Q4 2015 3 m earnings presentation
-
Upload
investors3m -
Category
Investor Relations
-
view
102.529 -
download
3
Transcript of Q4 2015 3 m earnings presentation
1. All Rights Reserved.26 January 2016© 3M
2015 Fourth Quarter Business Review
January 26, 2016
(unaudited)
2. All Rights Reserved.26 January 2016© 3M
Forward Looking StatementThis presentation contains forward-looking information about 3M's financial results and estimates and business prospects thatinvolve substantial risks and uncertainties. You can identify these statements by the use of words such as "anticipate,""estimate,” "expect," “aim," "project," "intend," "plan," "believe," "will," “should," “could," "target," "forecast" and other wordsand terms of similar meaning in connection with any discussion of future operating or financial performance or business plansor prospects. Among the factors that could cause actual results to differ materially are the following: (1) worldwide economicand capital markets conditions and other factors beyond 3M's control, including natural and other disasters affecting theoperations of 3M or its customers and suppliers; (2) 3M's credit ratings and its cost of capital; (3) competitive conditions andcustomer preferences; (4) foreign currency exchange rates and fluctuations in those rates; (5) the timing and marketacceptance of new product offerings; (6) the availability and cost of purchased components, compounds, raw materials andenergy (including oil and natural gas and their derivatives) due to shortages, increased demand or supply interruptions(including those caused by natural and other disasters and other events); (7) the impact of acquisitions, strategic alliances,divestitures, and other unusual events resulting from portfolio management actions and other evolving business strategies, andpossible organizational restructuring; (8) generating fewer productivity improvements than estimated; (9) unanticipatedproblems or delays with the phased implementation of a global enterprise resource planning (ERP) system, or security breachesand other disruptions to 3M's information technology infrastructure; and (10) legal proceedings, including significantdevelopments that could occur in the legal and regulatory proceedings described in 3M's Annual Report on Form 10-K for theyear ended December 31, 2014, and its subsequent quarterly reports on Form 10-Q (the “Reports”). Changes in suchassumptions or factors could produce significantly different results. A further description of these factors is located in theReports under “Cautionary Note Concerning Factors That May Affect Future Results” and “Risk Factors” in Part I, Items 1 and1A (Annual Report) and in Part I, Item 2 and Part II, Item 1A (Quarterly Report). The information contained in this presentation isas of the date indicated. 3M assumes no obligation to update any forward-looking statements contained in this presentation asa result of new information or future events or developments.
3. All Rights Reserved.26 January 2016© 3M
GAAP EPS of $1.66, down 8.3% year-on-year
Excluding restructuring, EPS of $1.80, down 0.6% year-on-year
Sales of $7.3 billion, down 5.4% in dollar terms
Organic local currency declined 1.1%
Acquisitions, net of divestitures, increased sales by 1.5%
Foreign exchange translation (FX) reduced sales by 5.8%
Operating margins of 20.5%, down 100 basis points year-on-year
Excluding restructuring, operating margins of 22.1%, up 60 basis points
Returned $1.8 billion to shareholders via dividends and gross share repurchases
Q4 2015 Summary
Refer to 3M’s January 26, 2016 press release for full details.
4. All Rights Reserved.26 January 2016© 3M
Organic local currency: U.S. -0.4%
Asia Pacific -2.7% China/Hong Kong -3% Japan -3%
EMEA 1.1% West Europe up slightly
Latin America/Canada -0.6% Mexico +7%, Brazil -6%
FX reduced sales by 5.8% Euro -13%, Yen -5%, Real -34%
($M) US APAC EMEA LAC
Organic volume -1.0% -2.5% -0.8% -6.0%
Price +0.6% -0.2% +1.9% +5.4%
Organic local currency -0.4% -2.7% +1.1% -0.6%
Acq/div +1.7% +0.7% +1.8% +1.3%
FX ----- -4.2% -11.7% -18.6%
Total growth +1.3% -6.2% -8.8% -17.9%
Q4 2015 Sales Recap
-5.4%
-5.8%
1.5%
-1.1%
1.2%
-2.3%
Total
FX
Acquisition/divestiture
Organic local currency
Price
Organic volume
Worldwide Sales Change Due To:
5. All Rights Reserved.26 January 2016© 3M
Q4 2015
Restructuring
Q4 2015 ex-restructuring
Pension/OPEB
Strategic investments
FX
Organic volume
Productivity/other
Acquisitions, net of divestitures
Price/raw materials
Q4 2014
Operating margin of 20.5%, down 100 basis points; up 60 basis points
excluding restructuring
0.0%
($M)Q4
2014Q4
2015 Change
Sales $7,719 $7,298 -5.4%
Gross profit $3,692 $3,471 -6.0%
% to sales 47.8% 47.5% -0.3 pts
SG&A $1,594 $1,538 -3.5%
% to sales 20.7% 21.1% +0.4 pts
R&D & related $436 $433 -0.7%
% to sales 5.6% 5.9% +0.3 pts
Operating income $1,662 $1,500 -9.7%
% to sales 21.5% 20.5% -1.0 pt
Net income $1,179 $1,038 -12.0%
GAAP earnings per share $1.81 $1.66 -8.3%
21.5%
-0.3%
-0.4%
-0.6%
20.5%
Refer to 3M’s January 26, 2016 press release for full details.
