3M Posts Record Sales, EPS for Both 4Q, Full Year 2013

3M reported fourth-quarter earnings of $1.62 per share, an increase of 14.9% versus the fourth quarter of 2012. Sales grew 2.4% year-on-year to $7.6 billion. Organic local-currency sales grew 3.4%, acquisitions added 0.7% to sales and currency impacts reduced sales by 1.7% year-on-year. Sales and per-share earnings were the highest of any fourth quarter in 3M’s history.

Operating income was $1.6 billion and operating income margins for the quarter were 20.9%. Fourth-quarter net income was $1.1 billion and the company converted 131% of net income to free cash flow. 3M paid $423 million in cash dividends to shareholders and repurchased $1.7 billion of its own shares during the quarter.

Organic local-currency sales growth was 5.8% in Industrial, 4.8% in Safety and Graphics, 3.6% in Health Care, 1.3% in Consumer and 0.4% in Electronics and Energy. On a geographic basis, organic local-currency sales grew 4.5% in the U.S., 3.4% in EMEA (Europe, Middle East and Africa), 3.3% in Asia Pacific and 2.2% in Latin America/Canada.

Full-year 2013 earnings were $6.72 per share, an increase of 6.3%. Sales increased 3.2% to $30.9 billion with organic local-currency growth of 3.4%. Acquisitions added 1.4% to sales and foreign currency reduced sales by 1.6%. For the full year, 3M paid $1.7 billion in cash dividends to shareholders and repurchased $5.2 billion of its own shares.

“The fourth quarter concluded a very successful year for 3M,” said Inge G. Thulin, 3M chairman, president and CEO “We generated broad-based, profitable sales growth across the portfolio and per-share earnings rose nearly 15% in the quarter. Free cash flow conversion was 131%, which enabled us to continue investing in our businesses while also returning a record amount of cash to shareholders.”

“3M employees around the world are bringing our vision and strategy to life and improving 3M’s relevance in the eyes of our customers,” Thulin continued. “Three key levers – namely portfolio management, investing in innovation and business transformation – combined with more aggressive capital deployment, will drive enhanced value creation going forward.”

3M affirmed its 2014 full-year performance expectations. The company expects 2014 earnings to be in the range of $7.30 to $7.55 per share with organic local-currency sales growth of 3 to 6%.

Industrial sales were $2.6 billion, up 6.1% in U.S. dollars. Organic local-currency sales increased 5.8%, acquisitions (Ceradyne) added 2.0% to sales and foreign currency translation reduced sales by 1.7%. Sales growth was driven by advanced materials, automotive OEM, 3M Purification, aerospace and automotive aftermarket. Operating income was $553 million, up 13.9% year-on-year; operating margin of 21.5%.

Health Care sales were $1.4 billion, up 2.4% in U.S. dollars. Sales growth was strongest in health information systems, food safety, critical and chronic care and infection prevention; sales declined in drug delivery systems. Operating income was $425 million, a decrease of 1.0%; operating margin of 31.2%.

Safety and Graphics sales were $1.3 billion, up 2.5% in U.S. dollars. Sales growth was led by roofing granules, personal safety, commercial graphics and architectural markets. Operating income was $256 million, an increase of 15.6% year-on-year; operating margin of 19.1%.

Electronics and Energy sales were $1.3 billion, a decrease of 1.0% in U.S. dollars. Energy-related sales grew year-on-year, led by renewable energy and electrical markets; electronics-related sales declined, with growth in optical systems and electronic solutions more than offset by declines in other businesses. Operating income was $221 million, up 1.1% year-on-year; operating margin of 16.7%.

Consumer sales were $1.1 billion, down 0.9% in U.S. dollars. Sales growth was led by the consumer health care and home care businesses. Operating income was $226 million, down 3.4% year-on-year; operating margin of 20.4%.