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3M Delivers Third-Quarter Sales of $7.7 Billion and Earnings of $2.05 per Share; Company Announces Restructuring Plan

ST. PAUL, Minn.--(BUSINESS WIRE)--3M (NYSE: MMM) today reported third-quarter earnings of $2.05 per share, an increase of 3.5 percent versus the third quarter of 2014. Sales declined 5.2 percent year-on-year to $7.7 billion. Organic local-currency sales grew 1.2 percent and acquisitions, net of divestitures, added another 1.0 percent. Foreign currency translation reduced sales by 7.4 percent year-on-year.

“We continue to take actions to strengthen our portfolio, increase our scientific edge through research and development, and transform our business processes through a new global ERP system. We are building a stronger, more streamlined and more focused company that can compete and win for years to come.”

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Operating income was $1.9 billion and operating income margins for the quarter were 24.3 percent, up 0.9 percentage points year-on-year. Third-quarter net income was $1.3 billion and the company converted 101 percent of net income to free cash flow.

3M paid $635 million in cash dividends to shareholders and repurchased $1.5 billion of its own shares during the quarter.

Organic local-currency sales growth was 5.0 percent in Consumer, 3.7 percent in Health Care, 2.9 percent in Safety and Graphics and 0.2 percent in Industrial; Electronics and Energy declined 2.8 percent. On a geographic basis, organic local-currency sales grew 2.3 percent in Latin America/Canada, 1.5 percent in the U.S., 1.5 percent in EMEA (Europe, Middle East and Africa) and 0.4 percent in Asia Pacific.

“3M delivered a solid operational performance in a continued slow-growth environment, marked by strong earnings, organic growth in all geographic areas and expanded margins,” said Inge G. Thulin, 3M’s chairman, president and chief executive officer. “We continue to take actions to strengthen our portfolio, increase our scientific edge through research and development, and transform our business processes through a new global ERP system. We are building a stronger, more streamlined and more focused company that can compete and win for years to come.”

To further strengthen its competitiveness, 3M also announced a restructuring plan that will result in an expected reduction of 1,500 positions worldwide with estimated pre-tax savings of $130 million in 2016. The company anticipates a fourth-quarter pre-tax charge of approximately $100 million, or $0.13 per share, related to this plan. Reductions will be primarily focused on structural overhead, largely in the U.S., and slower-growing markets with particular emphasis on EMEA and Latin America.

3M also updated its guidance for the full-year 2015.

Excluding the announced restructuring charges, 3M now expects earnings will be in the range of $7.73 to $7.78 per share, versus a prior range of $7.73 to $7.93 per share. On a GAAP basis, including the announced restructuring charges, the company expects earnings will be in the range of $7.60 to $7.65 per share.

Organic local-currency sales growth is expected to be in the range of 1.5 to 2.0 percent, versus previous guidance of 2.5 to 4 percent. The company anticipates that full-year free cash flow conversion will be in the range of 95 to 100 percent, versus a previous estimated range of 90 to 100 percent.

Third-Quarter Business Group Discussion

Industrial

  • Sales of $2.6 billion, down 7.1 percent in U.S. dollars. Organic local-currency sales increased 0.2 percent, acquisitions increased sales 0.7 percent and foreign currency translation reduced sales by 8.0 percent.
  • On an organic local-currency basis:
    • Sales growth was led by automotive OEM, 3M purification, abrasives, and industrial adhesives and tapes; advanced materials declined.
    • Sales grew in Latin America/Canada, Asia Pacific and EMEA; sales declined in the U.S.
  • Operating income was $580 million, a decrease of 5.8 percent year-on-year; operating margin of 22.5 percent.

Safety and Graphics

  • Sales of $1.4 billion, down 2.2 percent in U.S. dollars. Organic local-currency sales increased 2.9 percent, acquisitions increased sales 4.2 percent and foreign currency translation reduced sales by 9.3 percent.
  • On an organic local-currency basis:
    • Sales grew in roofing granules, commercial solutions and personal safety; traffic safety and security declined.
    • Sales increased in Asia Pacific, EMEA and the U.S.; sales declined in Latin America/Canada.
  • Operating income was $324 million, a decrease of 4.8 percent year-on-year; operating margin of 22.9 percent.

Health Care

  • Sales of $1.3 billion, down 3.2 percent in U.S. dollars. Organic local-currency sales increased 3.7 percent, acquisitions increased sales by 0.9 percent and foreign currency translation reduced sales by 7.8 percent.
  • On an organic local-currency basis:
    • Sales grew in health information systems, food safety, critical and chronic care, oral care and infection prevention; drug delivery systems declined year-on-year.
    • Sales grew in all areas led by Latin America/Canada, Asia Pacific and the U.S.
  • Operating income was $432 million, an increase of 0.1 percent year-on-year; operating margin of 32.1 percent.

Electronics and Energy

  • Sales of $1.4 billion, down 8.1 percent in U.S. dollars. Organic local-currency sales declined 2.8 percent, divestitures reduced sales by 0.7 percent and foreign currency translation reduced sales by 4.6 percent.
  • On an organic local-currency basis:
    • Electronics-related sales declined 3 percent, as sales grew in electronics materials solutions and declined in display materials and systems; energy-related sales declined 2 percent, as growth in telecom was offset by declines in electrical markets and renewable energy.
    • Sales grew in EMEA; sales declined in the U.S., Latin America/Canada and Asia Pacific.
  • Operating income was $342 million, an increase of 1.4 percent year-on-year; operating margin of 24.9 percent.

Consumer

  • Sales of $1.2 billion, down 1.2 percent in U.S. dollars. Organic local-currency sales increased 5.0 percent and foreign currency translation reduced sales by 6.2 percent.
  • On an organic local-currency basis:
    • Sales growth was led by stationery and office supplies, home improvement and home care.
    • Sales rose in the U.S., Asia Pacific and EMEA; Latin America/Canada sales declined year-on-year.
  • Operating income was $293 million, up 7.5 percent year-on-year; operating margin of 25.2 percent.

3M will conduct an investor teleconference at 9:00 a.m. EDT (8:00 a.m. CDT) today. Investors can access this conference via the following:

  • Telephone replay:
    Call 800-633-8284 within the U.S. or +1 402-977-9140 outside the U.S. (for both U.S. and outside the U.S. access code is 21735069). The telephone replay will be available until 10:30 a.m. CDT on October 27, 2015.

Forward-Looking Statements
This news release contains forward-looking information about 3M's financial results and estimates and business prospects that involve substantial risks and uncertainties. You can identify these statements by the use of words such as "anticipate," "estimate," "expect," "aim," "project," "intend," "plan," "believe," "will," "should,"...


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