (RFID/Wireless/GPS)

Near TermTactics

►Focus on adjacent segments with higher growth, cost and revenue synergies

Strategy ►Focus on mega trends, scale and relative share in core businesses

Strategy

Selected DivestitureSelected

DivestitureOrganic Growth

Capital StrategyCapital

StrategyAcquisitionsAcquisitions


Share Repurchases

$0

$500

$1,000

$1,500

$2,000

$2,500

2001 2002 2003 2004 2005 2006

Supporting Investments and Cash Back to Shareholders

For The Period 2001-06:► $8.9 billion in share repurchases► $6.7 billion in dividends paid► Dividend CAGR of 9%► Returned ~103% of reported net

income via dividends/share repurchases

Billions

Dividends

$0$300$600$900

$1,200$1,500

2001 2002 2003 2004 2005 2006

Billions


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

►Move towards higher relative share in smaller markets

►Heavy up on globalization

►Technology remains part of who we are

►Accelerate M&A to improve core growth and fill gaps

►Careful tradeoffs of share and growth to maintain value creation momentum

►Building on brands, technology, people, service & distribution


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Lehman Brothers 2007 Industrial Select Conference

Economy & Finance