REG - 3M Company - 3rd Quarter Results <Origin Href="QuoteRef">MMM.N</Origin> - Part 6
01/11/2017 07:06
- Part 6: For the preceding part double click ID:nRSA1805Ve
8,172
% of worldwide sales 39.4 % 31.6 % 19.4 % 9.6 % - 100.0 %
Components of net sales change:
Volume - organic 3.8 % 13.4 % 3.3 % 4.4 % - 6.6 %
Price (0.2) (0.6) 0.7 0.9 - -
Organic local-currency sales 3.6 12.8 4.0 5.3 - 6.6
Divestitures (1.6) (0.5) (0.8) (2.1) - (1.2)
Translation - (1.5) 4.2 2.4 - 0.6
Total sales change 2.0 % 10.8 % 7.4 % 5.6 % - 6.0 %
Total sales change:
Industrial 4.0 % 6.4 % 9.6 % 7.2 % - 6.2 %
Safety and Graphics (3.0) % 6.2 % 8.7 % (0.6) % - 1.9 %
Health Care 8.5 % 7.4 % 5.2 % 10.7 % - 7.7 %
Electronics and Energy (1.8) % 19.2 % 4.8 % 8.3 % - 13.1 %
Consumer 1.1 % 5.3 % 1.6 % 5.6 % - 2.2 %
Organic local-currency sales change:
Industrial 5.0 % 8.7 % 5.2 % 5.6 % - 6.1 %
Safety and Graphics 3.1 % 11.0 % 7.7 % 4.2 % - 6.0 %
Health Care 8.5 % 8.8 % 1.6 % 8.6 % - 6.9 %
Electronics and Energy (1.5) % 20.0 % 0.9 % 6.2 % - 13.2 %
Consumer 1.1 % 7.1 % (2.2) % 2.7 % - 1.9 %
Additional information beyond what is included in the preceding table is as follows:
· In the Asia Pacific geographic area, where 3M's Electronics and Energy business is concentrated, sales benefited
from strengthened demand across most electronics market segments. In China/Hong Kong, both total sales and organic
local-currency sales increased 23 percent. In Japan, total sales declined 1 percent, as organic local-currency sales growth
of 5 percent was more than offset by foreign currency translation impacts.
· In the EMEA geographic area, Central/East Europe and Middle East/Africa had both total sales and organic
local-currency sales increases of 8 percent. West Europe total sales grew 7 percent, driven by foreign currency translation
impacts, in addition to organic local-currency sales growth of 3 percent.
· In the Latin America/Canada geographic area, total sales increased 8 percent in Mexico, driven by organic
local-currency sales growth of 5 percent. In Canada, total sales increased 16 percent, driven by organic local-currency
sales growth of 14 percent. In Brazil, total sales growth of 2 percent was driven by foreign currency translation impact,
as organic local-currency sales growth was flat.
Selling prices were flat year-on-year for the third quarter of 2017, compared to a year-on-year decrease of 0.3 percent for
the second quarter of 2017. In Asia Pacific, strong volume growth in electronics had a negative impact on price. Latin
America/Canada and EMEA had price growth, while the U.S. selling prices declined slightly.
Foreign currency translation increased year-on-year sales by 0.6 percent, with translation-related sales increases in both
EMEA and Latin America/Canada. In Asia Pacific, the U.S. dollar was weaker compared to the third quarter of 2016 by 8
percent versus the Japanese Yen, while the Chinese Yuan was flat. In EMEA, the U.S. dollar was stronger compared to the
third quarter of 2016 by 6 percent versus the Euro, while the British Pound was flat.
Nine months ended September 30, 2017
Europe, Latin
United Asia Middle East America/ Other
States Pacific & Africa Canada Unallocated Worldwide
Net sales (millions) $ 9,291 $ 7,335 $ 4,771 $ 2,277 $ (7) $ 23,667
% of worldwide sales 39.3 % 31.0 % 20.1 % 9.6 % - 100.0 %
Components of net sales change:
Volume - organic 2.6 % 11.4 % 1.4 % 2.8 % - 5.1 %
Price (0.3) (0.4) 0.5 1.0 - (0.1)
Organic local-currency sales 2.3 11.0 1.9 3.8 - 5.0
Divestitures (1.3) (0.3) (0.5) (1.3) - (0.9)
Translation - (1.0) (0.4) 2.2 - (0.2)
Total sales change 1.0 % 9.7 % 1.0 % 4.7 % - 3.9 %
Total sales change:
Industrial 3.9 % 6.1 % 3.0 % 4.3 % - 4.3 %
Safety and Graphics (1.2) % 5.4 % 2.4 % 0.8 % - 1.4 %
Health Care 4.7 % 6.9 % (1.7) % 10.4 % - 3.9 %
Electronics and Energy (0.6) % 17.2 % (1.2) % 4.0 % - 10.6 %
Consumer (1.2) % 6.7 % (2.8) % 6.9 % - 0.7 %
Organic local-currency sales change:
Industrial 5.0 % 7.8 % 3.7 % 2.6 % - 5.2 %
Safety and Graphics 2.8 % 8.3 % 4.9 % 3.2 % - 4.6 %
Health Care 4.7 % 7.8 % (0.6) % 8.1 % - 4.1 %
Electronics and Energy 0.4 % 17.8 % (1.7) % 2.5 % - 11.0 %
Consumer (1.2) % 6.8 % (2.6) % 3.9 % - 0.5 %
Additional information beyond what is included in the preceding table is as follows:
· In the Asia Pacific geographic area, where 3M's Electronics and Energy business is concentrated, sales benefited
from strengthened demand across most electronics market segments. Total sales in China/Hong Kong grew 15 percent and Japan
grew 5 percent. On an organic local-currency sales basis, China/Hong Kong grew 18 percent and Japan grew 9 percent.