Q4 2015 P&L
-1.6%
+0.1%
+2.0%
-0.2%
22.1%
6. All Rights Reserved.26 January 2016© 3M
$1.81 $1.66
Q4 2014 Q4 2015
-8.3%
Q4 2014 GAAP EPS $1.81
Organic growth, marginexpansion +$0.03
Includes headwinds of $0.05 from higher pension/OPEB expense and $0.04 from strategic investments
Tax rate -$0.01 Q4 2015 28.6% (excluding restructuring)vs. Q4 2014 28.0%
FX -$0.11 Pre-tax earnings impact of $96M
Acquisitions and divestitures* +$0.02 Includes net impact from closed
acquisitions and divestitures
Shares outstanding +$0.06 Average diluted shares down 4%
Q4 2015 ex-restructuring $1.80
Restructuring -$0.14 Pre-tax earnings impact of $114M
Q4 2015 GAAP EPS $1.66
Q4 2015 GAAP EPS
* Acquisitions include Capital Safety, Polypore’s Separations Media business; divestitures include Library Systems and license plate converting business in France
7. All Rights Reserved.26 January 2016© 3M
($M)Q4
2014Q4
2015 Change 2014 2015 Change
Operating cash flow $2,183 $2,338 $155 $6,626 $6,420 ($206)
Capital expenditures ($490) ($446) $44 ($1,493) ($1,461) $32 Expecting FY 2016 of $1.3B to $1.5B
Free cash flow $1,693 $1,892 $199 $5,133 $4,959 ($174)
Free cash flow conversion 144% 182% +38 pts 104% 103% -1 pt Expecting FY 2016 of 95% to 105%
Dividends $544 $628 $84 $2,216 $2,561 $345
Gross share repurchase $1,279 $1,134 ($145) $5,652 $5,238 ($414) Expecting FY 2016 of $4B to $6B
Total cash to shareholders $1,823 $1,762 ($61) $7,868 $7,799 ($69)
Refer to 3M’s January 26, 2016 press release for full details.
Q4 2015 Cash Flow
8. All Rights Reserved.26 January 2016© 3M
Organic local currency growth:
By business: strong sales growth in 3M purification and automotive OEM was offset by declines inindustrial adhesives and tapes, abrasives, and advanced materials
By area: sales grew in EMEA, Latin America/Canada and Asia Pacific, but declined in the U.S.
Automotive OEM business posted strong organic growth driven by increased market penetration
Polypore’s Separations Media acquisition integration on-track and meeting financial objectives; 50 basis points dilutive to margins
($M)Q4
2014Q4
2015%
Growth
Sales $2,627 $2,461 -6.3%
Organic local currency -1.8%
Acquisition/divestiture +1.7%
FX -6.2%
Operating income $538 $476 -11.6%
Operating marginEx-restructuring
20.5%20.5%
19.3%21.0%
-1.2 pts+0.5 pts
Industrial
9. All Rights Reserved.26 January 2016© 3M
Organic local currency growth:
By business: sales grew in roofing granules and commercial solutions; traffic safety and security was flat; personal safety declined
By area: sales declined in Asia Pacific, the U.S., EMEA and Latin America/Canada
Commercial solutions selected by leading financial institution to supply films for re-imaging campaign
Capital Safety integration on-track and meeting profit expectations
Net acquisition/divestiture impact increased operating margins by 1.5 percentage points
Safety & Graphics
($M)Q4
2014Q4
2015%
Growth
Sales $1,367 $1,294 -5.3%
Organic local currency -2.5%
Acquisition/divestiture +4.6%
FX -7.4%
Operating income $285 $282 -1.1%
Operating marginEx-restructuring
20.8%20.8%
21.8%22.7%
+1.0 pt+1.9 pts
10. All Rights Reserved.26 January 2016© 3M
Health Care
($M)Q4
2014Q4
2015%
Growth
Sales $1,392 $1,381 -0.8%
Organic local currency +4.5%
Acquisition/divestiture +0.8%
FX -6.1%
Operating income $431 $444 +2.7%
Operating marginEx-restructuring
31.0%31.0%
32.1%32.8%
+1.1 pts +1.8 pts
Organic local currency growth:
By business: sales grew in health information systems, food safety, oral care, drug delivery systems and critical and chronic care
By area: sales grew in all areas led by Asia Pacific, Latin America/Canada and EMEA
