3M Reports Second-Quarter 2018 Results
Jul. 24, 2018
ST. PAUL, Minn.--(BUSINESS WIRE)--Jul 24, 2018--3M (NYSE: MMM) today reported second-quarter 2018 results.
“3M had a strong quarter, including organic growth of 6 percent that was broad-based across all business groups and geographic areas,” said Mike Roman, 3M chief executive officer. “Our team delivered record sales and a double-digit increase in earnings per share, while keeping our commitment to investing in our business and returning cash to shareholders.
“Going forward we will continue to prioritize 3M’s portfolio, strengthen our innovation capabilities and accelerate our transformation, while developing our people. The 3M Playbook is working and we’re just getting started. We are well positioned to deliver even greater value for our customers and shareholders in 2018 and beyond.”
Sales were up 7.4 percent to $8.4 billion. Organic local-currency sales increased 5.6 percent while acquisitions, net of divestitures, increased sales by 0.8 percent. Foreign currency translation increased sales by 1.0 percent year-on-year.
Total sales grew 15.8 percent in Safety and Graphics, 6.8 percent in Industrial, 4.9 percent in Health Care, 4.6 percent in Consumer, and 3.6 percent in Electronics and Energy. Organic local-currency sales increased 8.5 percent in Safety and Graphics, 5.7 percent in Industrial, 5.2 percent in Electronics and Energy, 4.3 percent in Consumer, and 3.8 percent in Health Care.
On a geographic basis, total sales grew 9.5 percent in EMEA (Europe, Middle East and Africa), 7.9 percent in Asia Pacific, 7.1 percent in the U.S., and 3.1 percent in Latin America/Canada. Organic local-currency sales increased 6.0 percent in Latin America/Canada, 5.8 percent in EMEA, 5.6 percent in the U.S, and 5.5 percent in Asia Pacific.
Second-quarter GAAP earnings were $3.07 per share, an increase of 19 percent versus the second quarter of 2017. During the quarter, the company recorded a benefit of $0.48 per share related to the divestiture of the communication markets business, net of related restructuring actions. Second-quarter 2017 GAAP earnings were $2.58 per share which included a net benefit of $0.33 per share from the identity management business divestiture gain, partially offset by portfolio and footprint investments.
Second-quarter operating income was $2.4 billion with operating margins of 28.6 percent. Operating income includes a benefit of $389 million from the communication markets business divestiture, net of related restructuring actions.
The company paid $802 million in cash dividends to shareholders and repurchased $1.6 billion of its own shares during the quarter.
3M updated its 2018 GAAP earnings expectations to reflect the full-year impact from the communication markets business divestiture and related actions. The company now expects its GAAP earnings to be in the range of $9.08 to $9.38 per share versus $8.68 to $9.03 previously. Excluding the full-year impacts from the communication markets business divestiture gain and related actions, a first-quarter legal settlement, and the Tax Cuts and Jobs Act-related expense, 3M now expects its adjusted 2018 earnings to be in the range of $10.20 to $10.45 per share versus prior expectation of $10.20 to $10.55. The update to the range reflects the impact of the divested income associated with the communication markets business which was not included in prior guidance.
The company maintained its full-year organic local-currency sales growth guidance of 3 to 4 percent and free cash flow conversion of 90 to 100 percent, as referenced in the “Supplemental Financial Information Non-GAAP Measures” section.
Second-Quarter Business Group Discussion
IndustrialSales were $3.1 billion, up 6.8 percent in U.S. dollars. Organic local-currency sales increased 5.7 percent, foreign currency translation increased sales by 1.2 percent, and divestitures decreased sales by 0.1 percent. On an organic local-currency basis: Sales increased in all businesses led by separation and purification, advanced materials, abrasives, and industrial adhesives and tapes.Sales grew in all geographic areas led by EMEA, the U.S., and Latin America/Canada. Operating income was $724 million, an increase of 27.4 percent year-on-year; operating margins were 23.0 percent.
