Second quarter highlights:
- Operating income margins of 24.4 per cent, up 0.5 percentage points year-on-year
- Sales declined 0.3 per cent; organic local-currency sales declined 0.2 per cent
- Continued progress on business transformation, including West Europe ERP deployments
- Returned $1.5 billion to shareholders via dividends and gross share repurchases
3M recently reported second-quarter earnings of $2.08 per share, an increase of 3.0 per cent versus the second quarter of 2015. Sales declined 0.3 percent year-on-year to $7.7 billion. Organic local-currency sales declined 0.2 per cent while acquisitions, net of divestitures, added 1.4 per cent to sales. Foreign currency translation reduced sales by 1.5 per cent year-on-year.
Operating income was $1.9 billion and operating income margins for the quarter were 24.4 per cent, up 0.5 percentage points year-on-year. Second-quarter net income was $1.3 billion. The company’s operating cash flow was $1.3 billion, contributing to conversion of 75 per cent of net income to free cash flow.
3M paid $672 million in cash dividends to shareholders and repurchased $828 million of its own shares during the quarter.
Organic local-currency sales growth was 4.9 per cent in health care, 2.7 per cent in consumer and 2.3 per cent in safety and graphics, with declines of 1.4 per cent in industrial and 9.1 per cent in electronics and energy. On a geographic basis, organic local-currency sales growth was 4.8 per cent in Latin America/Canada, 3.0 per cent in EMEA (Europe, Middle East and Africa) and 0.4 per cent in the U.S., with a decline of 5.4 per cent in Asia Pacific.
“Building on a solid first quarter performance, our team controlled the controllable and posted another quarter of strong earnings and expanded margins,” says Inge G. Thulin, 3M’s chairman, president and CEO. “Our execution of the 3M playbook is enabling us to deliver premium returns today while also building for the future, which includes making good progress on business transformation and investing approximately 10 per cent of our sales into R&D and capital expenditures in the quarter.”
Looking ahead, 3M now expects 2016 earnings to be in the range of $8.15 to $8.30 per share, up eight to 10 percent year-on-year, versus a prior expectation of $8.10 to $8.45.
To reflect the current economic environment and outlook, the company also updated its organic local-currency sales growth guidance to be in the range of zero to one per cent, versus a previous range of one to three per cent. 3M forecasts foreign currency translation to reduce 2016 sales by one to two percent, versus a previous expected reduction of one to three per cent. The company also estimates its full-year tax rate will be in the range of 29.0 to 29.5 per cent, versus a prior range of 29.5 to 30.5 per cent.