ST. PAUL, Minn.–3M (NYSE: MMM) today reported first-quarter 2020 results. “In this unprecedented time, I could not be more proud of how our 96,000 people have stepped up to help fight COVID-19, and I thank all 3Mers for their incredible efforts,” said Mike Roman, 3M chairman and chief executive officer. “We are attacking the pandemic from all angles, which includes mobilizing all of our resources and rapidly increasing output of critical supplies to healthcare workers and first responders.”
“Given the breadth and diversity of our businesses, the financial impact of COVID-19 is varying across 3M,” Roman continued. “In the first quarter we saw strong growth in personal safety, as well as in other areas of our portfolio experiencing high demand due to the pandemic. At the same time, we experienced weak demand in several end markets that were more severely impacted by actions taken around the world to slow the pandemic. Looking ahead, 3M is taking action that will help us navigate near-term uncertainty, generate strong cash flow, and lead out of the slowdown by delivering for employees, customers and shareholders.”
COVID-19 Response & Business Impact
3M has been aggressively responding to the COVID-19 pandemic given its critical role as a provider of personal protective equipment in the U.S. and across the world. Since the beginning of the year, 3M has continued to:
- Lead in pandemic response
- Accelerated respirator production, including ramped up idle respirator lines
- Doubled global respirator output to 100 million/month (U.S. ~35 million/month)
- Increasing capital investment to double respirator output again
- Partnering to create innovative solutions to protect healthcare workers
- Prioritize supplies to the most critical areas
- Immediately redirected vast majority of global respirators output to healthcare
- Uniting with governments and distribution partners to expedite products to healthcare workers
- Closely collaborating with U.S. Administration, FDA, HHS, DoD and FEMA to import 166.5 million respirators into the U.S.
- Fight fraud and price gouging
- Working with distributors and governments to ensure secure supply chains
- 3M has not increased respirator prices as a result of the pandemic
- Published N95 respirator prices; created hotline for fraud and price gouging
- Working with national and local legal authorities to bring lawsuits in multiple states and Canada
- Support communities through aid for relief and recovery efforts
- Contributing $20 million in financial support to frontline healthcare workers, vulnerable populations disproportionately affected by the virus and medical research initiatives
The COVID-19 pandemic is affecting 3M’s businesses in a number of ways. 3M has experienced strong end-market demand, specifically in personal safety, home improvement, general cleaning, food safety and biopharma filtration. At the same time, several other end markets have experienced significant weakness due to social distancing and shelter-in-place mandates. These end markets include oral care, automotive OEM and aftermarket, general industrial, commercial solutions, and stationery and office.
The company is continuing to adapt quickly to the current environment, with a focus on mitigating the near-term impact while positioning 3M’s businesses for success coming out of the crisis. Actions being taken include:
- Protecting our employees
- Mobilized global crisis action team in January
- Updated safe workplace protocols globally, including work-from-home where possible
- Implemented pandemic support programs
- Ensuring business continuity
- Maintaining strong customer service with new global Enterprise Operations organization
- Ongoing adjustments to operations, including targeted shutdowns due to weak customer/market demand or government mandates
- Targeted paid short-term furloughs in businesses most impacted
- Protecting financial flexibility
- Taking aggressive cost reductions while minimizing employee impact—estimated cost savings of $350 to $400 million in the second quarter of 2020
- Adjusting capital allocation plans—prioritizing organic investments and the dividend, and suspended share repurchase program
- Reduced full-year 2020 cap-ex plan to approximately $1.3 billion versus $1.6 to $1.8 billion, previously
- Added $1.75 billion of cash via March 2020 debt issuance
- Continue to expect after-tax proceeds of $0.4 billion from closing of drug delivery divestiture in second quarter 2020
Withdrawing Full-Year Outlook
Due to the evolving and uncertain impact of the COVID-19 pandemic, 3M currently is not able to estimate the full duration, magnitude and pace of recovery across its diverse end markets with reasonable accuracy. Therefore, 3M believes it is prudent to withdraw its previously communicated full-year 2020 outlook, which was provided on January 28, 2020. The company will begin reporting monthly sales information starting in May to provide transparency on 3M’s ongoing business performance.
Sales were up 2.7 percent year-on-year to $8.1 billion. Organic local-currency sales grew 0.3 percent while acquisitions, net of divestitures, increased sales by 4.2 percent. Foreign currency translation reduced sales by 1.8 percent year-on-year.
Total sales grew 21.0 percent in Health Care and 4.6 percent in Consumer, with declines of 1.0 percent in Safety and Industrial and 5.0 percent in Transportation and Electronics. Organic local-currency sales increased 6.1 percent in Consumer, 2.2 percent in Safety and Industrial and 1.2 percent in Health Care, with a decline of 3.0 percent in Transportation and Electronics.
On a geographic basis, total sales grew 10.1 percent in the Americas, with declines of 2.1 percent in EMEA (Europe, Middle East and Africa) and 5.4 percent in Asia Pacific. Organic local-currency sales increased 4.2 percent in the Americas, with declines of 1.7 percent in EMEA and 4.4 percent in Asia Pacific.
First-quarter GAAP earnings were $2.22 per share, an increase of 47 percent year-on-year, with operating income of $1.7 billion and operating margins of 20.6 percent.
Excluding special items, first-quarter adjusted earnings were $2.16 per share, a decline of 2.7 percent year-on-year, with operating income of $1.7 billion and operating margins of 20.8 percent, as referenced in the “Supplemental Financial Information Non-GAAP Measures” section.
The company’s operating cash flow was $1.2 billion with adjusted free cash flow of $0.9 billion contributing to adjusted free cash flow conversion of 74 percent. See the “Supplemental Financial Information Non-GAAP Measures” section for applicable information.