· In the EMEA geographic area, Central/East Europe and Middle East/Africa total sales and organic local-currency grew
2 percent. West Europe total sales grew 1 percent, as organic local-currency sales growth of 2 percent was partially offset
by foreign currency translation.
· In the Latin America/Canada geographic area, total sales increased 4 percent in Mexico, as organic local-currency
sales growth of 7 percent was partially offset by foreign currency translation and divestitures. In Canada, both total
sales and organic-local currency sales grew 6 percent. In Brazil total sales growth of 11 percent was driven by foreign
currency translation, while organic local-currency sales increased 1 percent.
Foreign currency translation reduced year-on-year sales by 0.2 percent, with the translation-related sales increase in
Latin America/Canada more than offset by the decreases in EMEA and Asia Pacific.
Managing currency risks:
The stronger U.S. dollar had a negative impact on sales and earnings in the first nine months of 2017. 3M utilizes a number
of tools to hedge currency risk related to earnings. 3M uses natural hedges such as pricing, productivity, hard currency
and hard currency-indexed billings, and localizing source of supply. 3M also uses financial hedges to mitigate currency
risk. In the case of more liquid currencies, 3M hedges a portion of its aggregate exposure, using a 12, 24 or 36 month
horizon, depending on the currency in question. For less liquid currencies, financial hedging is frequently more expensive
with more limitations on tenor. Thus this risk is largely managed via local operational actions using natural hedging tools
as discussed above. In either case, 3M's hedging approach is designed to mitigate a portion of foreign currency risk and
reduce volatility, ultimately allowing time for 3M's businesses to respond to changes in the marketplace.
Financial condition:
3M generated $4.380 billion of operating cash flows in the first nine months of 2017, a decrease of $73 million when
compared to the first nine months of 2016. Refer to the section entitled "Financial Condition and Liquidity" later in MD&A
for a discussion of items impacting cash flows.
In February 2016, 3M's Board of Directors authorized the repurchase of up to $10 billion of 3M's outstanding common stock,
with no pre-established end date. In the first nine months of 2017, the Company purchased $1.6 billion of its own stock,
compared to $2.8 billion of stock purchases in the first nine months of 2016. As of September 30, 2017, approximately $5.6
billion remained available under the February 2016 authorization. The Company expects to purchase $2.0 billion to $2.5
billion of its own stock in 2017. In February 2017, 3M's Board of Directors declared a first-quarter 2017 dividend of
$1.175 per share, an increase of 6 percent. This marked the 59th consecutive year of dividend increases for 3M. In May
2017, 3M's Board of Directors declared a second quarter 2017 dividend of $1.175 per share. In August 2017, 3M's Board of
Directors declared a third quarter 2017 dividend of $1.175 per share.
3M currently has an AA- credit rating with a stable outlook from Standard & Poor's and has an A1 credit rating with a
stable outlook from Moody's Investors Service. The Company generates significant ongoing cash flow and has proven access to
capital markets funding throughout business cycles.
3M expects to contribute approximately $300 million to $500 million of cash to its global defined benefit pension and
postretirement plans in 2017. The Company does not have a required minimum cash pension contribution obligation for its
U.S. plans in 2017.
Divestitures and Strategic Investments:
In both the third quarter and first nine months of 2017, the Company continued to execute on accelerating investments in
growth initiatives and footprint optimization. In addition, the Company divested certain businesses as it continued to
focus its portfolio on opportunities that create greater value for its shareholders. As shown below, these divestitures and
strategic investments led to a net year-on-year decrease of approximately $0.05 per diluted share and a benefit of $0.10
per diluted share, respectively, for the three and nine months ended September 30, 2017.
