3M reported second quarter earnings of US$2.02 per share, an increase of 5.8% versus the second quarter of 2014. Sales declined 5.5% y/y to US$7.7 billion. Organic local currency sales grew 1.8% and foreign currency translation reduced sales by 7.3% y/y.
Operating income was US$1.8 billion and operating income margins for the quarter were 23.9%, up 1.1 percentage points y/y. Second quarter net income was US$1.3 billion and the company converted 74% of net income to free cash flow.
3M paid US$646 million in cash dividends to shareholders and repurchased US$1.7 billion of its own shares during the quarter.Organic local currency sales growth was 4.9% in Safety and Graphics, 3.4% in Health Care, 3.4% in Consumer and 1.4% in Industrial; Electronics and Energy declined 3.0%. On a geographic basis, organic local-currency sales grew 4.1% in the US, 0.8% in Latin America/Canada, 0.5% in Asia Pacific, and 0.4% in EMEA (Europe, Middle East and Africa).
“In the face of a mixed economic environment, the 3M team delivered positive organic growth in all geographic areas while expanding worldwide margins by over a full point,” said Inge G. Thulin, 3M’s Chairman, President and Chief Executive Officer. “We also continued to invest in our future, including strategic acquisitions. In June, we announced the acquisition of Capital Safety, which will bolster our personal safety platform and build on our fundamental strengths in technology, manufacturing, global capabilities and brand.”
3M also updated its guidance for the full year 2015. The company expects earnings will be in the range of US$7.80 to US$8.00 per share, versus a prior range of US$7.80 to US$8.10 per share. Organic local currency sales growth is expected to be in the range of 2.5 - 4%, versus previous guidance of 3 - 6%.
3M continues to expect that foreign currency translation will reduce 2015 sales by 6 - 7%. The company also anticipates that full year free cash flow conversion will be in the range of 90 - 100%.
“We are amending our growth outlook slightly to account for lower than expected global economic growth,” said Thulin. “As always, we are focused on executing our plan and improving those factors within our control. I am confident in our team's ability to generate profitable growth and premium returns into the future.”
Adapted from press release by Rosalie Starling
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