3M Hosted Sustainability in Health Care Summit;highlighted innovative best practices while showcasing 3M products and solutions for improving sustainability in hospitals
Continued strong growth in developing economies;particular strength in China/Hong Kong
Planning to reinvest benefit from suspension of medical device tax into our U.S. Health Care business
11. All Rights Reserved.26 January 2016© 3M
Electronics & Energy
($M)Q4
2014Q4
2015%
Growth
Sales $1,371 $1,210 -11.7%
Organic local currency -7.7%
Acquisition/divestiture -0.7%
FX -3.3%
Operating income $257 $200 -22.4%
Operating marginEx-restructuring
18.7%18.7%
16.5%17.5%
-2.2 pts-1.2 pts
Organic local currency growth:
By business: electronic-related sales declined 8% (sales declined in electronics materials solutions and display materials and systems); energy-related sales declined 6% (sales declined in renewable energy, telecom and electrical markets)
By area: sales declined in the U.S., EMEA, Latin America/Canada and Asia Pacific
Launched joint development program with HP to combat visual hacking with integrated privacy solutions for notebook displays
Portfolio management actions (renewable energy) reduced Electronics & Energy margins by 2.4 percentage points
12. All Rights Reserved.26 January 2016© 3M
Consumer
($M)Q4
2014Q4
2015%
Growth
Sales $1,128 $1,101 -2.4%
Organic local currency +2.7%
Acquisition/divestiture ----
FX -5.1%
Operating income $254 $254 +0.5%
Operating marginEx-restructuring
22.5%22.5%
23.1%23.4%
+0.6 pts+0.9 pts
Organic local currency growth:
By business: sales grew in home improvement, stationery and office supplies, and home care; consumer health care declined
By area: sales grew in all areas led by the U.S., Asia Pacific and EMEA
Continued to expand presence in home furnace filter market with Filtrete™ brand
Strong holiday sales in Scotch® and Command™ products
13. All Rights Reserved.26 January 2016© 3M
2015 Full-Year Performance
Solid financial results despite challenging external environment
Investing in the business: capital expenditures $1.5 billion, R&D $1.8 billion, acquisitions $3.7 billion
Significant progress on our three key levers: portfolio management, investing in innovation, business transformation
Completed corporate restructuring … further strengthening competiveness
Launched new brand platform … “3M Science. Applied to Life.™”
Returned $7.8 billion to shareholders via dividends and gross share repurchases
Delivered strong ROIC of 22.5%
Refer to 3M’s January 26, 2016 press release for full details.
14. All Rights Reserved.26 January 2016© 3M
2016 Planning Estimates GAAP EPS of $8.10 to $8.45, up 7% to 11%
Sales growth
Organic local-currency growth of +1% to +3%
Foreign currency translation headwind of -1% to -3%
Acquisitions, net of divestitures, add approximately +1%
Tax rate of 29.5% to 30.5%
Free cash flow conversion of 95% to 105%
17. All Rights Reserved.26 January 2016© 3M
Business Segment Information
Net Sales Operating Income Net Sales Operating Income
Business Groups Q4 2014 Q4 2015 Q4 2014 Q4 2015 2014 2015 2014 2015
Industrial $2,627 $2,461 $538 $476 $10,990 $10,328 $2,389 $2,263
Safety & Graphics $1,367 $1,294 $285 $282 $5,732 $5,515 $1,296 $1,305
Health Care $1,392 $1,381 $431 $444 $5,572 $5,420 $1,724 $1,724
Electronics & Energy $1,371 $1,210 $257 $200 $5,604 $5,220 $1,115 $1,102
Consumer $1,128 $1,101 $254 $254 $4,523 $4,422 $995 $1,046
Corporate and Unallocated ($1) $1 ($67) ($123) $4 $1 ($251) ($355)
Elimination of Dual Credit ($165) ($150) ($36) ($33) ($604) ($632) ($133) ($139)
Total $7,719 $7,298 $1,662 $1,500 $31,821 $30,274 $7,135 $6,946