3M 2012 Annual Report Download - page 28

22
Industrial and Transportation Business (34.6% of consolidated sales):
2012
2011
2010
Sales (millions)
$
10,346
$
10,073
$
8,429
Sales change analysis:
Organic local currency
4.5
%
10.0
%
17.0
%
Acquisitions
1.1
5.9
0.2
Translation
(2.9)
3.6
1.2
Total sales change
2.7
%
19.5
%
18.4
%
Operating income (millions)
$
2,258
$
2,057
$
1,754
Percent change
9.8
%
17.3
%
42.6
%
Percent of sales
21.8
%
20.4
%
20.8
%
The Industrial and Transportation segment serves a broad range of markets, such as automotive original equipment
manufacturer (OEM) and automotive aftermarket (auto body shops and retail), renewable energy, electronics, paper and
packaging, food and beverage, and appliance. 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, acoustic systems products, and components and products that are used in the
manufacture, repair and maintenance of automotive, marine, aircraft and specialty vehicles.
Year 2012 results:
Sales in Industrial and Transportation totaled $10.3 billion, up 2.7 percent in U.S. dollars. Organic local-currency sales
increased 4.5 percent, acquisitions added 1.1 percent, and foreign currency translation reduced sales by 2.9 percent.
Acquisitions growth was primarily driven by Winterthur Technologie AG (Winterthur) in the abrasives market, Ceradyne,
Inc. (Ceradyne) in the advanced technical ceramics market, and Alpha Beta Enterprise Co. Ltd. (Alpha Beta) in industrial
tapes, all of which are discussed further below. On an organic local-currency basis, sales growth was strongest in
automotive OEM, aerospace, abrasives and filtration. On an organic local-currency basis, sales declined in renewable
energy, impacted by weak end market demand.
Geographically, organic local-currency sales increased 7 percent in both the United States and Latin America/Canada, 3.5
percent in Asia Pacific, and 1 percent in EMEA.
Operating income was $2.3 billion in 2012, 9.8 percent higher than 2011, with the primary benefit related to the
combination of selling price increases and raw material cost decreases. Operating income growth was led by the United
States. Operating income margins increased by 1.4 percentage points to 21.8 percent.
As disclosed in Note 2, in November 2012, 3M acquired Ceradyne, Inc. (Ceradyne), which is headquartered in Costa
Mesa, California. Ceradyne is involved in the development and production of advanced technical ceramics for demanding
applications in the automotive, oil and gas, solar, industrial, electronics and defense industries.
Year 2011 results:
Sales in Industrial and Transportation increased 19.5 percent to $10.1 billion, with 10.0 percent of this increase
attributable to organic local-currency growth. Acquisitions increased sales by 5.9 percent, primarily driven by Winterthur
and Alpha Beta (discussed below). Foreign currency impacts added 3.6 percent to 2011 sales growth. Geographically,
sales increased in all major regions, led by Asia Pacific and Europe. Organic local-currency sales growth was broad-
based across the portfolio, led by renewable energy, aerospace and aircraft maintenance, energy and advanced
materials, abrasives systems, and industrial adhesives and tapes. In addition, despite the Japan and Thailand natural
disasters, 3M also achieved growth in its automotive aftermarket and automotive OEM businesses.
3M continued to invest in its Industrial and Transportation business. In March 2011, 3M acquired a controlling interest in
Winterthur via completion of a public tender offer. Winterthur, based in Zug, Switzerland, is a leading global supplier of
precision grinding technology serving customers in the area of hard-to-grind precision applications in industrial,
automotive, aircraft, and cutting tools. In addition, in February 2011, 3M completed its acquisition of the tape-related
assets of Alpha Beta, a leading manufacturer of box sealing tape and masking tape headquartered in Taipei, Taiwan.