3M Posts Record 3Q 2014 Sales, EPS

3M reported third-quarter earnings of $1.98 per share, an increase of 11.2% versus the third quarter of 2013. Sales grew 2.8% year-on-year to $8.1 billion. Organic local-currency sales grew 3.9%, acquisitions added 0.1% to sales and currency impacts reduced sales by 1.2% year-on-year.

Third-quarter operating income was $1.9 billion and operating income margins were 23.4%. Net income was $1.3 billion and the company converted 103% of net income to free cash flow in the quarter.

3M paid $550 million in cash dividends to shareholders and repurchased $1.2 billion of its own shares during the quarter.

Organic local-currency sales growth was 5.4% in Health Care, 4.3% in Electronics and Energy, 4.2% in Industrial, and 3.1% in both Consumer, and Safety and Graphics. On a geographic basis, organic local-currency sales grew 6.0% in the U.S., 4.9% in Asia Pacific, 0.8% in EMEA (Europe, Middle East and Africa) and 0.4% in Latin America/Canada.

“This was another strong quarter for 3M,” said Inge G. Thulin, 3M’s chairman, president and CEO. “The 3M team once again delivered broad-based organic growth with operating margins exceeding 22% in all businesses. As we look forward, our focus will remain on actively managing the portfolio and strategically investing in the business to continue delivering profitable growth across the company. 3M remains on track to deliver its long-term financial objectives.”

3M updated its 2014 full-year performance expectations. The company now anticipates earnings in the range of $7.40 to $7.50 per share versus a prior expectation of $7.30 to $7.55. Organic local-currency sales growth is expected to be 4 to 5% versus 3 to 6% previously. 3M estimates foreign currency impacts will reduce sales by approximately 1.5% for the year versus a previous estimate of approximately 1%. The company also updated its full-year free cash flow conversion expectation to 95 to 100% from a prior range of 90 to 100%.

Third-Quarter Business Group Discussion

The Industrial group reported sales of $2.8 billion, up 3.0% in U.S. dollars. Sales growth was led by aerospace and commercial transportation, 3M purification, automotive OEM, advanced materials, and industrial adhesives and tapes; sales declined in personal care. Operating income was $616 million, up 7.9% year-on-year, with an operating margin of 22.2%.

Electronics and Energy sales were $1.5 billion, up 3.5% in U.S. dollars. Sales in electronics-related businesses rose 8% year-on-year, with strong growth in display materials and systems and in electronics materials solutions; energy-related businesses declined 2%. Operating income was $338 million, up 12.5% year-on-year, with an operating margin of 22.5%.

Safety and Graphics sales were $1.4 billion, up 1.3% in U.S. dollars. Sales growth was led by personal safety and traffic safety and security; sales declined in roofing granules. Operating income was $340 million, an increase of 8.8% year-on-year, with an operating margin of 23.5%.

Health Care sales were $1.4 billion, up 4.7% in U.S. dollars. Acquisitions (Treo Solutions) added 0.5% to sales. Sales increased across the portfolio, led by double-digit growth in drug delivery systems and health information systems. Operating income was $432 million, an increase of 1.4%, with an operating margin of 31.0%.

Consumer sales were $1.2 billion, up 2.1% in U.S. dollars. Sales grew in DIY, consumer health care and home care; stationery and office supplies declined year-on-year. Operating income was $272 million, up 10.1% year-on-year, with an operating margin of 23.2%.