3M Abrasives Driving a New Growth Trajectory. Chris Holmes, Executive Vice President, Industrial and Transportation Business
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1 3M Abrasives Driving a New Growth Trajectory, Executive Vice President, Industrial and Transportation Business Click to edit Master title style Driven to Innovate 2012 Outlook Meeting December 6, 2011 Abrasives 101 Mineral Size Coat Make Coat Backing 2 Flexible abrasives 1
2 Abrasives 101 erformance (log scale) P Abrasive Grain Performance Alumina Zirconia Sol Gel Superabrasives Diamond CBN Conventional grains are controlled for size but not shape Cubitron TM II, a whole new ballgame! Fused Alumina Silicon Carbide $1.00 $10 $1,000 Cost $/lb (log scale) 3 Flexible abrasives Abrasives 101 It s always a trade off between cut and finish Cut Rate Surface Finish i Coarse Grinding De-gating Dimensioning De-burring Defect removal Leveling Grinding De-burring Dimensioning Finishing Cleaning Blending Defect removal Surface preparation Fine Polishing Lapping Finishing Cleaning Defect removal Surface preparation 4 Flexible abrasives 2
3 3M Abrasives Story I Told You in M Started in Abrasives An Old Division 109 years old!! $14B Market growing in every country Abrasives used everywhere Drove operational excellence to rebuild fundamentals Defined our core, focused on strengthening it Acquired small businesses in superabrasives, bonded and surface conditioning Developed a supportive platform with 3M tools Delivered 8 percent sales growth In 4 years had 2X OI%, 2X ROIC, 5X economic profit 3M Abrasive Systems Division Core and Adjacency Growth Map SuperAbrasives Markets And Geography Other Abrasives Tools & 3M Equipment SuperAbrasives GIDCO & DPI Other Power Tools ASD Core PowerTools General Industrial Channel for Abrasive Coated Abrasives Finishing Nonwoven Abrasives Markets Standard needing Productivity Metal Abrasives / Wood / Auto Cutoffs Conventional Unifam Bonded Abr 13 3M All Rights Reserved. 5 3M Abrasives is Growing Acquisition Sales $1B Core $0.5B Growing fast through science and getting even better 6 3
4 Solidify Core Add Technology Bonded New Markets Hard-to-grind surfaces Acquisition R&D Win with Science Target Focus Energize Adjacencies 4 Steps USED to GET BETTER Compelling Vision Plan & Motivation to WIN Exciting Marketing Competitive Mindset Operational Excellence Improve Localize Prioritize Be Credible 7 We Understand Our Environment Depleting Natural Resources Changing Consumption Increased Government Intervention Rapid Pace of Technology Change Shifting Demographics Economic Hangover Global Growing Emerging Inter-Connectivity Markets Eight short- and long-term megatrends that are shaping our world 8 4
5 Megatrends Increase and Expand the Need for Surface Modification Solutions Energy Crunch Expanding Urbanization Changing Demographics Low Cost Luxuries 9 Extend to Adjacent Spaces Bonded Abrasives 3M Power Tools Conventional Ceramic Grain Invent a New Future Precision Shaped Grain Trizact Grow the Core Business Wheels Flat Stock A B C AZ Belts J & X wgt. Belts 10 Product Leadership Full Portfolio of Coated and Surface Conditioning Abrasives Manage the Pyramid 5
6 Core and Adjacency Growth Map Other Abrasives SuperAbrasives Markets and Geography Mill Rolls Winterthur 3M SuperAbrasives GIDCO & DPI RSS e Tools & Equipment New Prods ASA Standard Abrasives M9 PSG PowerTools for Abrasive Finishing Unifam Next Gen tools Winterthur Conventional Bonded Abr 11 3M Abrasives New Product Sales and M) New Product Sales $ ( ASD Historical New Product & Analysis 30% = New Product Vitality Index = Sales of products new in the last 5 yrs divided by total sales 4% 7% 7% 7% 11% $108 21% $171 29% $287 30% $427 30% $480 30% $523 30% $577 30% $633 $689 $27 $54 $57 $ e 2012e 2013e 2014e 2015e 2016e Operating Plan 2012 Strategic Plan 2013 Strategic Plan 2014 Strategic Plan A step-change in approach drives a step-change in results 2015 Strategic Plan 2016 Strategic Plan 12 6
