MMM Investor Day Summary: no big departure from the prior 5-year plan, but incrementally more positive

3M held its annual Investor Day late last week. This was the new CEO Mike Roman’s first Investor Day at the helm of the company. The 5-year 2019-2023 plan overall didn’t change much.

The management team adjusted its total organic growth up from 2-5% to 3-5%, outpacing the global economic growth of 2-3%. Each segment’s growth expectations are below:

o Consumer 2-4%

o Health Care: 4-6%

o Safety & Graphics: 3-6%

o Industrial 3-5%

o Electronics & Energy 2-6%

§ Most product pruning has been accomplished, so the focus is now on the 12 priority opportunities: wound care, population health, automotive electrification, connected road, food safety, biopharma filtration, connected safety, structural bonding, surface finishing, air quality, grid modernization, custom orthodontic.

§ 200-300bps operating improvement (thanks to volume leverage, portfolio rationalization, product innovation) is better than the prior 5 year plan.

§ EPS growth CAGR of 8-11% (unchanged): contributing to EPS growth are: 3-5% from organic growth, 1-3% from M&A, 2-3% from margin expansion and finally 0-2% from tax & other

§ ROIC of 20% (unchanged)

§ $60-80B in cash for capital deployment: 30% towards growth investments, 30% for dividends, 40% for M&A and share buybacks

§ The company wants to target acquisitions in the health care and industrial segments

The management team initiated its 2019 guidance:

§ 2-4% organic growth, from volume & price

§ Raw materials and interest expenses will be a headwind

§ $2-4B share buyback

§ EPS growth of 7-11%, driven by price increases

§ ROIC of 22-25%

Some ESG comments were presented by the new CEO, and highlight a focus on environmental and social goals:

[tag MMM] $MMM.US

Julie S. Praline

Director, Equity Analyst

Direct: 617.226.0025

Fax: 617.523.8118

Crestwood Advisors

One Liberty Square

Suite 500

Boston, MA 02109

www.crestwoodadvisors.com