3M 2010 Annual Report Download - page 2

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George W. Buckley
Chairman of the Board,
President and Chief Executive Officer
To our shareholders
Five years ago we set out to move 3M, gradually but permanently, to a higher
growth regimen. We believed this was the best way to create new value for
our shareholders and opportunities for the people of 3M. We had already
shown that we could improve our margins – now we needed to prove that
we could grow. After the high growth rates of the 1960s and 1970s we
had been stuck in a low growth mode since 1979. We knew that achieving
consistently higher rates of growth, while maintaining the premium margins
and returns we’d come to expect from 3M, was not going to be easy. In fact,
many onlookers thought it was an impossible task.
We knew clearly that it would require a step change in our approach to growth and especially in
our approach to investments in growth. It would require a rekindling of our creativity, the taking
of more calculated risks and pressing into new high-growth spaces and geographies all while
leveraging what we already had. It would also require a 3M where imagination and creativity
were encouraged and could flourish, not laissez faire, but creativity that could be directed and
fruitful. As the next few years unfolded, it turned out to be an even more daunting task than we
had thought at the outset, in that we were going to have to do this in an environment where
(1) our second-largest business, Optical Systems, was commoditizing and shrinking, (2) we
faced the worst recession in living memory, and (3) fast-thinking, fast-moving competition from
all around the world was rising rapidly.
So how have we been doing? Looking at 2010 as a milestone
toward those goals, it was indeed a very good year. Organic
volumes rose 13.7 percent in the year versus an estimated
worldwide Industrial Production Index (IPI) growth of 8 percent …
and we posted record sales of $26.7 billion, an increase of
15.3 percent. This is one of the highest growth rates ever
achieved in our 100-plus year history – a phenomenal performance
by the people of 3M. We also achieved a record operating profit
of $5.9 billion, with margins of 22.2 percent, up 140 basis
points. We posted another all-time annual record with earnings
per share of $5.63, an increase of 25 percent year on year. Free
cash flow was $4.1 billion, with a conversion rate of 100 percent.