The company paid $847 million in cash dividends to shareholders and repurchased $365 million of its own shares during the quarter.
First-Quarter Business Group Discussion
Safety and Industrial
- Sales of $2.9 billion, down 1.0 percent in U.S. dollars. Organic local-currency sales increased 2.2 percent, foreign currency translation decreased sales by 2.2 percent, and divestitures decreased sales by 1.0 percent.
- On an organic local-currency basis:
- Sales increased in personal safety, roofing granules, and industrial adhesives and tapes; sales declined in closure and masking, electrical markets, automotive aftermarket, and abrasives.
- Sales grew in the Americas and EMEA; sales declined in Asia Pacific.
- Operating income was $726 million, an increase of 14.0 percent year-on-year; operating margins of 24.7 percent.
Transportation and Electronics
- Sales of $2.2 billion, down 5.0 percent in U.S. dollars. Organic local-currency sales decreased 3.0 percent, foreign currency translation decreased sales by 1.3 percent, and divestitures decreased sales by 0.7 percent.
- On an organic local-currency basis:
- Sales increased in electronics and were flat in advanced materials, and transportation safety; sales declined in commercial solutions, and automotive and aerospace.
- Sales declined in the Americas, Asia Pacific and EMEA.
- Operating income was $484 million, a decline of 7.3 percent year-on-year; operating margins of 21.6 percent.
- Adjusted operating income was $482 million, a decline of 7.1 percent year-on-year; adjusted operating margins of 21.5 percent.
- Sales of $2.1 billion, up 21.0 percent in U.S. dollars. Organic local-currency sales increased 1.2 percent, foreign currency translation decreased sales by 1.8 percent, and acquisitions increased sales by 21.6 percent.
- On an organic local-currency basis:
- Sales grew in drug delivery, food safety, medical solutions, and separation and purification, and were flat in health information systems; sales declined in oral care.
- Sales grew in the Americas; sales declined in EMEA and Asia Pacific.
- Both GAAP and adjusted operating income was $456 million, a decline of 1.7 percent year-on-year on a GAAP basis; or a decline of 0.7 percent on an adjusted basis; operating margins of 21.7 percent.
- Sales of $1.3 billion, up 4.6 percent in U.S. dollars. Organic local-currency sales increased 6.1 percent and foreign currency translation decreased sales by 1.5 percent.
- On an organic local-currency basis:
- Sales grew in home improvement, home care and consumer health care; sales declined in stationery and office supplies.
- Sales grew in the Americas; sales declined in Asia Pacific and EMEA.
- Operating income was $269 million, up 14.5 percent year-on-year; operating margins of 21.4 percent.
3M will conduct an investor teleconference at 9:00 a.m. EDT (8:00 a.m. CDT) today. Investors can access this conference via the following:
- Live webcast at http://investors.3M.com.
- Live telephone:
Call 800-762-2596 within the U.S. or +1 212-231-2916 outside the U.S. Please join the call at least 10 minutes before the start time.
- Webcast replay:
Go to 3M’s Investor Relations website at http://investors.3M.com and click on “Quarterly Earnings.”
- Telephone replay:
Call 800-633-8284 within the U.S. or +1 402-977-9140 outside the U.S. (for both U.S. and outside the U.S., the access code is 21930637). The telephone replay will be available until 11:30 a.m. EDT (10:30 a.m. CDT) on May 5, 2020.
This news release contains forward-looking information about 3M’s financial results and estimates and business prospects that involve substantial risks and uncertainties. You can identify these statements by the use of words such as “anticipate,” “estimate,” “expect,” “aim,” “project,” “intend,” “plan,” “believe,” “will,” “should,” “could,” “target,” “forecast” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or business plans or prospects. Among the factors that could cause actual results to differ materially are the following: (1) worldwide economic, political, regulatory, capital markets and other external conditions and other factors beyond the Company’s control, including natural and other disasters or climate change affecting the operations of the Company or its customers and suppliers; (2) risks related to public health crises such as the global pandemic associated with the coronavirus (COVID-19); (3) liabilities related to certain fluorochemicals, including lawsuits concerning various PFAS-related products and chemistries, and claims and governmental regulatory proceedings and inquiries related to PFAS in a variety of jurisdictions; (4) legal proceedings, including significant developments that could occur in the legal and regulatory proceedings described in the Company’s Annual Report on Form 10-K for the year ended Dec. 31, 2019, and any subsequent quarterly reports on Form 10-Q (the “Reports”); (5) competitive conditions and customer preferences; (6) foreign currency exchange rates and fluctuations in those rates; (7) the timing and market acceptance of new product offerings; (8) the availability and cost of purchased components, compounds, raw materials and energy (including oil and natural gas and their derivatives) due to shortages, increased demand or supply interruptions (including those caused by natural and other disasters and other events); (9) unanticipated problems or delays with the phased implementation of a global enterprise resource planning (ERP) system, or security breaches and other disruptions to the Company’s information technology infrastructure; (10) the impact of acquisitions, strategic alliances, divestitures and other unusual events resulting from portfolio management actions and other evolving business strategies, and possible organizational restructuring; (11) operational execution, including scenarios where the Company generates fewer productivity improvements than estimated; (12) financial market risks that may affect the Company’s funding obligations under defined benefit pension and postretirement plans; and (13) the Company’s credit ratings and its cost of capital. Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Reports under “Cautionary Note Concerning Factors That May Affect Future Results” and “Risk Factors” in Part I, Items 1 and 1A (Annual Report) and in Part I, Item 2 and Part II, Item 1A (Quarterly Reports), as updated by applicable Current Reports on Form 8-K. The information contained in this news release is as of the date indicated. The Company assumes no obligation to update any forward-looking statements contained in this news release as a result of new information or future events or developments.
Courtesy of -(BUSINESS WIRE)-