3M company

Savino Bartolomeo

Paula Biste

Camesha Cody-Vera

Renan Dault

Mathieu Picca

Lucas Pilleri

Company Profile

Capital Structure

Dividend Policy

Valuation

23.11.2012 Strategic Finance 2

3M is a diversified technology company serving customers and communities with innovative products and services.

More than 35 business units, organized into six businesses:

Consumer and Office

Display and Graphics

Electro and Communications

Health Care

Industrial and Transportation

Safety, Security and Protection Services


Year-end 2011: Global sales: $30 billion International (non-US) sales: $19.5 billion (66% of

total) Operations in more than 65 countries Products sold in nearly 200 countries 84,000 employees globally

Five-year financial objectives: 9% to 11% growth in earnings per share 4% to 6% organic revenue growth More than 20% return on invested capital 100% free cash flow conversion


Innovation ◦ Development of new products

◦ About 30% of 3M‘s total sales are currently derived from products introduced within the last 5 years.

◦ 3M is one of the most innovative companies in the world, after Apple and Google.


Global expansion: ◦ Emerging countries as a long-term growth opportunity

◦ Planed investment in China: $50 million in the next five years

◦ Increase annual sales in China from 15% to 20%

Year Mil. USD % of sales revenue

2011 1,570 5.30

2010 1,434 5.38

2009 1,293 5.59

2008 1,404 5.56

2007 1,368 5.50

R&D Investments

Rising energy and facility costs: Negative effect on prices of raw materials, increasing cost and

reducing operating margins

Environmental regulations Increase of “environmental remediation” costs, recorded at

$28 Million by December 31 2011 Development of additional Prevention Programs

Currency risk Currency exchange rates volability may affect the achievement

of projected growth rates in sales and earnings.

Economic Conditions Weak economic conditions in certain markets, resulting in

lowering of inventory levels by customers.


23.11.2012 7 Strategic Finance

26

68

6

27

71

2

Eurobond

USD fixed

Other borrowing

0 20 40 60 80

Long Term Debt

2010

Long Term Debt

2011

At December 31 (USD Mil.) 2011 2010

Total debt 5,166 5,452

- Cash, cash equivalents and marketable securities 4,576 5,018

= Net Debt 590 434

3800

3850

3900

3950

4000

4050

4100

2009 2010 2011

Free Cash Flow M

illion $

CAGR=-1,7%

• The reason why the Free Cash Flow decreased depend on the Capital spending. Capital Spending increased to $1.379 billion in 2011, compared to $1.091 billion in 2010 and $903 million in 2009. • In 2011, a large portion of the investment is addressing supply constraints in a number of businesses with significant growth potential.


4700

4800

4900

5000

5100

5200

5300

2009 2010 2011

Cash Flow from Operating Activities

Million $

CAGR=3,4%

In 2011, cash flows provided by operating activities increased $110 million compared to 2010. The main positive contribution to operating cash flows related to year-on-year increases in net income including noncontrolling interest.

3M maintain high cash balances, because cash is a risk-free asset that reduces the average risk of the firm’s assets


0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

0,4

0,45

31 Dec 2009 31 Dec 2010 31 Dec 2011

0,43

0,34 0,33

Debt/Equity Ratio Debt/Equity ratio indicates what proportion of equity and debt the company is using to finance its assets.

This mean that 3M is a low risk for shareholders because it’s mainly financed from equity.


Cash, cash-equivalents and marketable securities at December 31, 2011 totaled approximately $4.6 billion, helped by cash flows from operating activities of $5.3 billion. The Company has sufficient liquidity to meet currently anticipated growth plans, including capital expenditures, working capital investments and acquisitions.

High Cash FLow

Less Debt

Flexibility


Institutional Investors:

Active involvement and influence in corporate governance

Influencing the conduct and capital requirements of listed companies.

Top institutional shareholder owns 4,85%

71%

29%

0%

Institutions

Mutual Funds

Insiders


Consistent increase of dividends for 51 consecutive years. Annual increase in its EPS from 1999 to 2007. Slow dividend growth during tough economic conditions,

while compensating with stronger dividend growth during boom times.

3M’s dividend is safe, given the strong cashflows that the company generates from its diversified businesses.

5-Year average payout ratio of 39%


0

1

2

3

4

5

6

7

2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Tit

olo

asse

EPS (USD)

Dividends (USD)

The company has recovered

from 2008-2009 crisis and

reported earnings 4.5% higher

than 2007 compared with

2011.

Positive cash flow, necessary

to pay its dividends and make

acquisitions.

Declining profit margins.

The perspective of the rising

energy costs, 3M has to find

alternatives to keep cost

structure stable otherwise this

will influence future cash flows

and in long term the dividend

policy.


Thank you for your attention!


Economy & Finance

3M company