Mike Roman Chief Executive Officer

Transcription

1 Mike Roman Chief Executive Officer Bank of America Merrill Lynch Global Industrials Conference March 21, 2019

2 Forward looking statement This presentation contains forward-looking information about 3M's financial results and estimates and business prospects that involve substantial risks and uncertainties. You can identify these statements by the use of words such as "anticipate," "estimate," "expect," "aim," "project," "intend," "plan," "believe," "will," "should," "could," "target," "forecast" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or business plans or prospects. Among the factors that could cause actual results to differ materially are the following: (1) worldwide economic, political, and capital markets conditions and other factors beyond the Company's control, including natural and other disasters or climate change affecting the operations of the Company or its customers and suppliers; (2) the Company's credit ratings and its cost of capital; (3) competitive conditions and customer preferences; (4) foreign currency exchange rates and fluctuations in those rates; (5) the timing and market acceptance of new product offerings; (6) 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); (7) 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; (8) generating fewer productivity improvements than estimated; (9) unanticipated problems or delays with the phased implementation of a global enterprise resource planning (ERP) system, or security breaches and other disruptions to the Company's information technology infrastructure; (10) financial market risks that may affect the Company s funding obligations under defined benefit pension and postretirement plans; and (11) 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, 2018, and any 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 "Cautionary Note Concerning Factors That May Affect Future Results" and "Risk Factors" in Part I, Items 1 and 1A (Annual Report) and in Part I, Item 2 and Part II, Item 1A (Quarterly Reports). 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. Note on non-gaap financial measures This presentation refers to certain non-gaap financial measures including free cash flow, free cash flow conversion, return on invested capital (ROIC). These non- GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Reconciliations of these non-gaap financial measures to the most directly comparable GAAP financial measures can be found in the appendix to this presentation. 2

3 Agenda The 3M Value Model Priorities New alignment Financial objectives 3

4 The 3M Value Model Vision V i s i o n Strengths Technology Manufacturing Global Capabilities Brand Priorities Innovation Portfolio Transformation People and Culture Values V a l u e s 4

5 Our vision Vision Strengths Priorities Values 5

6 Our strengths: the power of 3M Customer Insights Customer Inspired Innovation Fundamental Strengths Unique and differentiated value Customer First End-user focused Technology Manufacturing Global Capabilities Brand Vision Strengths Priorities Values 6

7 Our priorities Delivering on our commitments for growth, value, and returns Portfolio Transformation Innovation People & Culture Fully leveraging our 3M value model Activating our transformation advantages Realizing the full potential of our innovation model Developing our people and advancing our culture Vision Strengths Priorities Values 7

8 Our values Leadership Behaviors Play to win Prioritize and execute Foster collaboration and teamwork Develop others and self Innovate Act with integrity and transparency Code of Conduct: Be 3M Be good Be honest Be fair Be loyal Be accurate Be respectful Inclusion Diversity Sustainability Respect, encourage, challenge Vision Strengths Priorities Values 8

9 Increasing customer value and shareholder returns Top priorities to delivering our overall plan and in 2019 Portfolio Transformation 9

10 Aligning businesses to customers and markets FROM Health Care Safety & Graphics Industrial Electronics & Energy Consumer TO Health Care Safety & Industrial Transportation & Electronics Consumer 10

11 New structure supports and advances our four priorities Portfolio, Innovation, Transformation, and People and Culture Enables business groups to better serve global markets and customers, and accelerate growth and operational efficiency Supports our global growth strategy of connecting directly with customers while leveraging go-tomarket models that will deliver where, when and how our customers want Enables consolidation of benefits from Transformation progress, while strengthening and maximizing value across our portfolio Strengthens innovation through better prioritization and alignment to Priority Growth Platforms 3M will start reporting financial results under new structure starting with the second quarter 2019; first quarter 2019 financial results will be reported under our current structure 11

12 Safety & Industrial Advancing safety and industry performance 2018e sales $12B Spec-in, regulated, consumables Primarily sold through channel partners including ecommerce Business includes: Personal safety Adhesives and tapes Abrasives Closure and masking Electrical markets Automotive aftermarket (excluding retail car care) Roofing granules 12

13 Transportation & Electronics Advancing transportation and a connected world 2018e sales $10B Design-in, spec-in, regulated Direct to OEMs, tier suppliers, converters or channel partners Business includes: Electronics-related (display materials; electronics materials) Automotive and aerospace Commercial solutions Advanced materials Transportation safety 13

