3M Reports Q4 2014 Results

3M has reported fourth-quarter earnings of $1.81 per share, an increase of 11.7% versus the fourth quarter of 2013. Sales grew 2.0% year-on-year to $7.7 billion. Organic local-currency sales grew 6.3% with acquisitions adding 0.1% to sales. Foreign currency translation reduced sales by 4.4% year-on-year.
 
Operating income was $1.7 billion and operating income margins for the quarter were 21.5%. Fourth-quarter net income was $1.2 billion and the company converted 144% of net income to free cash flow.
 
3M paid $544 million in cash dividends to shareholders and repurchased $1.3 billion of its own shares during the quarter.
 
Organic local-currency sales growth was 9.2% in Safety and Graphics, 6.4% in Health Care, 6.2% in Electronics and Energy, 5.9% in Industrial, and 5.8% in Consumer. On a geographic basis, organic local-currency sales grew 9.0% in Latin America/Canada, 6.9% in Asia Pacific, 6.6% in the U.S., and 3.3% in EMEA (Europe, Middle East and Africa).
 
Full-year 2014 earnings were $7.49 per share, an increase of 11.5%. Sales increased 3.1% to a record $31.8 billion with organic local-currency growth of 4.9%. Foreign currency translation reduced sales by 1.9%. Full-year operating income margins were 22.4%, up 0.8%age points versus 2013. 3M converted 104% of net income to free cash flow for the year and generated 22% return on invested capital.
 
For the full year, 3M paid $2.2 billion in cash dividends to shareholders and repurchased $5.7 billion of its own shares.
 
“3M delivered strong results in the fourth quarter, which culminated a solid 2014 performance,” said Inge G. Thulin, 3M’s chairman, president and CEO. “Organic growth was positive across all business groups and geographic areas, and operating margins rose by nearly a full point. We once again generated substantial free cash flow, which allowed for continued investment in our businesses and significant return of cash to our shareholders.”
 
3M affirmed its 2015 full-year performance expectations. The company expects 2015 earnings to be in the range of $8.00 to $8.30 per share with organic local-currency sales growth of 3 to 6%. 3M also expects free cash flow conversion to be in the range of 90 to 100%.
 
Fourth-Quarter Business Group Discussion
 
Industrial
 
• Sales of USD2.6 billion, up 1.4% in U.S. dollars. Organic local-currency sales increased 5.9% and foreign currency translation reduced sales by 4.5%.
• On an organic local-currency basis:
1. Sales growth was led by advanced materials, aerospace and commercial transportation, industrial adhesives and tapes, and automotive aftermarket.
2. Sales grew in all major geographies, led by the U.S., Latin America/Canada and Asia Pacific.
• Operating income was $538 million, down 2.9% year-on-year; operating margin of 20.5%.
 
Health Care
 
• Sales of $1.4 billion, up 2.4% in U.S. dollars. Organic local-currency sales increased 6.4%, acquisitions increased sales by 0.6% and foreign currency translation reduced sales by 4.6%.
• On an organic local-currency basis:
1. Sales growth was led by health information systems, food safety, infection prevention, and critical and chronic care.
2. Sales increased in all major geographies, with the strongest growth in Latin America/Canada, Asia Pacific and the U.S.
• Operating income was $431 million, an increase of 1.6%; operating margin of 31.0%.
 
Electronics and Energy
 
• Sales of $1.4 billion, up 3.3% in U.S. dollars. Organic local-currency sales increased 6.2% and foreign currency translation reduced sales by 2.9%.
• On an organic local-currency basis:
1. Electronics-related sales increased 9% with strong growth in both electronics materials solutions and display materials and systems; energy-related sales increased 2% year-on-year with solid growth in electrical markets partially offset by declines in telecom and renewable energy businesses.
2. Positive sales growth in Latin America/Canada, Asia Pacific and EMEA; U.S. was flat year-on-year.
• Operating income was $257 million, up 16.1% year-on-year; operating margin of 18.7%.
 
Safety and Graphics
 
• Sales of $1.4 billion, up 3.4% in U.S. dollars. Organic local-currency sales increased 9.2% and foreign currency translation reduced sales by 5.8%.
• On an organic local-currency basis:
1. Sales growth was led by the personal safety and commercial solutions businesses; sales in traffic safety and security systems were down slightly year-on-year.
2. Sales grew across all areas, led by Asia Pacific, Latin America/Canada and EMEA.
• Operating income was $285 million, an increase of 12.3% year-on-year; operating margin of 20.8%.
 
Consumer
 
• Sales of $1.1 billion, up 2.2% in U.S. dollars. Organic local-currency sales increased 5.8% and foreign currency translation reduced sales by 3.6%.
• On an organic local-currency basis:
1. Sales growth was led by DIY, consumer health care, and home care.
2. Sales increased in Latin America/Canada, the U.S. and Asia Pacific; EMEA sales declined year-on-year.
• Operating income was $254 million, up 12.4% year-on-year; operating margin of 22.5%.