Three months ended September 30, 2017 Nine months ended September 30, 2017
Divestiture impacts and strategic investments net benefit/(cost) (in millions, except per share amounts) Pre-tax impact Impact per diluted share after-tax Pre-tax impact Impact per diluted share after-tax
Divestiture impacts:
2017 divestiture gains $ - $ 490
Less: prior year divestiture gains - (40)
Year-on-year lost operating loss/(income) from divested businesses 10 (2)
Year-on-year divestiture impacts, net of lost operating loss/(income) $ 10 $ 0.01 $ 448 $ 0.56
Strategic investments:
2017 portfolio and footprint optimization activities:
Restructuring actions and exit activities $ - $ (123)
Asset charges and accelerated depreciation (24) (140)
Other costs (11) (26)
Less: prior year portfolio and footprint optimization activities 6 21
Year-on-year portfolio and footprint optimization (29) $ (0.04) (268) $ (0.34)
Incremental year-on-year growth initiatives (19) (94)
Total incremental strategic investments $ (48) $ (0.06) $ (362) $ (0.46)
Year-on-year divestiture impacts and strategic investments net benefit/(cost) $ (38) $ (0.05) $ 86 $ 0.10
The total pre-tax year-on-year divestiture impacts, net of strategic investments from the table above, are further detailed
below by business group:
Three months ended Nine months ended
(Millions) September 30, 2017 September 30, 2017
Industrial $ (12) $ (114)
Safety and Graphics 5 460
Health Care (4) (49)
Electronics and Energy (7) (80)
Consumer (13) (88)
Corporate and Unallocated (7) (43)
Total pretax divestiture gains, net of strategic investments $ (38) $ 86
Fourth Quarter 2017 Items:
In October 2017, 3M sold its electronic monitoring business to an affiliate of Apax Partners for $200 million, net of cash
sold and closing and other adjustments. 3M expects a pre-tax gain of approximately $100 million (or 12 cents per diluted
share) in the fourth quarter of 2017 as a result of this divestiture. Refer to Note 2 for additional details.
In October 2017, 3M completed the acquisition of the underlying legal entities and associated assets of Scott Safety, which
is headquartered in Monroe, North Carolina, from Johnson Controls for $2.0 billion, net of closing and other adjustments.
The income from on-going operations, net of acquisition and integration costs, is expected to decrease earnings in the
fourth quarter of 2017 by approximately 8 cents per diluted share. Refer to Note 2 for additional details.
During the fourth quarter of 2017, a debt extinguishment charge of approximately $95 million related to the repurchase of
$305 million aggregate principal amount of the Company's high coupon debt via tender offers is expected to decrease
earnings by approximately 11 cents per diluted share. Refer to Note 8 for additional details.
Additionally in the fourth quarter of 2017, the Company will recognize additional incremental strategic investments
comprised of growth initiatives and portfolio and footprint optimization charges. These incremental strategic investments
are expected to decrease fourth quarter 2017 earnings year-on-year by approximately 6 cents to 10 cents per diluted share.
RESULTS OF OPERATIONS
Net Sales:
Refer to the preceding sections entitled "Sales and operating income by business segment" and "Sales and operating income
by geographic area" for discussion of sales change.
Operating Expenses:
Three months ended Nine months ended
September 30, September 30,
(Percent of net sales) 2017 2016 Change 2017 2016 Change
Cost of sales 49.4 % 49.9 % (0.5) % 50.5 % 49.7 % 0.8 %
Selling, general and administrative expenses 19.9 19.9 - 20.4 20.3 0.1
Research, development and related expenses 5.7 5.5 0.2 5.9 5.8 0.1
Gain from sale of businesses - - - (2.1) (0.2) (1.9)
Operating income 25.0 % 24.7 % 0.3 % 25.3 % 24.4 % 0.9 %
3M expects global defined benefit pension and postretirement expense in 2017 (before settlements, curtailments, special
termination benefits and other) to increase by approximately $74 million pre-tax when compared to 2016, which impacts cost
of sales; selling, general and administrative expenses (SG&A); and research, development and related expenses (R&D). Refer
to 3M's Current Report on Form 8-K dated May 4, 2017 (MD&A section entitled Critical Accounting Estimates - Pension and
Postretirement Obligations and Note 11, Pension and Postretirement Benefit Plans) for background concerning the change to
the spot yield curve approach and other factors that will impact pension and postretirement expenses in 2017. The
year-on-year increase in defined benefit pension and postretirement expense for the third quarter and first nine months of
2017 was $20 million and $64 million, respectively.