14 Health Care Improving the quality and delivery of health care 2018e sales $7B Regulated, consumables Primarily sell direct to healthcare professional or channel partners Business includes: Medical solutions Oral care Separation and purification sciences Health information systems Drug delivery Food safety 14

15 Consumer Bringing 3M to the hearts and minds of customers 2018e sales $5B Consumables Predominantly sell through consumer retail, B2C and omnichannel Business includes: Home improvement (including retail car care) Stationery and office Home care Consumer health care 15

16 Increasing investment in Priority Growth Platforms Wound Care Population Health Automotive Electrification Connected Roads Food Safety Biopharmaceutical Filtration Connected Safety Structural Bonding Surface Finishing Air Quality Grid Modernization Custom Orthodontics 16

17 Balanced capital allocation plan Maintaining discipline and flexibility Growth investments ~30% Dividend ~30% Flexible deployment ~40% R&D ~6% to sales Cap-ex 5.0% 5.5% to sales 61 years Consecutive annual increases 100+ years Paid dividends without interruption Expected to grow in-line with earnings over time Acquisitions Highest priority for flexible deployment Share repurchase Maintain minimum repurchase threshold Based on relative value; influenced by other demands on capital Note: capital allocation percentages based on mid-point of plan 17

18 Long-term financial objectives plan: continuity in realistic targets Organic localcurrency growth Earnings per share growth 3% to 5% 8% to 11% Return on invested capital Free cash flow conversion 20% 100% Refer to appendix slide deck for the definition and calculation of ROIC and free cash flow conversion 18

19 Organic local-currency growth targets Strong, market-leading global businesses average 3% to 5% Health Care Safety & Industrial Transportation & Electronics Consumer 4% to 6% 3% to 5% 2% to 6% 2% to 4% Organic local-currency growth = organic volume + price 19

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21 Reconciliation of GAAP amounts to free cash flow conversion ($M) Major GAAP cash flow categories: Year 2018 Operating cash flow $6,439 Investing cash flow $222 Financing cash flow ($6,701) Free cash flow (non-gaapmeasure): Operating cash flow $6,439 Planning Estimates ($B) Free cash flow (non-gaap measure): Year 2019 Operating cash flow $7.7 to $8.4 Purchases of property, plant and equipment ($1.7 to $1.9) Free cash flow $5.8 to $6.7 Net income attributable to 3M $6.1 to $6.4 Free cash flow conversion 95% to 105% Purchases of property, plant and equipment ($1,577) Free cash flow $4,862 Net income attributable to 3M $5,349 Free cash flow conversion 91% Free cash flow and free cash flow conversion are not defined under U.S. generally accepted accounting principles (GAAP). Therefore, they should not be considered a substitute for income or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income attributable to 3M. The Company believes free cash flow and free cash flow conversion are meaningful to investors as they function as useful measures of performance and the Company uses these measures as an indication of the strength of the Company and its ability to generate cash. 21

22 Reconciliation of GAAP amounts to return on invested capital ($B) Return on invested capital (non-gaap measure): Year 2018 Results Planning Estimates ($B) Return on invested capital (non-gaap measure): Year 2019 Net income including non-controlling interest $5.4 Interest expense (after-tax)* $0.2 Adjusted net income (return) $5.6 Net income including non-controlling interest $6.1 to $6.4 Interest expense (after-tax)** ~$0.4 Adjusted net income (return) $6.5 to $6.8 Ave. shareholder s equity (including non-controlling interest) $10.4 Ave. short-term and long-term debt $14.9 Ave. invested capital $25.3 Return on invested capital 22% Ave. shareholder s equity (including non-controlling interest) Ave. short-term and long-term debt Ave. invested capital Return on invested capital $10.0 to$11.0 $17.0 to $18.0 $27.0 to $ % to 25% *Effective income tax rate used for interest expense 23.4% **Effective income tax rate used for interest expense 20% to 22% Return on Invested Capital (ROIC) is not defined under U.S. generally accepted accounting principles. Therefore, ROIC should not be considered a substitute for other measures prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines ROIC as adjusted net income (net income including non-controlling interest plus after-tax interest expense) divided by average invested capital (equity plus debt). The Company believes ROIC is meaningful to investors as it focuses on shareholder value creation. 22