3M reported first-quarter earnings of $1.79 per share, an increase of 11.2% versus the first quarter of 2013. Sales grew 2.6% year-on-year to $7.8 billion. Organic local-currency sales grew 4.6% while currency impacts reduced sales by 2.0% year-on-year.
First-quarter operating income was $1.7 billion, operating income margins were 21.9% and net income was $1.2 billion. The company converted 66% of net income to free cash flow in the first quarter, which was in line with traditional seasonal patterns.
Organic local-currency sales growth was 6.2% in Health Care, 4.9% in Industrial, 4.6% in Safety and Graphics, 4.1% in Electronics and Energy and 2.6% in Consumer. On a geographic basis, organic local-currency sales grew 6.9% in Asia Pacific, 6.8% in Latin America/Canada, 3.7% in EMEA (Europe, Middle East and Africa) and 2.6% in the U.S.
“This was a solid quarter for 3M,” said Inge G. Thulin, 3M’s chairman, president and CEO. “Our teams delivered positive organic growth in all business groups and geographic areas, we posted strong margins across the portfolio and we returned a record amount of cash to shareholders. At the same time we increased investments in R&D and commercialization to help secure future growth in the business. 3M is well-positioned to generate sustainable, profitable growth far into the future.”
3M maintained its full-year earnings expectation of $7.30 to $7.55 per share with organic local-currency sales growth of 3 to 6%.
First-Quarter Business Group Discussion:
• Sales of $2.8 billion, up 3.1% in U.S. dollars. Organic local-currency sales increased 4.9% and foreign currency translation reduced sales by 1.8%. Sales growth was led by 3M Purification, automotive OEM, advanced materials, abrasive systems,and aerospace and commercial transportation; sales declined in personal care. Operating income was $618 million, up 6.7% year-on-year; operating margin of 22.3%.
Safety and Graphics:
• Sales of $1.4 billion, up 1.7% in U.S. dollars. Organic local-currency sales increased 4.6% and foreign currency translation reduced sales by 2.9%. Sales grew in personal safety, roofing granules and commercial solutions, while the traffic safety and security business declined year-on-year. Operating income was $318 million, a decrease of 4.2% year-on-year; operating margin of 22.3%.
• Sales of $1.4 billion, up 4.8% in U.S. dollars. Organic local-currency sales increased 6.2% and foreign currency translation reduced sales by 1.4%. Sales increased across the portfolio, with the strongest growth in drug delivery, health information systems, food safety, critical and chronic care and infection prevention. Operating income was $427 million, an increase of 5.6%; operating margin of 31.1%.
Electronics and Energy
• Sales of $1.3 billion, an increase of 2.7% in U.S. dollars. Organic local-currency sales increased 4.1% and foreign currency translation reduced sales by 1.4%. Electronics-related sales increased 5%, with strong growth in optical systems partially offset by declines in the electronic markets materials and the electronic solutions businesses; energy-related sales grew 2% year-on-year, led by renewable energy and telecom. Operating income was $227 million, up 16.1% year-on-year; operating margin of 17.3%.
• Sales of $1.1 billion, down 0.2% in U.S. dollars. Organic local-currency sales increased 2.6%, divestitures reduced sales by 0.3% and foreign currency translation reduced sales by 2.5%. Sales grew in DIY, consumer health care and home care while stationery and office supplies declined year-on-year. Operating income was $228 million, down 3.5% year-on-year; operating margin of 21.2%.