3M recently reported sales of $8.1 billion in the 2020 first quarter, a 2.7% increase compared to the first quarter of 2019. Organic local currency sales grew 0.3%, while acquisitions, net of divestitures, increased sales by 4.2%. Foreign currency translation reduced sales by 1.8% compared to the 2019 first quarter.
Total sales grew 21% in Health Care and 4.6% in Consumer, with declines of 1% in Safety and Industrial and 5% in Transportation and Electronics. Organic local currency sales increased 6.1% in Consumer, 2.2% in Safety and Industrial, and 1.2% in Health Care, with a decline of 3% in Transportation and Electronics.
On a geographic basis, total sales grew 10.1% in the Americas, with declines of 2.1% in EMEA (Europe, Middle East and Africa) and 5.4% in Asia-Pacific. Organic local currency sales increased 4.2% in the Americas, with declines of 1.7% in EMEA and 4.4% in Asia-Pacific.
“In this unprecedented time, I could not be more proud of how our 96,000 people have stepped up to help fight COVID-19, and I thank all 3Mers for their incredible efforts,” said Mike Roman, 3M chairman and CEO. “We are attacking the pandemic from all angles, which includes mobilizing all of our resources and rapidly increasing output of critical supplies to healthcare workers and first responders.
“Given the breadth and diversity of our businesses, the financial impact of COVID-19 is varying across 3M. In the first quarter we saw strong growth in personal safety, as well as in other areas of our portfolio experiencing high demand due to the pandemic. At the same time, we experienced weak demand in several end markets that were more severely impacted by actions taken around the world to slow the pandemic. Looking ahead, 3M is taking action that will help us navigate near-term uncertainty, generate strong cash flow, and lead out of the slowdown by delivering for employees, customers and shareholders.”
The Safety and Industrial segment reported sales of $2.9 billion in the 2020 first quarter, a decrease of 1%. Organic local currency sales increased 2.2%, foreign currency translation decreased sales by 2.2%, and divestitures decreased sales by 1%. On an organic local currency basis, sales increased in personal safety, roofing granules, and industrial adhesives and tapes, while sales declined in closure and masking, electrical markets, automotive aftermarket, and abrasives. Sales grew in the Americas and EMEA but declined in Asia-Pacific.
Sales dropped 5% to $2.2 billion for the Transportation and Electronics segment in the first quarter of 2020. Organic local currency sales decreased 3%, foreign currency translation decreased sales by 1.3%, and divestitures decreased sales by 0.7%. On an organic local currency basis, sales increased in electronics and were flat in advanced materials and transportation safety; sales declined in commercial solutions and automotive and aerospace. Regionally, sales declined in the Americas, Asia-Pacific, and EMEA.
The Health Care segment achieved sales of $2.1 billion in the 2020 first quarter, an increase of 21%. Organic local currency sales increased 1.2%, foreign currency translation decreased sales by 1.8%, and acquisitions increased sales by 21.6%. On an organic local currency basis, sales grew in drug delivery, food safety, medical solutions, and separation and purification; were flat in health information systems; and declined in oral care. Sales grew in the Americas but declined in EMEA and Asia-Pacific.
Sales for the Consumer segment grew 4.6% to $1.3 billion for the first quarter of 2020. Organic local currency sales increased 6.1%, and foreign currency translation decreased sales by 1.5%. On an organic local currency basis, sales grew in home improvement, home care, and consumer health care but declined in stationery and office supplies. Regionally, sales grew in the Americas and declined in Asia-Pacific and EMEA.
3M also shared details regarding its response to the COVID-19 pandemic, given its role as a provider of personal protective equipment in the U.S. and across the world. Since the beginning of the year, 3M reports that it has:
- Led in pandemic response
- Accelerated respirator production, including ramping up idle respirator lines
- Doubled global respirator output to 100 million/month (about 35 million/month in the U.S.)
- Increased capital investment to double respirator output again
- Partnered to create innovative solutions to protect healthcare workers
- Prioritized supplies to the most critical areas
- Immediately redirected the vast majority of global respirator output to healthcare
- United with governments and distribution partners to expedite products to healthcare workers
- Closely collaborated with U.S. administration, FDA, HHS, DoD, and FEMA to import 166.5 million respirators into the U.S.
- Fought fraud and price gouging
- Worked with distributors and governments to ensure secure supply chains
- Not increased respirator prices as a result of the pandemic
- Published N95 respirator prices; created a hotline for fraud and price gouging
- Worked with national and local legal authorities to bring lawsuits in multiple states and Canada
- Supported communities through aid for relief and recovery efforts
- Contributed $20 million in financial support to frontline healthcare workers, vulnerable populations disproportionately affected by the virus, and medical research initiatives
The COVID-19 pandemic is reportedly affecting 3M’s businesses in a number of ways. 3M reports that it has experienced strong end-market demand, specifically in personal safety, home improvement, general cleaning, food safety, and biopharma filtration. At the same time, several other end markets have experienced significant weakness due to social distancing and shelter-in-place mandates. These end markets include oral care, automotive OEM and aftermarket, general industrial, commercial solutions, and stationery and office.
According to 3M, it is continuing to adapt quickly to the current environment, with a focus on mitigating the near-term impact while positioning its businesses for success coming out of the crisis. Actions being taken include:
- Protecting employees
- Mobilizing global crisis action team in January
- Updating safe workplace protocols globally, including work-from-home where possible
- Implementing pandemic support programs
- Ensuring business continuity
- Maintaining strong customer service with new global Enterprise Operations organization
- Ongoing adjustments to operations, including targeted shutdowns due to weak customer/market demand or government mandates
- Targeted paid short-term furloughs in businesses most impacted
- Protecting financial flexibility
- Taking aggressive cost reductions while minimizing employee impact (estimated cost savings of $350-400 million in the second quarter of 2020)
- Adjusting capital allocation plans (prioritizing organic investments and the dividend) and suspending share repurchase program
- Reducing full-year 2020 cap-ex plan to approximately $1.3 billion vs. $1.6-1.8 billion, previously
- Adding $1.75 billion of cash via March 2020 debt issuance
- Continuing to expect after-tax proceeds of $0.4 billion from closing of drug delivery divestiture in second quarter 2020
Due to the evolving and uncertain impact of the COVID-19 pandemic, 3M reports that it is currently not able to estimate the full duration, magnitude, and pace of the recovery across its diverse end markets with reasonable accuracy. Therefore, 3M believes it is prudent to withdraw its previously communicated full-year 2020 outlook, which was provided on January 28, 2020. The company will begin reporting monthly sales information starting in May to provide transparency on 3M’s ongoing business performance.
For more information, visit www.3m.com.