The Company is investing in an initiative called business transformation, with these investments impacting cost of sales,
SG&A, and R&D. Business transformation encompasses the ongoing multi-year phased implementation of an enterprise resource
planning (ERP) system on a worldwide basis, as well as changes in processes and internal/external service delivery across
3M.
In both the three and nine months ended September 30, 2017, strategic investments in growth initiatives, portfolio actions
and footprint optimization, in addition to gains on divestitures, impacted 3M's operating expenses. The table below
reflects actual amounts within the period and does not include any year-on-year impacts.
Three months ended Nine months ended
(Millions) September 30, 2017 September 30, 2017
Cost of sales $ 18 $ 220
Selling, general and administrative expenses 57 185
Research, development and related charges - 9
Gain on sale of businesses - (490)
Total $ 75 $ (76)
Cost of Sales:
Cost of sales includes manufacturing, engineering and freight costs.
Cost of sales, measured as a percent of sales, decreased in the third quarter of 2017, helped by 6.6 percent organic sales
volume growth and an approximate 1 percent year-on-year reduction in raw material input costs as a result of input
management. This decrease was partially offset by year-on-year charges related to 3M's optimization of its portfolio and
supply chain footprint, foreign currency effects (net of hedge impacts), and higher defined benefit pension expense.
Cost of sales, measured as a percent of sales, increased in the first nine months of 2017 due to incremental strategic
investments in productivity, portfolio actions and footprint optimization, foreign currency effects (net of hedge impacts),
and higher defined benefit pension expense. This was partially offset by an approximate 1.5 percent year-on-year reduction
in raw material input costs as a result of input management. Selling prices decreased net sales year-on-year by 0.1 percent
in the first nine months of 2017.
Selling, General and Administrative Expenses:
SG&A in dollars increased 6.1 percent and 4.5 percent in the third quarter and first nine months of 2017, respectively,
when compared to the same period last year, impacted by incremental strategic investments and higher defined benefit
pension expense.
Research, Development and Related Expenses:
R&D in dollars increased $36 million and $93 million in the third quarter and first nine months of 2017, respectively,
compared to the same period last year. 3M continued to invest in its key initiatives, including R&D aimed at disruptive
innovation programs with the potential to create entirely new markets and disrupt existing markets.
Gain on Sale of Businesses:
In January 2017, 3M completed the sale of assets related to its safety prescription eyewear business to HOYA Vision Care.
3M received proceeds of $53 million for this transaction and recognized, net of assets sold, transaction and other costs, a
pre-tax gain of $29 million, which was reported within the Company's Safety and Graphics business.
In May 2017, 3M completed the sale of its identity management business to Gemalto N.V. In June 2017, 3M completed the sale
of its tolling and automated license/number plate recognition business to Neology, Inc. 3M received proceeds of $833
million, or $809 million net of cash sold, and reflected a pre-tax gain of $461 million as a result of these two
divestitures in the second quarter of 2017, which was reported within the Company's Safety and Graphics business. For more
details, refer to Note 2.
In the first quarter of 2016, 3M completed the sale of the remainder of the assets of 3M's library systems business to One
Equity Partners Capital Advisors L.P. (OEP). Also in the first quarter of 2016, 3M completed the sale of its pressurized
polyurethane foam adhesives business (formerly known as Polyfoam) to Innovative Chemical Products Group, a portfolio
company of Audax Private Equity. 3M received proceeds of $56 million for these transactions and recognized a pre-tax gain
of $40 million as a result of these two divestitures in the first quarter of 2016. These businesses were formerly part of
the Company's Safety and Graphics business and Industrial business, respectively. Refer to Note 2 in 3M's Current Report on
Form 8-K dated May 4, 2017 (which updated 3M's 2016 Annual Report on Form 10-K) for more information on 3M's acquisitions
and divestitures.
Operating Income:
3M uses operating income as one of its primary business segment performance measurement tools. Refer to the table below for
a reconciliation of operating income margins for the three months and nine months ended September 30, 2017 versus the same
periods last year.
Three months ended Nine months ended
(Percent of net sales) September 30, 2017 September 30, 2017
Same period last year 24.7 % 24.4 %
Increase/(decrease) in operating income margin, due to:
Organic volume/productivity 0.9 0.8
Selling price and raw material impact 0.3 0.3
Foreign exchange impacts (0.4) (0.4)
Pension and postretirement benefit costs (0.3) (0.3)
Divestiture gains - 1.9
Operating loss/(income) from divested businesses 0.4 0.1
Incremental strategic investments (0.6) (1.5)
Current period 25.0 % 25.3 %
Operating income margins increased 0.3 percentage points in the third quarter of 2017 and increased 0.9 percentage points
in the first nine months of 2017 when compared to the same periods last year. 3M benefited from year-on-year divestiture
gains (refer to Note 2), non-repeating net operating losses from divested businesses, higher organic local-currency sales
growth and productivity. 3M also benefited from raw material cost decreases. Items that reduced operating income margins
included year-on-year incremental strategic investments in growth, productivity and portfolio actions, in addition to
charges related to 3M's optimization of its portfolio and supply chain footprint. Additional items that reduced operating
margins included foreign currency effects (net of hedge impacts) and higher year-on-year defined benefit pension expense.
