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3M Announces Fourth-Quarter Results; Company Posts Record Sales and Earnings Per Share for Both Fourth Quarter and Full Year


January, 2014

Fourth-Quarter Highlights:

  • Earnings of $1.62 per share, up 14.9 percent
  • Sales of $7.6 billion, up 2.4 percent
  • Organic local-currency sales growth of 3.4 percent
  • Operating income margins of 20.9 percent, up 1.4 percent year-on-year
  • Free cash flow conversion of 131 percent
  • Returned $2.1 billion to shareholders via dividends and gross share repurchases

ST. PAUL, Minn. – January 30, 2014 − 3M (NYSE:MMM) today reported fourth-quarter earnings of $1.62 per share, an increase of 14.9 percent versus the fourth quarter of 2012. Sales grew 2.4 percent year-on-year to $7.6 billion. Organic local-currency sales grew 3.4 percent, acquisitions added 0.7 percent to sales and currency impacts reduced sales by 1.7 percent year-on-year. Sales and per-share earnings were the highest of any fourth quarter in 3M’s history.

Operating income was $1.6 billion and operating income margins for the quarter were 20.9 percent. Fourth-quarter net income was $1.1 billion and the company converted 131 percent of net income to free cash flow.

3M paid $423 million in cash dividends to shareholders and repurchased $1.7 billion of its own shares during the quarter.

Organic local-currency sales growth was 5.8 percent in Industrial, 4.8 percent in Safety and Graphics, 3.6 percent in Health Care, 1.3 percent in Consumer and 0.4 percent in Electronics and Energy. On a geographic basis, organic local-currency sales grew 4.5 percent in the U.S., 3.4 percent in EMEA (Europe, Middle East and Africa), 3.3 percent in Asia Pacific and 2.2 percent in Latin America/Canada.

Full-year 2013 earnings were $6.72 per share, an increase of 6.3 percent. Sales increased 3.2 percent to $30.9 billion with organic local-currency growth of 3.4 percent. Acquisitions added 1.4 percent to sales and foreign currency reduced sales by 1.6 percent. The company converted 89 percent of net income to free cash flow for the year and generated 20.0 percent return on invested capital.

For the full year, 3M paid $1.7 billion in cash dividends to shareholders and repurchased $5.2 billion of its own shares.

“The fourth quarter concluded a very successful year for 3M,” said Inge G. Thulin, 3M chairman, president and chief executive officer. “We generated broad-based, profitable sales growth across the portfolio and per-share earnings rose nearly 15 percent in the quarter. Free cash flow conversion was 131 percent, which enabled us to continue investing in our businesses while also returning a record amount of cash to shareholders.”

Thulin continued, “3M employees around the world are bringing our vision and strategy to life and improving 3M’s relevance in the eyes of our customers. Three key levers – namely portfolio management, investing in innovation and business transformation – combined with more aggressive capital deployment, will drive enhanced value creation going forward.”

3M affirmed its 2014 full-year performance expectations. The company expects 2014 earnings to be in the range of $7.30 to $7.55 per share with organic local-currency sales growth of 3 to 6 percent. 3M also expects free cash flow conversion to be in the range of 90 to 100 percent.

Fourth-Quarter Business Group Discussion

Industrial
  • Sales of $2.6 billion, up 6.1 percent in U.S. dollars. Organic local-currency sales increased 5.8 percent, acquisitions (Ceradyne) added 2.0 percent to sales and foreign currency translation reduced sales by 1.7 percent.
  • On an organic local-currency basis:
    • Sales growth was driven by advanced materials, automotive OEM, 3M Purification, aerospace and automotive aftermarket.
    • Sales grew in all major geographies, with the largest increases in the U.S. and EMEA.
  • Operating income was $553 million, up 13.9 percent year-on-year; operating margin of 21.5 percent.
Health Care
  • Sales of $1.4 billion, up 2.4 percent in U.S. dollars. Organic local-currency sales increased 3.6 percent and foreign currency translation reduced sales by 1.2 percent.
  • On an organic local-currency basis:
    • Sales growth was strongest in health information systems, food safety, critical and chronic care and infection prevention; sales declined in drug delivery systems.
    • Sales grew in all major geographies, with the strongest growth in Asia Pacific, Latin America/Canada and the U.S.
  • Operating income was $425 million, a decrease of 1.0 percent; operating margin of 31.2 percent.
Safety and Graphics
  • Sales of $1.3 billion, up 2.5 percent in U.S. dollars. Organic local-currency sales increased 4.8 percent and foreign currency translation reduced sales by 2.3 percent.
  • On an organic local-currency basis:
    • Sales growth was led by roofing granules, personal safety, commercial graphics and architectural markets.
    • Sales rose in all major geographies, led by Latin America/Canada, Asia Pacific and the U.S.
  • Operating income was $256 million, an increase of 15.6 percent year-on-year; operating margin of 19.1 percent.
Electronics and Energy
  • Sales of $1.3 billion, a decrease of 1.0 percent in U.S. dollars. Organic local-currency sales increased 0.4 percent and foreign currency translation reduced sales by 1.4 percent.
  • On an organic local-currency basis:
    • Energy-related sales grew year-on-year, led by renewable energy and electrical markets; electronics-related sales declined, with growth in optical systems and electronic solutions more than offset by declines in other businesses.
    • Sales grew in EMEA and the U.S., were flat in Asia Pacific, and declined in Latin America/Canada.
  • Operating income was $221 million, up 1.1 percent year-on-year; operating margin of 16.7 percent.
Consumer
  • Sales of $1.1 billion, down 0.9 percent in U.S. dollars. Organic local-currency sales increased 1.3 percent, divestitures reduced sales by 0.2 percent and foreign currency translation reduced sales by 2.0 percent.
  • On an organic local-currency basis:
    • Sales growth was led by the consumer health care and home care businesses.
    • Sales grew in Asia Pacific, the U.S. and EMEA, and declined in Latin America/Canada.
  • Operating income was $226 million, down 3.4 percent year-on-year; operating margin of 20.4 percent.