News Column

3M's electronics unit revives, lifting 2Q profit

July 24, 2014

By Dee DePass, Star Tribune (Minneapolis)

July 24--3M Co. second-quarter results announced Thursday met Wall Street's expectations amid strong sales in Asia a welcome boost from its previously-pressured electronics and energy division.

All five business groups of the Maplewood-based manufacturer reported sales and profit gains from April to June, the second consecutive quarter with across-the-board increases. And executives reaffirmed their financial guidance for the rest of the year.

"Our businesses continued to execute very well during the second quarter," CEO Inge Thulin told analysts in a conference call. "Organic sales growth was again positive across all businesses and geographic regions, which helped drive double-digit growth in earnings per share."

Its operating margin shot up to 23 percent from a year ago, he added.

3M shares were up about a half-percent at midday.

3M's net profit grew 5.8 percent to $1.27 billion, or $1.91 a share, for the quarter ended June 30. That was in line with analysts' expectations.

Revenue grew 4.9 percent to $8.13 billion, exceeding the $8.09 billion expected by analysts. 3M experienced the fastest organic-sales growth in Asia, at nearly 7 percent, followed by Europe, the Middle East and Africa at 5 percent, with the U.S. and Latin America at slower rates.

The most improvement came in 3M's recently-struggling Electronics and Energy unit, where sales jumped 6.2 percent to $1.4 billion and operating income rose 23 percent to $293 million. 3M officials explained that U.S. sales were flat, however, product sales proved robust in Latin America, Asia and Europe. The division suffered sales declines as recently as the fourth quarter.

3M's largest division, Industrial, increased sales by 4.9 percent to $2.8 billion as demand rose for filtration, automotive, airplane, adhesive and abrasive products. Operating income rose 2.4 percent to $617 million.

Its Safety and Graphics division saw sales rise 4.1 percent to $1.5 billion as orders increased for roofing granules and personal and commercial safety products. Demand for roofing granules is an indicator of the health of the housing and construction industry, a sector of the economy that was hurting just a few years ago. That uptick pushed 3M's Safety and Graphics unit above the size of its Health Care business.

Health Care sales rose 5.9 percent to $1.4 billion led by demand for medical records software and infection prevention products. Operating income rose 4.1 percent to $434 million.

3M's Consumer division saw sales rise 3.7 percent to $1.1 billion while operating profit rose 2.3 percent to $241 million.

The company continued to boost capital spending in the quarter. It also paid $2 billion in dividends and share repurchases in the period.

Earlier this month, it announced that it would spend $885 million to acquire the remaining 25 percent of its Sumitomo 3M subsidiary in Japan, its first acquisition in more than a year and a half.

Dee DePass -- 612-673-7725


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Source: Star Tribune (Minneapolis, MN)

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