Interest Expense and Income:
Three months ended Nine months ended
September 30, September 30,
(Millions) 2017 2016 2017 2016
Interest expense $ 57 $ 50 $ 156 $ 135
Interest income (13) (8) (33) (20)
Total $ 44 $ 42 $ 123 $ 115
Interest expense was higher in the third quarter and first nine months of 2017 compared to the same periods last year,
largely due to higher U.S. average debt balances and higher interest rates. Interest income was higher in the third quarter
and first nine months of 2017 compared to the same periods last year, due to higher average cash balances and cash yields.
Provision for Income Taxes:
Three months ended Nine months ended
September 30, September 30,
(Percent of pre-tax income) 2017 2016 2017 2016
Effective tax rate 28.3 % 28.5 % 26.1 % 28.3 %
The effective tax rate for the third quarter of 2017 was 28.3 percent, compared to 28.5 percent in the third quarter of
2016, a decrease of 0.2 percentage points. The effective tax rate for the first nine months of 2017 was 26.1 percent,
compared to 28.3 percent in the first nine months of 2016, a decrease of 2.2 percentage points. The changes in the rates
between years are impacted by many factors, as described further in Note 6.
The Company currently anticipates its 2017 full-year tax rate will be 26.0 to 27.0 percent. The rate can vary from quarter
to quarter due to discrete items, such as the settlement of income tax audits and changes in tax laws and employee
share-based payment accounting; as well as recurring factors, such as geographic mix of income before taxes and foreign
currency effects.
Net Income Attributable to Noncontrolling Interest:
Three months ended Nine months ended
September 30, September 30,
(Millions) 2017 2016 2017 2016
Net income attributable to noncontrolling interest $ 4 $ 2 $ 9 $ 7
Net income attributable to noncontrolling interest represents the elimination of the income or loss attributable to non-3M
ownership interests in 3M consolidated entities. The primary noncontrolling interest relates to 3M India Limited, of which
3M's effective ownership is 75 percent.
Currency Effects:
3M estimates that year-on-year currency effects, including hedging impacts, decreased pre-tax income by $29 million and
$108 million for the three and nine months ended September 30, 2017, respectively. This estimate includes the effect of
translating profits from local currencies into U.S. dollars; the impact of currency fluctuations on the transfer of goods
between 3M operations in the United States and abroad; and transaction gains and losses, including derivative instruments
designed to reduce foreign currency exchange rate risks and any impacts from swapping Venezuelan bolivars into U.S.
dollars. 3M estimates that year-on-year derivative and other transaction gains and losses decreased pre-tax income by $34
million and $99 million for the three and nine months ended September 30, 2017, respectively.
Significant Accounting Policies and Critical Accounting Estimates:
Information regarding new accounting standards is included in Note 1 to the Consolidated Financial Statements. In addition,
refer to the Critical Accounting Estimates section within MD&A of 3M's Current Report on Form 8-K dated May 4, 2017 (which
updated 3M's 2016 Annual Report on Form 10-K).
PERFORMANCE BY BUSINESS SEGMENT
Disclosures relating to 3M's business segments are provided in Note 14. Effective in the first quarter of 2017, as part of
3M's continuing effort to improve the alignment of its businesses around markets and customers, the Company made the
following changes:
Integration of former Renewable Energy Division
· 3M's former Renewable Energy Division (RED) has been integrated into existing divisions within the Electronics and
Energy business segment and Safety and Graphics business segment. 3M is committed to leadership in sustainability and to
enabling the advancement of energy solutions into the future. Integrating RED's offerings into larger divisions already
serving these segments will provide increased scale and build on strength by leveraging 3M's existing brands, go-to-market
capabilities, and relationships to support growth objectives.
Creation of Automotive and Aerospace Solutions Division
· 3M created the Automotive and Aerospace Solutions Division, which combined the former Automotive Division and
Aerospace and Commercial Transportation Division, which were both within the Industrial business segment. Combining the
strengths along with the deep industry knowledge of each business will enable this new division to utilize shared
technology platforms and processes to deliver a broader set of innovative solutions, along with world-class quality and
service to 3M's customers. This combination will help accelerate the Company's profitable growth and market relevance
across the automotive, aerospace and commercial transportation industries.
