Replies to post #2195 on The Rising Influence of Rising Affluence

[DewDiligence]

MMM (92.23, +2.2%) is on the verge of breaking the all-time high set at the top of the bull market in Oct 2007. It’s funny how a mostly-fluff piece in Barron’s can move the market of a stock with a $65B market cap.

[DewDiligence]

3M today announced that it has increased its global manufacturing capacity of the company’s 3M Optically Clear Adhesives (OCAs) at multiple locations throughout Asia in Korea, Taiwan, China and Singapore. The increased capacity supports the growth of consumer electronics devices including smart phones, tablets, touch displays and e-readers.

http://finance.yahoo.com/news/3M-Increases-Global-bw-4129665338.html?x=0&.v=1

[DewDiligence]

3M celebrates 50th anniversary of Scotch Magic Tape with a planet-friendly variety:

http://finance.yahoo.com/news/3M-Sticks-Up-for-the-Planet-bw-139612154.html?x=0&.v=1

A helluva franchise.

[DewDiligence]

3M’s contribution to hospital hygiene:

http://finance.yahoo.com/news/3M-Announces-Infection-bw-573649293.html?x=0&.v=1

The Clean-Trace System detects adenosine triphosphate (ATP), a substance found in all living cells and present on any contaminated surface. Samples from high-touch surfaces in a hospital, such as bed rails, light switches or nurse call buttons, are collected using the 3M™ Clean-Trace™ ATP Surface Test. If the test picks up any organic material (ATP), it will emit light in direct proportion to the contamination level which can be read and quantified by the hand-held 3M™ Clean-Trace™ NGi Luminometer. Data collected can be uploaded to the 3M™ Clean-Trace™ Online Software which provides the users advanced data analysis with tracking and full trending capabilities including automatic report generation.

[DewDiligence]

Good for 3M:

“Sales of adhesives technologies typically increase at twice the rate of gross domestic product,” [Henkel CEO] Kasper Rorsted says.

http://online.wsj.com/article/SB10001424052702303339904576405431281873592.html

[DewDiligence]

3M expands manufacturing in Singapore and Taiwan:

http://finance.yahoo.com/news/3M-Expands-Manufacturing-of-bw-2584655899.html?x=0&.v=1

[DewDiligence]

3M acquires Avery Dennison’s office-products business for $550M in cash:

http://finance.yahoo.com/news/3M-Acquire-Office-Consumer-bw-1158548884.html?x=0

The Office and Consumer Products business of Avery Dennison is one of the world’s leading suppliers of office and education products, including labels, binders, presentation products, filing and indexing products, writing instruments, and other office and home organization products… Sales in 2011 are estimated to be $765 million with EBITDA of $95 million.

[DewDiligence]

CEO’s Growth Pitch for 3M Proves Hard Sell

[This piece from Monday’s WSJ presents the bear case for 3M. The fact that expectations are so low is a good thing for longs, IMHO. See #msg-60356285 and #msg-54817180 for related stories.]

http://online.wsj.com/article/SB10001424052970204624204577176873082751682.html

›JANUARY 23, 2012
By JAMES R. HAGERTY

When the normally ebullient George Buckley delivers 3M Co.'s fourth-quarter results on Thursday, he risks winding down his career on a feeble note.

The St. Paul, Minn., conglomerate, slowed by weakness in Europe and sluggish demand in some electronics markets, is expected to fall far short of its ambitious sales-growth goals.

That's a setback for Mr. Buckley, a native of Sheffield, England, and 3M's chief executive, who has sought to supercharge the company's shares by touting its growth potential.

Mr. Buckley, who trained as an electrical engineer, has worked hard to excite investors by talking up what he calls 3M's "whiz bang" technologies in such areas as adhesives, films and coatings used in cars, computers and medical supplies.

But while he is credited with firing up 3M's renowned research labs to rush out more products, his cheerleading has failed to persuade Wall Street that the company—best known for such items as Scotch tape and Post-it notes—is a hot growth story. [Can’t someone *ever* write a story about 3M w/o mentioning Post-it notes?]

He may be running out of time. Mr. Buckley, who headed boat maker Brunswick Corp. before becoming 3M's chief in 2005, is due to step down next month when he turns 65, the company's normal retirement age for executives, unless the board extends his contract. One possible successor is Inge Thulin, a Swede who has worked at 3M since 1979 and was named chief operating officer last year.

