3M recently reported first-quarter earnings of $2.16 per share, an increase of 5.4 per cent versus the first quarter of 2016. Sales were $7.7 billion, up 3.7 per cent year-on-year in dollar terms. Organic local-currency sales increased 4.6 per cent while divestitures reduced sales by 0.4 percent. Foreign currency translation decreased sales by 0.5 per cent year-on-year.
Operating income was $1.8 billion and operating income margins for the quarter were 23.1 per cent, down 1.0 percentage point year-on-year. This result includes an incremental $136 million of strategic investments in growth, productivity and portfolio actions. First-quarter net income was $1.3 billion, up 3.7 per cent. The company’s operating cash flow was $1.0 billion, contributing to conversion of 53 per cent of net income to free cash flow.
Organic local-currency sales growth was 11.5 percent in Electronics and Energy, 5.7 percent in Industrial, 4.8 percent in Safety and Graphics, 3.1 percent in Health Care, with a decline of 1.2 percent in Consumer. On a geographic basis, organic local-currency sales growth was broad-based, led by Asia Pacific at 10.1 percent; growth was 4.0 percent in EMEA (Europe, Middle East and Africa), 2.3 percent in Latin America/Canada and 1.4 percent in the U.S.
Consumer sales were flat with a decline in office and stationery. The Consumer Group saw sales of $1.0 billion, down 0.7 per cent in U.S. dollars. Organic local-currency sales decreased 1.2 per cent and foreign currency translation increased sales by 0.5 per cent. On an organic local-currency basis, sales grew in home improvement, consumer health care and home care, and declined in stationery and office. Sales grew in Asia Pacific and Latin America/Canada, were flat in EMEA, and declined in the U.S. Operating income was $222 million, down 6.8 per cent year-on-year with an operating margin of 21.3 per cent.
“The 3M team delivered a strong start to 2017, marked by organic sales growth of five per cent, with positive growth in all geographic areas,” says Inge G. Thulin, 3M’s chairman, president and CEO. “At the same time, we increased investments across the enterprise to further accelerate growth and improve productivity, while increasing our dividend for the 59th consecutive year. In the first quarter, we also announced the acquisition of Scott Safety, which will bolster 3M’s already strong position in the personal safety market.”
3M updated its guidance for 2017 due to a strong first-quarter performance and improved outlook. The company now forecasts organic local-currency sales growth to be two to five per cent, up from previous guidance of one to three per cent.