Business News
3M Reports Strong Third-Quarter Results
Friday 23. October 2009 - Company Again Raises Sales and Earnings Outlook on Positive Sequential Growth
3M (NYSE: MMM) today announced third-quarter earnings of $1.35 per share on sales of $6.2 billion, with operating income margins of 23.9 percent (a). Sales and per-share earnings declined 5.6 percent and 4.3 percent year-on-year, respectively. On a sequential basis, sales and per-share earnings increased 8.3 percent and 20.5 percent, respectively, and operating income margins improved by 3.1 percentage points versus second quarter levels. Free cash flow (i) for the third quarter was $1.6 billion, up 97 percent year-on-year.
Excluding special items (b-f), net income was $971 million and earnings were $1.37 per share, down 2.8 percent and 3.5 percent year-on-year, respectively. 3Ms Display and Graphics and Health Care businesses each delivered double-digit year-on-year profit improvements. All business segments and all geographic regions reported sequential sales improvements.
“These results reflect the strength of 3Ms business model as we again delivered higher than expected sales, strong operating margins and outstanding free cash flow,” said George W. Buckley, 3M chairman, president and CEO. “At the same time, we continued to invest in research and development, improving our supply chains and strengthening our brands and customer relationships, which will position us well as economies improve.”
For the second consecutive quarter, the company raised its 2009 earnings expectations. 3M now expects 2009 full-year earnings to be in the range of $4.50 to $4.55 per share, versus a prior range of $4.10 to $4.30. The company also updated its 2009 organic sales volume expectations to a decline of 9.5 percent to 10.5 percent from a previous range of down 10 percent to down 13 percent. All estimates quoted exclude special items.
Key Financial Highlights
Third-quarter worldwide sales totaled $6.2 billion, a year-on-year decrease of 5.6 percent. Local-currency sales including acquisitions decreased 3.3 percent, while currency translation effects reduced sales by 2.3 percent.
Local-currency sales including acquisitions increased 5.5 percent in Display and Graphics and 4.7 percent in Health Care, offset by declines of 2 percent in Safety, Security and Protection Services, 4.8 percent in Consumer and Office, 6.4 percent in Industrial and Transportation and 15.3 percent in Electro and Communications. Excluding special items (b-f), third-quarter net income was $971 million, or $1.37 per share, versus $999 million, or $1.42 per share, in the third quarter of 2008.
Business Segment Highlights
(Operating income and margin figures exclude special items (b-f))
Industrial and Transportation
Sales of $1.9 billion, down 6.4 percent year-on-year in local currency, including a 3 percent benefit from acquisitions; currency impacts reduced sales by 2.2 percent.
Continued year-on-year declines in many large industrial markets, such as automotive OEM and home appliances, although quarter-on-quarter trends are improving.
Double-digit local-currency growth in both the automotive aftermarket and renewable energy businesses.
Sequential sales and operating income improved by 10.1 percent and 22.7 percent, respectively, led by the industrial adhesives and tapes and automotive OEM businesses.
Operating income of $403 million, with strong operating margins of 21.2 percent.
Health Care
Sales of $1.1 billion, up 4.7 percent year-on-year in local currency; currency impacts reduced sales by 3.1 percent.
Local-currency sales growth led by the skin and wound care, infection prevention and oral care businesses; drug delivery local-currency sales were down year-on-year.
Profits increased year-over-year in all businesses.
All major geographic regions drove positive local-currency sales growth.
Operating income increased 12 percent to $340 million and operating margins were 31.5 percent.
Consumer and Office
Sales of $923 million, down 4.8 percent year-on-year in local currency, which includes 2.8 percentage points from acquisitions; currency impacts reduced sales by 1.8 percent.
Double-digit local-currency sales declines in the office channel; high unemployment levels were a major factor.
Overall soft consumer spending drove local-currency sales declines in the mass retail and do-it-yourself channels.
Positive local-currency sales growth in both home care cleaning products and in consumer health care, driven by the recent acquisitions of Futuro and ACE brands in the consumer health care market.
Sales increased sequentially in most businesses, including consumer mass retail, home care cleaning and consumer health care businesses.
Operating income of $227 million, with strong operating margins of 24.6 percent.
Display and Graphics
Sales of $896 million, up 5.5 percent year-on-year in local currency, including 2.5 percentage points of growth from acquisitions; currency impacts reduced sales by 1 percent; sales rose 10.8 percent sequentially.
Sales in optical systems rose 26 percent year-on-year and 27 percent sequentially, driven by new products for eco-friendly LCD displays along with overall improvement in LCD market volumes.
Single-digit local-currency sales growth in traffic safety systems; business conditions in commercial graphics remain challenging.
Operating income up 12 percent to $204 million, with margins of 22.8 percent.
Safety, Security and Protection Services
Sales of $864 million, down 2 percent year-on-year in local currency; currency translation impacts reduced sales by 4.1 percent.
Single-digit local-currency sales growth in security systems and in personal protective products, driven by H1N1-related respirator demand.
Respirator manufacturing plants running at full capacity; adding new respirator capacity to address substantial near-term backlog.
Difficult economic conditions continued to hurt sales of corrosion protection products.
Operating income increased 9.8 percent to $236 million, with strong operating margins of 27.3 percent.
Electro and Communications
Sales of $617 million, down 15.3 percent year-on-year in local currency; currency translation reduced sales by 0.9 percent.
Sales impacted by continued weak market conditions in telecom and commercial construction; despite these challenges, sales and operating income improved sequentially in all major geographies.
Operating income down 26 percent to $117 million, with margins of 19 percent.
On a sequential basis, sales increased 12 percent and operating income increased 59 percent.