Safety and GraphicsSales were $1.8 billion, up 15.8 percent in U.S. dollars. Organic local-currency sales increased 8.5 percent, foreign currency translation increased sales by 1.0 percent, and acquisitions, net of divestitures, increased sales by 6.3 percent. On an organic local-currency basis: Sales increased in all businesses led by personal safety, commercial solutions, and transportation safety.Sales grew in all geographic areas led by EMEA, the U.S., and Asia Pacific. Operating income was $480 million, down 43.6 percent year-on-year; Q2 2017 operating income included the identity management divestiture gain of $457 million; operating margins were 26.4 percent.
Health CareSales were $1.5 billion, up 4.9 percent in U.S. dollars. Organic local-currency sales increased 3.8 percent, foreign currency translation increased sales by 1.0 percent, and acquisitions increased sales by 0.1 percent. On an organic local-currency basis: Sales growth was led by food safety, medical solutions, and health information systems; drug delivery declined.Sales grew in all geographic areas led by Asia Pacific, Latin America/Canada, and EMEA. Operating income was $435 million, an increase of 6.7 percent year-on-year; operating margins were 28.6 percent.
Electronics and EnergySales were $1.3 billion, up 3.6 percent in U.S. dollars. Organic local-currency sales increased 5.2 percent, foreign currency translation increased sales by 1.1 percent and divestitures decreased sales by 2.7 percent. On an organic local-currency basis: Energy-related sales grew by 9 percent; electronics-related sales increased 4 percent with growth in both electronics materials solutions, and display materials and systems.Sales grew in all geographic areas led by the U.S., EMEA, and Asia Pacific. Operating income was $865 million, an increase of 167 percent year-on-year, reflecting a benefit of $494 million from the communication markets divestiture gain; operating margins were 64.7 percent.
ConsumerSales were $1.2 billion, up 4.6 percent in U.S. dollars. Organic local-currency sales increased 4.3 percent and foreign currency translation increased sales by 0.3 percent. On an organic local-currency basis: Sales grew in home improvement, stationery and office, and home care; consumer health care declined.Sales grew in the U.S., Latin America/Canada, and Asia Pacific; EMEA declined. Operating income was $261 million, up 32.3 percent year-on-year; operating margins were 21.4 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:Live webcast at http://investors.3M.com. Live telephone: Call 800-762-2596 within the U.S. or +1 212-231-2916 outside the U.S. Please join the call at least 10 minutes before the start time. Webcast replay: Go to 3M’s Investor Relations website at http://investors.3M.com and click on “Quarterly Earnings.” 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., the access code is 21863182). The telephone replay will be available until 11:30 a.m. EDT (10:30 a.m. CDT) on July 31, 2018.
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," "could," "target," "forecast" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or business plans or prospects. Among the factors that could cause actual results to differ materially are the following: (1) worldwide economic, political, and capital markets conditions and other factors beyond the Company's control, including natural and other disasters or climate change affecting the operations of the Company or its customers and suppliers; (2) the Company's credit ratings and its cost of capital; (3) competitive conditions and customer preferences; (4) foreign currency exchange rates and fluctuations in those rates; (5) the timing and market acceptance of new product offerings; (6) the availability and cost of purchased components, compounds, raw materials and energy (including oil and natural gas and their derivatives) due to shortages, increased demand or supply interruptions (including those caused by natural and other disasters and other events); (7) the impact of acquisitions, strategic alliances, divestitures, and other unusual events resulting from portfolio management actions and other evolving business strategies, and possible organizational restructuring; (8) generating fewer productivity improvements than estimated; (9) unanticipated problems or delays with the phased implementation of a global enterprise resource planning (ERP) system, or security breaches and other disruptions to the Company's information technology infrastructure; (10) financial market risks that may affect the Company’s funding obligations under defined benefit pension and postretirement plans; and (11) legal proceedings, including significant developments that could occur in the legal and regulatory proceedings described in the Company's Annual Report on Form 10-K for the year ended Dec. 31, 2017, and any subsequent quarterly reports on Form 10-Q (the “Reports”). Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Reports under "Cautionary Note Concerning Factors That May Affect Future Results" and "Risk Factors" in Part I, Items 1 and 1A (Annual Report) and in Part I, Item 2 and Part II, Item 1A (Quarterly Reports). The information contained in this news release is as of the date indicated. The Company assumes no obligation to update any forward-looking statements contained in this news release as a result of new information or future events or developments.
This article has been truncated. You can see the rest of this article by visiting http://www.businesswire.com/news/home/20180724005441/en.