Consolidation of U.S. customer account activity - impacting dual credit reporting
· The Company consolidated its customer account activity in the U.S. into more centralized sales districts. This
improved alignment reduces the complexity for customers when interacting with multiple businesses within 3M, creating a
better customer experience. 3M business segment reporting measures include dual credit to business segments for certain
U.S. sales and related operating income. This dual credit is based on which business segment provides customer account
activity with respect to a particular product sold in the U.S. The alignment of U.S. customer accounts to fewer, more
focused sales districts changed the attribution of dual credit across 3M's business segments.
Business segment information presented herein reflects the impact of these changes for all periods presented. 3M manages
its operations in five business segments. The reportable segments are Industrial; Safety and Graphics; Electronics and
Energy; Health Care; and Consumer.
Corporate and Unallocated:
In addition to these five business segments, 3M assigns certain costs to "Corporate and Unallocated," which is presented
separately in the preceding business segments table and in Note 14. Corporate and Unallocated includes a variety of
miscellaneous items, such as corporate investment gains and losses, certain derivative gains and losses, certain
insurance-related gains and losses, certain litigation and environmental expenses, corporate restructuring charges and
certain under- or over-absorbed costs (e.g. pension, stock-based compensation) that the Company determines not to allocate
directly to its business segments. Because this category includes a variety of miscellaneous items, it is subject to
fluctuation on a quarterly and annual basis.
Corporate and Unallocated operating expenses increased by $35 million and $36 million in the third quarter and first nine
months of 2017, respectively, when compared to the same period last year. In both the first and second quarters of 2017, a
portion of the severance actions were reflected in Corporate and Unallocated. In addition, 3M's defined benefit pension and
postretirement expense allocation to Corporate and Unallocated increased by $8 million and $27 million, respectively, in
the third quarter and first nine months of 2017 when compared to the same periods last year.
Operating Business Segments:
Information related to 3M's business segments for the third quarter and first nine months of 2017 and 2016 is presented in
the tables that follow. Organic local-currency sales include both organic volume impacts plus selling price impacts.
Acquisition impacts, if any, are measured separately for the first twelve months post-transaction. The divestiture impacts,
if any, foreign currency translation impacts and total sales change are also provided for each business segment. Any
references to EMEA relate to Europe, Middle East and Africa on a combined basis.
Refer to the preceding "Sales and operating income by geographic area" section for organic local-currency sales growth by
business segment within major geographic areas.
Industrial Business:
Three months ended Nine months ended
September 30, September 30,
2017 2016 2017 2016
Sales (millions) $ 2,764 $ 2,603 $ 8,193 $ 7,856
Sales change analysis:
Organic local-currency 6.1 % (1.3) % 5.2 % (1.5) %
Acquisitions - 1.6 - 2.1
Divestitures (0.6) (0.2) (0.6) (0.2)
Translation 0.7 0.7 (0.3) (1.2)
Total sales change 6.2 % 0.8 % 4.3 % (0.8) %
Operating income (millions) $ 614 $ 595 $ 1,762 $ 1,837
Percent change 3.1 % 1.9 % (4.1) % 2.2 %
Percent of sales 22.2 % 22.9 % 21.5 % 23.4 %
The Industrial segment serves a broad range of markets, such as automotive original equipment manufacturer (OEM) and
automotive aftermarket (auto body shops and retail), electronics, appliance, paper and printing, packaging, food and
beverage, and construction. Industrial products include tapes, a wide variety of coated, non-woven and bonded abrasives,
adhesives, advanced ceramics, sealants, specialty materials, 3M purification (filtration products), closure systems for
personal hygiene products, acoustic systems products, and components and products that are used in the manufacture, repair
and maintenance of automotive, marine, aircraft and specialty vehicles. 3M is also a leading global supplier of precision
grinding technology serving customers in the area of hard-to-grind precision applications in industrial, automotive,
aircraft and cutting tools. 3M develops and produces advanced technical ceramics for demanding applications in the
automotive, oil and gas, solar, industrial, electronics and defense industries.
Third Quarter 2017 results:
Sales in Industrial totaled $2.8 billion, up 6.2 percent in U.S. dollars. Organic local-currency sales increased 6.1
percent, divestitures reduced sales by 0.6 percent, and foreign currency translation increased sales by 0.7 percent.
On an organic local-currency sales basis:
· Sales grew in all businesses, led by advanced materials, industrial adhesives and tapes, and separations and
purification sciences.
· Abrasives, and automotive and aerospace solutions also showed positive growth, with strong performance in automotive
OEM platforms.
Acquisitions and divestitures:
· In October 2016, 3M sold the assets of its temporary protective films business.
· In January 2016, 3M completed its sale of the assets of 3M's pressurized polyurethane foam adhesives business
(formerly known as Polyfoam).
