3M reported second-quarter earnings of $1.91 per share, an increase of 11.7% versus the second quarter of 2013. Sales grew 4.9% year-on-year to $8.1 billion. Organic local-currency sales grew 4.8%, acquisitions added 0.1% to sales and currency impacts were flat year-on-year.
Second-quarter operating income was $1.9 billion and operating income margins were 22.8%. Net income was $1.3 billion and the company converted 103% of net income to free cash flow in the quarter.
3M paid $556 million in cash dividends to shareholders and repurchased $1.4 billion of its own shares during the quarter.
Organic local-currency sales growth was 6.4% in Electronics and Energy, 5.1% in Health Care, 4.7% in Industrial, 4.7% in Safety and Graphics and 4.2% in Consumer. On a geographic basis, organic local-currency sales grew 6.6% in Asia Pacific, 4.8% in EMEA (Europe, Middle East and Africa), 4.5% in the U.S. and 2.7% in Latin America/Canada.
“Our businesses continued to execute very well in the second quarter,” said Inge G. Thulin, 3M’s chairman, president and chief executive officer. “Organic sales growth was again positive across all businesses and geographic regions which helped drive double-digit growth in earnings per share. Strong productivity fueled increased growth investments, and operating margins increased year-on-year to nearly 23%.”
“In addition to a strong operating performance, we are also deploying capital more aggressively to both improve the business and to enhance shareholder returns,” Thulin continued. “On July 16, we announced the acquisition of the remaining 25% of our Sumitomo 3M subsidiary in Japan for a purchase price of $885 million. And during the second quarter we paid $2.0 billion to shareholders via a combination of cash dividends and gross share repurchases. My thanks to the 3M team for the results thus far in 2014.”
3M also confirmed its 2014 full-year performance expectations. The company continues to expect earnings of $7.30 to $7.55 per share and organic local-currency sales growth of 3 to 6%. Foreign currency impacts are expected to reduce sales by approximately 1% for the year. 3M also expects full-year free cash flow conversion to be in the range of 90 to 100%.
Industrial sales were $2.8 billion, up 4.9% in U.S. dollars. Organic local-currency sales increased 4.7% and foreign currency translation increased sales by 0.2%. Sales growth was led by 3M purification, automotive OEM, aerospace and commercial transportation, abrasives, and industrial adhesives and tapes. Operating income was $617 million, up 2.4% year-on-year; operating margin of 21.9%.
Safety and Graphics sales were $1.5 billion, up 4.1% in U.S. dollars. Sales growth was strongest in the personal safety and commercial solutions businesses; sales declined in roofing granules. Sales increased in all regions, with the largest increases in EMEA and the U.S. Operating income was $353 million, an increase of 7.4% year-on-year; operating margin of 23.6%.
Electronics and Energy sales were $1.4 billion, up 6.2% in U.S. dollars. Sales in electronics-related businesses rose 11% year-on-year, while energy-related businesses grew 1%. There was positive sales growth in Latin America/Canada, Asia Pacific and EMEA, while the U.S. was flat. Operating income was $293 million, up 23.4% year-on-year; operating margin of 20.6%.
Health Care sales were $1.4 billion, up 5.9% in U.S. dollars. Organic local-currency sales increased 5.1%, acquisitions (Treo Solutions) added 0.4% to sales and foreign currency translation increased sales by 0.4%. Sales grew across the portfolio, with the strongest growth in health information systems, critical and chronic care, and infection prevention. Sales rose in all geographies, with the largest growth in Latin America/Canada, Asia Pacific and the U.S. Operating income was $434 million, an increase of 4.1%; operating margin of 30.7%.
Consumer sales were $1.1 billion, up 3.7% in U.S. dollars. Sales growth was led by DIY, consumer health care and home care. There was positive sales growth in Asia Pacific, the U.S. and EMEA, while Latin America/Canada was down slightly. Operating income was $241 million, up 2.3% year-on-year; operating margin of 21.1%.