Douglas Ward, who worked at 3M for nearly 30 years, including senior roles in manufacturing of optical products, before departing last year, credits Mr. Buckley with increasing the emphasis on research and development, in part by frequently visiting the company's labs. Tim O'Neil, a marketing and sales manager at 3M for about 15 years until he joined another company in 2011, says he found Mr. Buckley "incredibly intelligent" but said his growth goals seemed like too much of a stretch.

Some executives at 3M "felt like we bit off more than we could chew," said Mr. O'Neil, who added that he nonetheless sees a bright future for 3M.

A 3M spokeswoman said Mr. Buckley wasn't available to comment.

The company's near-term prospects appear lackluster. The mean Wall Street fourth-quarter earnings estimate for 3M is $1.31 a share, up from the $1.28 a share it reported a year earlier, according to FactSet Research Systems. If not for the company's stock buybacks, though, the expected per-share earnings would be down slightly from a year earlier.

3M's organic sales growth, which excludes the effects of recent acquisitions, price changes and currency fluctuations, will be 3% this year, according to Barclays Capital forecasts, down from an estimated 4% in 2011. For the past several years Mr. Buckley has trumpeted a goal of raising average organic growth to between 7% and 8% a year from the 3M's previous norm of around 4%.

"It's an incredibly impressive company," regularly churning out inventions, said Scott Davis, an analysts at Barclays. "But it's so diverse and large that growing [sales] more than 5% a year is tremendously difficult. In the end, 3M's core competency might not be growth." [Probably one of the most vacuous best soundbites I’ve ever heard from a sell-side analyst, and that’s saying a lot.]

Instead, Mr. Davis said, 3M should be emphasizing such strengths as its profit margins, global reach and reliable dividends. The company has increased its dividend every year for more than five decades.

The 3M spokeswoman declined to comment on those suggestions.

As of Friday, 3M shares…were trading at 13.6 times expected 2012 earnings, compared with a median of 15.3 for a peer group of 22 other industrial stocks, Mr. Davis said. A growth stock would trade at 16 to 20 times earnings, he said.

At a meeting with investors in December, Mr. Buckley wasn't ready to abandon his elusive organic-growth goal. "I don't think we should give up on that right now," he said. In a rambling speech quoting Winston Churchill and George Bernard Shaw, he argued that the growth trend can be thrown off by sudden changes in customers' willingness to hold inventories.

"We must not be confused into thinking the growth model is broken when this happens," Mr. Buckley said. "It is only a transient."

Even a weak economy has its positive side, he said, predicting a "rapid acceleration of petty crime" in the U.S. "It's a business opportunity for 3M," Mr. Buckley said: The company makes safety products including electronic access-control systems and fingerprint readers.‹

[DewDiligence]

3M ranked third—behind only APPL and GOOG—in Booz’s list of the world’s most innovative companies:

http://finance.yahoo.com/news/3m-ranks-one-top-innovators-160000934.html

[DewDiligence]

Lewis Lehr, 3M visionary, dies at 95:

http://www.wsj.com/articles/lewis-lehr-spurred-3m-into-medical-supplies-and-china-1470347194

As chief executive of 3M Co. from 1979 to 1986, Lewis Lehr pushed the company deeper into medical supplies, established an early presence in China and strove to keep a growing bureaucracy from smothering innovation.

…In the early 1940s, he studied chemical engineering at the University of Nebraska… One of his mentors there suggested he apply for a job at 3M in St. Paul. Mr. Lehr…drove to the small town of St. Paul, Neb. to apply—only to find out 3M was in Minnesota. Once that was cleared up, he embarked on a 39-year career [LOL].

…As he moved up the ranks, Mr. Lehr was enthusiastic about 3M’s efforts to develop surgical “drapes,” made of nonwoven fabric and plastic film, used to wall off body parts during surgery to prevent infections. When he learned 3M was thinking about junking that business, Mr. Lehr offered to buy it. That caught the attention of his superiors, who decided to develop the surgical-supplies business after all.

3M went on to build a wide-ranging health-care business... Health care in this year’s second quarter chipped in about a quarter of 3M’s operating profit. Operating profit margins in health care were nearly 33%, compared with 24% for the whole company.

Mr. Lehr became CEO as China was starting a gradual opening to foreign businesses. After years courting the Chinese, 3M in 1983 became the first foreign company allowed to set up a wholly owned business there rather than a joint venture. Today, China is one of 3M’s largest markets and a major center of its manufacturing and research.

3M was also in the pharma business, but that unit was sold in 2006.