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3M's (MMM) CEO Inge Thulin on Q1 2016 Results - Earnings Call Transcript

3M Company (NYSE:MMM)

Q1 2016 Earnings Conference Call

April 26, 2016 09:00 ET


Bruce Jermeland - Director, Investor Relations

Inge Thulin - Chairman, President and Chief Executive Officer

Nick Gangestad - Chief Financial Officer


Joe Ritchie - Goldman Sachs

Julian Mitchell - Credit Suisse

Steven Winoker - Bernstein

Scott Davis - Barclays

John Inch - Deutsche Bank

Andrew Kaplowitz - Citigroup

Deane Dray - RBC

Nigel Coe - Morgan Stanley

Jeffrey Sprague - Vertical Research Partners

Shannon O’Callaghan - UBS

Steve Tusa - JPMorgan

Laurence Alexander - Jefferies


Ladies and gentlemen, thank you for standing by. Welcome to the 3M First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, April 26, 2016. I would now like to turn the call over to Bruce Jermeland, Director of Investor Relations at 3M.

Bruce Jermeland

Thank you and good morning everyone. Welcome to our first quarter 2016 business review. On the call today are Inge Thulin, 3M’s Chairman, President and CEO and Nick Gangestad, our Chief Financial Officer. Each will make some formal comments and then we will take your questions. As a reminder, please mark your calendars for upcoming earnings call dates, July 26 and October 25. Also, take note of our next investor meeting scheduled for December 13. More details will be available as we get closer to that date.

Today’s earnings release and the slide presentation accompanying this call are posted on our Investor Relations website at Please take a moment to read the forward-looking statement on Slide 2. During today’s conference call, we will make certain predictive statements that reflect our current views about 3M’s future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Item 1A of our most recent Form 10-K lists some of the most important risk factors that could cause actual results to differ from our predictions.

Please turn to Slide 3 and I will hand it off to Inge.

Inge Thulin

Thank you, Bruce. Good morning, everyone and thank you for joining us again. We had opportunity to see many of you last month at our Investor Day, where we laid out 3M’s new 5-year plan. We also updated you on the 3M playbook and how it is being executed across our enterprise to deliver efficient growth both today and into the future. In the first quarter, the 3M team continued to execute our playbook and delivered another strong operational performance. We increased margins more than a full percentage point and improved our cash flow generation by 20% year-over-year. At the same time, we continue to invest in the business, including opening a new world class laboratory in the United States while also returning cash to our shareholders.

Looking at the numbers, we posted first quarter earnings of $2.05 per share, which is an increase of 11% year-over-year. Please note that this includes a $0.10 earnings benefit related to a new accounting standard that 3M adopted in the first quarter and Nick will provide more details during his comments. Adjusting for this impact, we delivered Q1 earnings of $1.95 per share. Company-wide, organic growth was down slightly at minus 1%. Three of our business groups grew organically in the quarter led by healthcare at 6%, with strong organic growth across all its businesses.

Our Consumer business, which is the home to some of 3M’s most iconic brands also delivered a good quarter of organic growth. I am very pleased that our two domestic-driven businesses, Health Care and Consumer, continue to do well and are off to a very good start in 2016. Safety and Graphics also posted solid organic growth with particular strengths in commercial solutions and personal safety. Organic growth in our industrial business was down low single-digits, which was similar to last quarter. And as expected, Electronics and Energy declined low double-digits. Electronics and Energy continued to be impacted by softness in the consumer electronics markets, which we expect to persist through the first half of the year.