· Acquisition sales growth in 2016 related to the August 2015 acquisition of Membrana, a leading provider of
microporous membranes and modules for filtration in the life sciences, industrial, and specialty segments.
Operating income:
· Operating income margins decreased 0.7 percentage points, as third quarter footprint and portfolio actions reduced
year-on-year operating income margins by 0.4 percentage points.
First Nine Months 2017 results:
Sales in Industrial totaled $8.2 billion, up 4.3 percent in U.S. dollars. Organic local-currency sales increased 5.2
percent, divestitures reduced sales by 0.6 percent, and foreign currency translation reduced sales by 0.3 percent.
On an organic local-currency sales basis:
· Sales grew in all businesses, led by advanced materials, automotive and aerospace solutions, and industrial
adhesives and tapes.
Acquisitions and divestitures:
· In October 2016, 3M sold the assets of its temporary protective films business.
· In January 2016, 3M completed its sale of the assets of 3M's pressurized polyurethane foam adhesives business
(formerly known as Polyfoam).
· Acquisition sales growth in 2016 related to the August 2015 acquisition of Membrana, a leading provider of
microporous membranes and modules for filtration in the life sciences, industrial, and specialty segments.
Operating income:
· Operating income margins decreased 1.9 percentage points, as divestiture impacts related to the first quarter 2016
sale of the Polyfoam business resulted in a net year-on-year operating income margin reduction of 0.4 percentage points. In
addition, incremental strategic investments decreased first nine months margins by 0.9 percentage points.
Safety and Graphics Business:
Three months ended Nine months ended
September 30, September 30,
2017 2016 2017 2016
Sales (millions) $ 1,529 $ 1,500 $ 4,603 $ 4,538
Sales change analysis:
Organic local-currency 6.0 % 1.5 % 4.6 % 2.1 %
Acquisitions - 2.0 - 5.1
Divestitures (4.9) (2.1) (3.0) (2.2)
Translation 0.8 0.4 (0.2) (1.9)
Total sales change 1.9 % 1.8 % 1.4 % 3.1 %
Operating income (millions) $ 410 $ 372 $ 1,661 $ 1,152
Percent change 10.5 % 11.7 % 44.2 % 9.4 %
Percent of sales 26.8 % 24.8 % 36.1 % 25.4 %
The Safety and Graphics segment serves a broad range of markets that increase the safety, security and productivity of
people, facilities and systems. Major product offerings include personal protection products, such as respiratory, hearing,
eye and fall protection equipment; traffic safety solutions, such as retroreflective sign sheeting; commercial solutions,
including commercial graphics sheeting and systems, architectural design solutions for surfaces, and cleaning and
protection products for commercial establishments; and roofing granules for asphalt shingles.
Third Quarter 2017 results:
Sales in Safety and Graphics totaled $1.5 billion, up 1.9 percent in U.S. dollars. Organic local-currency sales increased
6.0 percent, divestitures reduced sales by 4.9 percent, and foreign currency translation increased sales by 0.8 percent.
On an organic local-currency sales basis:
· Sales increases were led by personal safety, which continued to experience strong demand.
· Sales also increased in roofing granules and transportation safety, while commercial solutions declined.
Acquisitions and divestitures:
· Acquisition sales growth in 2016 reflected the acquisition of Capital Safety in August 2015. Capital Safety is a
leading global provider of fall protection equipment.
· In January 2017, 3M sold its safety prescription eyewear business.
· In May 2017, 3M closed on the sale and transfer of control of its identity management business. In June 2017, 3M
completed the sale of its tolling and automated license/number plate recognition business.
Operating income:
· Operating income margins increased 2.0 percentage points, benefiting from higher organic sales volume, partially
offset by third quarter footprint and portfolio actions, which resulted in a year-on-year operating income margin reduction
of 0.6 percentage points.
First Nine Months 2017 results:
Sales in Safety and Graphics totaled $4.6 billion, up 1.4 percent in U.S. dollars. Organic local-currency sales increased
4.6 percent, divestitures reduced sales by 3.0 percent, and foreign currency translation reduced sales by 0.2 percent.
On an organic local-currency sales basis:
· Sales growth was led by personal safety.
· Roofing granules and transportation safety showed positive growth, while commercial solutions was flat.
Acquisitions and divestitures:
· Acquisition sales growth in 2016 reflected the acquisition of Capital Safety in August 2015. Capital Safety is a
leading global provider of fall protection equipment.
· In the first quarter of 2016, 3M divested the remainder of the library systems business.
· In January 2017, 3M sold its safety prescription eyewear business.
· In the second quarter of 2017, 3M finalized the sale of its identity management business and tolling and automated
license/number plate recognition business. 3M recorded a pre-tax gain of approximately $461 million as a result of these
two divestitures.