7 Managing the Pyramid in a Vertical Market Castings and Forgings Metalworking Belts Competitors & 3M Market Prices Engineered $Market Price /SQYD 3M Product & Price Competitor & Price Differentiated Utility $Market Price /SQYD 3M Product & Price Competitor & Price $Market Price /SQYD 3M Product & Price Competitor & Price $Market Price /SQYD 3M Product & Price Competitor & Price 13 Managing the Pyramid in a Vertical Market Castings and Forgings Metalworking Belts Products Containing 3M TM Cubitron TM Abrasive Grain Engineered Differentiated Utility 14 7
8 Managing the Pyramid in a Vertical Market Castings and Forgings Metalworking Belts Engineered Products Containing 3M TM Cubitron TM Abrasive Grain Differentiated Utility 15 Managing the Pyramid in a Vertical Market Castings and Forgings Metalworking Belts Engineered Products Containing 3M TM Cubitron TM Abrasive Grain Differentiated New B-Tier AZ Belt Product Utility 16 New C-Tier Flexible J Wgt. 8
9 17 Revolutionary Performance Normal Not Normal at all Conventional Ceramic Grain Plows through Metal Precision Shaped Grain Slices through Metal Value Proposition Lasts longer Cuts faster & cooler Increase productivity Increase throughput Reduce cost per grind Reduce down time Reduce changeovers Reduce effort required to grind Reduce wear & tear on tools Reduce heat buildup on stainless SAVE TIME, SAVE MONEY, SAVE RESOURCES! External Success Revolutionary Performance Cuts >30% faster Lasts 2-10X longer Cuts much cooler Wide Leverage 2011 Sales..270% Growth + + Attitude, access & improved marketing Customer & distributor buy in and 2X sales on product introductions + Impact on other 3M branded products 18 1/3 less effort I don t like it. I love it. And if I can t have it I won t come in tomorrow. -Operator after 984F test vs. Competitor It defines greatness! Everyone knows it and wants it + A VERY charged up 3M Abrasives Team 9
10 External Success Wide Leverage We HAVE CHANGED 19 Global Industry for Abrasives ~ $15B Conventional Bonded 25% Other 8% Flexible Abrasives 29% 3M traditionally has competed in less than one-third of the market Slurries and Compounds 9% Superabrasive Bonded 29% The Acquisition of Winterthur in 2011 provides great growth potential in two additional large abrasive technologies with application in high growth markets including solar, wind energy, aerospace and AOEM 20 10
11 Our Recent Acquisition of Winterthur Launches 3M into Bonded Abrasives Rappold / Winterthur Austria Slip Naxos Sweden Winterthur Switzerland Wendt Germany / USA Automotive Precision Parts Steel Industry Precision Metal Finishing Precision Metal Hard-to-Grind The leader in premium grinding and finishing solutions 21 3M Abrasives is Now an Industrial Powerhouse + Work Piece (Gear) Precision Worm Wheel Dressing Tool Flexible Abrasives Coated Abrasives, Sandpaper Scotch-Brite Bit TM Surface Conditioning i Products, Non-Woven Abrasives Belts, Sheets, Rolls, Discs Precision Grinding Grinding Wheels Cutting-Off Wheels Bonded Abrasives Precision Grinding Machines Superabrasives, Dressing Tools Imagine the technical and commercial opportunities! 22 11
12 Global Abrasives Business: Then and Now 3M has $2.3B Global Abrasives Business* Now - The Industrial piece is $1.5B growing organically 10% M had $1.6B Global Abrasives Business* - The Industrial piece was $1B growing organically 8.4% 23 *Other 3M Abrasives outlets are Auto Aftermarket, Consumer & Electronics 3M Abrasives on a New Growth Trajectory 24 Winning at the business of abrasives with a very exciting future ahead! 12
13 Click to edit Master title style Driven to Innovate 13
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