3M 2009 Annual Report Download - page 27

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Industrial and Transportation Business (30.8% of consolidated sales):
2009 2008 2007
Sales (millions) ............................................................................... $ 7,116 $ 8,173 $ 7,639
Sales change analysis:
Organic local-currency sales (volume and price).................... (12.6)% 0.4% 3.9%
Acquisitions ............................................................................. 2.4 3.7 1.6
Local-currency sales ............................................................... (10.2)% 4.1% 5.5%
Translation .............................................................................. (2.7) 2.9 3.7
Total sales change...................................................................... (12.9)% 7.0% 9.2%
Operating income (millions) ........................................................... $ 1,238 $ 1,548 $ 1,580
Percent change........................................................................... (20.0)% (2.0)% 12.3%
Percent of sales .......................................................................... 17.4% 18.9% 20.7%
The Industrial and Transportation segment serves a broad range of markets, such as appliance, paper and
packaging, food and beverage, electronics, automotive original equipment manufacturer (OEM) and automotive
aftermarket (auto body shops and retail). Industrial and Transportation products include tapes, a wide variety of
coated and non-woven abrasives, adhesives, specialty materials, filtration products, energy control products, closure
systems for personal hygiene products, and components and products that are used in the manufacture, repair and
maintenance of automotive, marine, aircraft and specialty vehicles.
Fourth quarter and year 2009 results:
Industrial and Transportation is a large and highly diversified set of businesses that, when taken together, correlate
well with the overall economy. Early in 2009, the business saw significant sales declines that required swift and
aggressive restructuring and cost reduction plans to offset the impact of lower volumes, including the impact of large
inventory declines in the wholesale distribution channel. Inventories began to stabilize around mid-year 2009, and it
now appears that inventory and point-of-sale levels in this channel are in reasonably good balance.
Sales in Industrial and Transportation rose 10 percent to $1.9 billion in the fourth quarter. Fourth quarter local-
currency growth was 4.6 percent, which included organic volume growth of 3 percent. Fourth-quarter growth was led
by the renewable energy business and the automotive OEM business. 3M also drove positive local-currency sales
growth in industrial adhesives and tapes, automotive aftermarket and in Dyneon LLC, which supplies flouropolymers
and elastomers into the oil, gas and transportation industries. Other businesses in this segment posted local-
currency sales declines ranging from one to five percent in the fourth quarter. On a regional basis, growth was
strongest in Latin America and in Asia Pacific.
The combination of positive sales volumes in the quarter, higher year-on-year factory production levels and
improvements in cost structure resulted in operating income growth in the fourth quarter. This segment recorded net
charges of $36 million related to restructuring actions and exit activities in the fourth quarter of 2008. Including these
net charges, operating income in the fourth quarter of 2009 increased 86 percent to $397 million and operating
income margins improved by 8.5 percentage points to 20.8 percent.
Full-year 2009 sales were $7.1 billion, down 12.9 percent in dollars and down 10.2 percent in local currency. Foreign
currency impacts penalized sales for the year by 2.7 percent. Sales increased in the renewable energy and
automotive aftermarket businesses, but sales decreased in the other businesses, impacted by end-market declines.
This segment announced restructuring actions in 2009, along with plant shut-downs, furloughs and mandatory
vacation across the operation. In 2009, this business segment recorded charges of $88 million related to
restructuring actions, with this charge comprised of employee-related liabilities for severance and benefits of $83
million and fixed asset impairments of $5 million. Including these special items, 2009 operating income was $1.2
billion and operating income margins were 17.4 percent. This segment recorded $66 million related to restructuring
and exit activities in 2008.
Industrial and Transportation continued to invest aggressively to accelerate its growth capability. For example, the
renewable energy business recently opened a new large-scale high-tech manufacturing site in Singapore, and the
industrial abrasives business opened a new state-of-the-art manufacturing site in North America. Recently, 3M
Purification Inc. launched a high-quality disposable filtration system for the biopharmaceuticals industry. And finally,
the automotive aftermarket business introduced the 3M™ Dirt Trap Protection System, which increases paint booth
productivity and reduces daily maintenance costs in auto body repair shops.