In this fast moving economy, people have become very busy. There are several companies that produce improved products to simplify and improve people's lives. 3M Co. (MMM) has made people’s lives simpler, and has created a niche in the hearts of the people.
3M, together with its subsidiaries, operates as a diversified technology company with manufacturing operations spread over 70 countries. The company operates in six segments: industrial and transportation; health care; consumer and office; safety, security and protection services; display and graphics, and electro and communications businesses. 3M products are sold through a number of distribution channels, including directly to users and through wholesalers, retailers, jobbers, distributors and dealers in a range of trades in a number of countries worldwide. Popular 3M consumer brands include Post-It, Scotch, Scotch-Brite, Filtrete and more.
Tracking the Performance
On Jan. 30, 2014, this St. Paul, Minn.-based company reported fourth quarter 2013 net income of $1.103 billion or $1.62 per share, compared with $991 million or $1.41 a share in the year-earlier quarter. The reason behind this increase is higher sales. Net sales during the quarter were $7.569 billion, up 2.4 % year over year. The increase in sales was driven by 3.4% organic local currency sales growth and acquisition benefits of 0.7%. However, the positives were partly offset by currency impact of 1.7%. Operating income for fourth quarter 2013 was $1.6 billion, while operating margin was 20.9%.
For fiscal 2013, the company reported net income of $4.659 billion or $6.72 per share, compared with $4.444 billion or $6.32 a share in the year-earlier quarter. Sales increased 3.2% to $30.871 billion with organic local-currency growth of 3.4%. Acquisitions added 1.4% to sales and foreign currency reduced sales by 1.6%. The company’s segment performance and balance sheet and cash flow items have been provided in the following chart.
3M converted 131% of net income to free cash flow during the fourth quarter. For fiscal 2013, the company paid $1.7 billion in cash dividends to shareholders and repurchased $5.2 billion of its shares.
In 2014, 3M expects EPS in the range of $7.30 to $7.55 with an organic local-currency sales growth of 3% to 6%, and free cash flow conversion to be in the range of 90% to 100%. The company is increasing its R&D investment to develop new products for new market (diversification strategy). This will accelerate its organic growth.
3M is increasing its share repurchase program to $17 billion to $22 billion, or 20% to 25% of market cap, and is also increasing its 2014 dividend 35% to $3.42 per share. This has been shown in the chart below.
Further, 3M is building on portfolio prioritization, emphasizing high-growth spaces, leveraging enhanced integration capabilities and increasing focus on technology.
To strengthen its healthcare analytics division, 3M entered into an agreement to acquire Treo Solutions, a leading provider of data analytics and business intelligence to health care payers and providers on Feb. 21, 2014.
On Jan. 5, 2014, 3M Touch Systems Inc., a wholly owned subsidiary of the 3M Electronic Solutions Division, announced its latest multi-touch solutions for interactive digital signage applications. This will enhance Microsoft Corporation’s (MSFT) Windows 7 applications, with its multiple display applications.
China at a Glance
Diversified conglomerate 3M reported solid organic local-currency sales growth across all geographic regions. 3M’s newly formed greater China area represents big growth potential.
In greater China 3M has three subsidiaries: China, Hong Kong and Taiwan; 20 plants/ distribution centers; two R&D centers; and seven customer technical centers. 3M is driving a balanced approach between export and domestic business, it has increased local product development and has a comprehensive human capital plan. These above factors are driving the company’s growth.
Further, demand for dental products is increasing at a great pace in China, and 3M is also enjoying this demand. Demand for industrial adhesives, photovoltaic components and Post-It Notes are also increasing. To gain profitable market share, the company is constantly investing in R&D to deliver China for China solutions. With this strong business model, 3M is enjoying a monopoly in China.
On a Concluding Note
3M has a history of world-class performance, and strong five-year financial objectives which has been shown below.
Charts from company website
3M’s past performance as well as future financial objectives will attract more and more investors. Going forward, the company’s position will be strengthened through increased investments in innovation and more aggressive capital deployment. Further, 3M’s world-class talent, technological strength, manufacturing and engineering process, unparalleled global reach and strong financial position will help the company to perform well in the coming future.