3M 2Q16 Earnings Call Notes

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3M (MMM) Inge G. Thulin on Q2 2016 Results

Earnings up 3%, sales down slightly

“Looking at the numbers, earnings were $2.08 per share, up 3% year over year. Organic sales were down slightly, at minus 20 basis points. Our two domestic-driven businesses once again paced our company’s organic growth in the quarter. Health Care posted 5% growth, with positive growth in all businesses and geographic areas. And Consumer grew 3%, driven by strong performance in our Command, Filtrete, and Post-it products. ”

Electronics and energy declined in high single digits

“Organic growth in Electronics & Energy declined in the high-single digits, as we communicated during the second quarter. That business continues to be impacted by weaker demand and elevated channel inventories in the consumer electronics market.”

UK is only a small percentage of sales and we have regionalized in Europe anyways

“Well, this is Inge. So, first of all, UK for us is less than 3% as an enterprise in terms of revenue. And we had a very good result this quarter in West Europe, as you saw, with 3% organic local currency growth with all business groups growing, which is very, very nice to see, to be honest. So we had Industrial at 3%, we had SGBG 2%, we had Health Care, 5%, we had EEBG 5%, and we had Consumer 2%. If you think about Europe and put that in perspective with what we have to do, there’s no reason for us to change strategy around Europe. Our strategy has always been to have localization in terms of execution based on languages. And, number two, build up a very strong backbone relative to resources what we now do with ERP.”

No need to change strategy based on Brexit at all

“There is no reason for us to change the strategy in Europe based on the outcome of the Brexit. No reason for us to do that. The other thing that is very nice for us to see is the margin expansion that is coming for us in West Europe as well. ”

The electronic business is a good business for us to be in

“the Electronic business is a good business for us to be in. We’re a material science company and the strengths of our capabilities in that market is very, very strong. So from a strategic perspective, there is no question mark for me. And when you look upon the four fundamentals that we have in the company in terms of technology, manufacturing capabilities and geographical reach plus brand equity, it’s very, very good for us.”