Operating income:
· Operating income margins increased 10.7 percentage points, largely driven by year-on-year divestiture gains that
were partially offset by acquisition charges and incremental strategic investments, which combined resulted in a net
operating income margin benefit of 9.7 percentage points.
In October 2017, 3M completed the acquisition of the underlying legal entities and associated assets of Scott Safety, which
is headquartered in Monroe, North Carolina, from Johnson Controls for $2.0 billion, net of closing and other adjustments.
This business will be reported within the Company's Safety and Graphics business. Refer to Note 2 for additional details.
Also in October 2017, 3M completed the sale of its electronic monitoring business. The Company expects to reflect a pre-tax
gain of approximately $100 million in the fourth quarter of 2017 as a result of this divestiture; which will be reported
within the Safety and Graphics business. Refer to Note 2 for additional details.
Health Care Business:
Three months ended Nine months ended
September 30, September 30,
2017 2016 2017 2016
Sales (millions) $ 1,476 $ 1,371 $ 4,339 $ 4,176
Sales change analysis:
Organic local-currency 6.9 % 1.6 % 4.1 % 4.3 %
Acquisitions - - - 0.3
Translation 0.8 (0.4) (0.2) (1.8)
Total sales change 7.7 % 1.2 % 3.9 % 2.8 %
Operating income (millions) $ 471 $ 431 $ 1,317 $ 1,350
Percent change 9.3 % (0.5) % (2.4) % 5.0 %
Percent of sales 31.9 % 31.5 % 30.4 % 32.3 %
The Health Care segment serves markets that include medical clinics and hospitals, pharmaceuticals, dental and orthodontic
practitioners, health information systems, and food manufacturing and testing. Products and services provided to these and
other markets include medical and surgical supplies, skin health and infection prevention products, inhalation and
transdermal drug delivery systems, oral care solutions (dental and orthodontic products), health information systems, and
food safety products.
Third Quarter 2017 results:
Sales in Health Care totaled $1.5 billion, up 7.7 percent in U.S. dollars. Organic local-currency sales increased 6.9
percent and foreign currency translation increased sales by 0.8 percent.
On an organic local-currency sales basis:
· Sales increased in all businesses, led by drug delivery systems, food safety, medical consumables (which is
comprised of the critical and chronic care business and infection prevention business), and oral care.
· Sales also increased in health information systems.
· In developing markets, Health Care organic local-currency sales growth was led by China/Hong Kong and Latin
America.
Acquisitions:
· In September 2017, 3M acquired Elution Technologies, LLC, a manufacturer of food safety test kids. Refer to Note 2
for additional details.
Operating income:
· Operating income margins increased 0.4 percentage points year-on-year, helped by organic local-currency sales
growth. Incremental strategic investments, primarily related to accelerating future growth opportunities, reduced margins
by 0.3 percentage points.
First Nine Months 2017 results:
Sales in Health Care totaled $4.3 billion, up 3.9 percent in U.S. dollars. Organic local-currency sales increased 4.1
percent and foreign currency translation reduced sales by 0.2 percent.
On an organic local-currency sales basis:
· Sales increased in drug delivery systems, food safety, medical consumables (which is comprised of the critical and
chronic care and infection prevention businesses) and oral care.
· Sales declined slightly in health information systems.
Acquisitions:
· Acquisition sales growth in 2016 related to the March 2015 purchase of Ivera Medical Corp. Ivera is a manufacturer
of health care products that disinfect and protect devices used for access into a patient's bloodstream.
· In September 2017, 3M acquired Elution Technologies, LLC, a manufacturer of food safety test kids.
Operating income:
· Operating income margins decreased 1.9 percent year-on-year, as incremental strategic investments, primarily related
to accelerating future growth opportunities, reduced margins by 1.1 percentage points.
Electronics and Energy Business:
Three months ended Nine months ended
September 30, September 30,
2017 2016 2017 2016
Sales (millions) $ 1,414 $ 1,250 $ 3,838 $ 3,468
Sales change analysis:
Organic local-currency 13.2 % (7.9) % 11.0 % (10.0) %
Divestitures (0.1) - (0.2) -
Translation - 0.6 (0.2) (0.6)
Total sales change 13.1
- More to follow, for following part double click ID:nRSA1805VgRecent news on 3M Co
See all newsREG - Stock Exch Notice - Admission to ISM - 30/11/2023
AnnouncementRCS - 3M Company - StageZero Announces COC Protocol in Europe
AnnouncementREG - Official List - Removal: 3M Company
AnnouncementREG - Stock Exch Notice - Cancellation - 3M Company
AnnouncementREG - 3M Company - 3rd Quarter Results
Announcement