Manufacturing conglomerate 3M reported its 2020 first quarter financial results on Tuesday, which were led by soaring health care sales amid the COVID-19 pandemic, while sales in the company’s safety and industrial group continued a downward trajectory.
The St. Paul, MN-based company posted Q1 total sales of $8.08 billion, up 2.7 percent year-over-year (YoY), with organic sales up 0.3 percent. Total profit of $1.29 billion jumped 45 percent.
3M’s biggest business segment, Safety and Industrial, had Q1 sales of $2.9 billion, down 1.0 percent YoY, with organic sales up 2.2 percent. 3M said organic sales increased in personal safety, roofing granules and adhesives and tapes, while sales declined in closure and masking, electrical markets, automotive aftermarket and abrasives. Operating profit of $726 million increased 14.0 percent YoY at operating margins of 24.7 percent.
In its other units:
- 3M’s Transportation and Electronics segment had Q1 sales of $2.2 billion, down 5.5 percent YoY, with organic sales down 3.0 percent. Operating profit of $484 million fell 7.3 percent on operating margins of 21.6 percent.
- 3M’s Health Care segment had Q1 sales of $2.1 billion, up 21.0 percent YoY, with organic sales up 1.2 percent. Operating profit of $456 million dipped 1.7 percent on operating margins of 21.7 percent.
- 3M’s Consumer segment had Q1 sales of $1.3 billion, up 4.6 percent YoY, with organic sales up 6.1 percent. Operating profit of $269 million jumped 14.5 percent on operating margins of 21.4 percent.
The company said adjusted sales in the Americas are down approximately 20 percent in April amid factory shutdowns and reduced operations and office managers buying fewer supplies as more workforces are working from home.
“Given the breadth and diversity of our businesses, the financial impact of COVID-19 is varying across 3M,” said Mike Roman, 3M chairman and CEO. “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.”
“The COVID-19 pandemic is affecting 3M’s businesses in a number of ways,” Roman continued. “3M 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.”
3M’s Q1 earnings release recapped COVID-19 response efforts the company has taken to ensure employee safety, prioritize supplies to critical areas and fight fraud and price gouging. The company said about 25 percent of its factories and warehouses were closed as of earlier in April, and that it expects the second quarter, which began in April, to be the weakest for the global economy.
3M said it was also furloughing some staff and temporarily idling some non-face mask production lines due to weakened demand.
The release also detailed financial measures 3M has taken to better position the business. Those financial activities include:
- Aggressive cost reductions that will provide estimated Q2 cost savings of $350 million to $400 million
- Reducing full-year 2020 capital expenditure plan to approximately $1.3 billion from a previous $1.6 billion to $1.8 billion
- Added $1.75 billion of cash via March 2020 debt issuance
3M said it has doubled its global production of N95 face masks to about 100 million per month and plans to double production again by early 2021.