MMM - Earnings call transcript Q3 2017

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the 3M Third Quarter Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session.

As a reminder, this conference is being recorded Tuesday, October 24, 2017. to Investor call Relations like Jermeland, to now of Director at would turn over the Bruce I XM.

Bruce Jermeland

Thank Welcome you, review. to everyone. our third and quarter XXXX good morning, business

Relations and Inge Officer. release Financial will and at today's this Earnings. your make website and accompanying XM's are questions. our comments, Each today call formal slide on we'll call Nick Gangestad, presentation the the Chairman, On our under are earnings President, heading then CEO; some Please and Chief that Investor Thulin, XM.com posted take note Quarterly

begin Before dates turn investor me to we our Please let the remind you events. for of slide X. future

in noon. earnings January event XX December Invitations York slide to X a First, please statement starting our our this RSVP City We afternoon, a.m. you meeting forward-looking second, from soon QX to sent moment will there. so place be be hope outlook as conference Please take XX. our possible. read New see And for as will held to X. this on with on XXXX earnings, take call will on

predictions. factors of call to uncertainties. turn the risk actual Inge. of could that some I'll today's about During and from to future Please important Item And will call, and assumptions results. statements certain future on our most and that expectations cause risks our XA to most financial based statements to certain recent XM's lists These are performance current our Form of conference slide the XX-K off that reflect subject hand predictive results events we views X. make are differ

Inge G. Thulin

growth to for morning, while even Organic all record strong half, us. business posted so and performance the more Good geographic our did to positive everyone, team the all groups across quarter. invest thank and Thank earnings joining a and continuing an We you first accelerated with third and Coming areas. robust sales in X% delivered record future. growth off you, for Bruce.

enterprise. take an through sales highlights. $X.X for the you me Total were billion, Let our all-time high

mentioned, followed broad-based at for I by led grew Graphics. delivered & strong by X% Safety growth organically, & Energy organic we and X% of As X% growth XX%. Industrial both Health Care Electronics

of X% quarter X% growth. Consumer growth groups earnings us business also growth capabilities second enable across developing business presence, and X%, developing to increased our to of geographic win. its was record. both was depth Growth per long-standing XX% to and EPS, positive growth share, see Company-wide which a market markets. It good is we market true more developed to than consecutive in with developed all organic XX% posted all was areas. expanded where This markets, Our respect with $X.XX to in position, With XX%. in margins broad-based we above of QX

a we Turning to rate conversion good of posted flow, free XXX%. cash

We while to to significant in returning continue through And dividends billion share turn invest to and the cash also slide we our grow $X.X quarter the Please X. and returned repurchases. business shareholders.

and today continuing both we which executing positioned levers, three the This our results, value into key to build significant that enterprise for are is financial an Beyond creators. future. success includes are

sales enhance portfolio our Safety. organic finalized in this of and why is premium monitoring to our customers over development fast-growing business, invest Scott aligned we deliver This intensified have in second we our a in strategic process is with time, how Research which same is personal returns objectives. management, The to first no This strengthening sales last XM. we several and longer X% Portfolio our and of us our innovation market. and will total completed of we And the of shareholders. safety is management. At and lever. $XXX years, our heartbeat development, the acquisition growth the is electronic month to research value Investing the continue competitiveness complement into the the quarter. the the which relevant It's million customers the further making our and more earlier marketplace. premium global position we to

lever is remains customers. The track business which starts Europe third West with with transformation, our of ends ERP and deployment The complete. system our on nearly

which turn over That the also deployments Nick. have more in concludes Nick? to December I XX. meeting my initial about now at hear We remarks. started on the States, United call you outlook our And will will

Nicholas C. Gangestad

organic performance. I'll Inge, continue the good sequentially slide Selling X.X%, in on Thanks, recap second year we versus third posted we markets the quarter X strong and growth quarter and everyone. of on were outgrow serve. a prices We sales start morning, as flat our quarter year. improved with of to

foreign was sales single increase Electronics, in All-in, quarterly last XX U.S., quarter last X% basis U.S. basis marks in increased Care by nonstrategic XX XX which Excluding price a months divestiture performance points, year. digit up and reduced the our was high basis currency in by this strongest third versus a translation Conversely, businesses Health Industrial. pricing of growth increased the over In quarter XXX the led sales by points. The points. X.X%, in year. organic dollars increase sales mid-single-digit

quarter. businesses Consumer positive & delivered also Safety growth the Our Graphics and in

digit growth growth groups post Kong X% including business in strong Graphics & Energy of with within in Asia-Pacific quarter, our our organic in QX. growth XX% business business. led Japan. China/Hong Organic was Asia-Pacific Safety in All continued and Electronics in increases double and the & to in XX% the company

Excluding Electronics, China/Hong Japan the was grew mid-teens and Kong in X%. up

X%. and with businesses EMEA. Graphics growth the in West X% & led was Industrial EMEA, Both to Moving growth Europe up QX organic Safety the in

businesses organic growth flat. growth up the of Latin X%. Mexico a growth while Care Health QX leading way, posted strong delivered level, Brazil America/Canada with was in At positive X%, organic Finally, All high digits. up XX%. single was Canada was country

will were which third basis XX P&L billion which later. net Company-wide, turn We sales to with X X.X%. the expectations, point us income margins incremental globe, giving third to growth impact broad-based up $X.X Please full Inge from continue discuss generate our a of highlights. raising a quarter basis, quarter On slide GAAP includes in $X.X third year the strategic were across investments. confidence quarter operating billion, XX%, for

Let's in margin points Gains margins. operating closer the third the look a growth our take to basis of organic performance productivity quarter. components XX at volume from various and contributed

nonstrategic Our basis selling in by continued combination material basis exit focus enterprise is The price to lower which another raw margins, businesses. the on points costs strengthening points. XX our ways, improved portfolio management and many of added XX of changes including due

the expense decreased margins brought XX pension XX year-on-year OPEB quarter. net of currency down basis margins and higher hedging Foreign impacts And by points points. basis in

Let's at for share. earnings to a X now turn slide closer look per

raw This GAAP share earnings efforts. penny investments. result up a from $X.XX quarter to was along X.X% driver benefits Acquisitions incremental strategic over continued includes and year share, with per combination added impact over the Third and year. $X.XX growth QX The divestitures contributed of the per organic impact Organic predominant positive to were is $X.XX earnings earnings. year productivity a our transformation year. material business and on productivity having growth

of $X.XX was a the earnings net rate lower hedging benefit. by And currency $X.XX a tax share. Foreign reduced slightly

to X interest expense Finally, turn cash net was look at Please a a to for of outstanding higher flow. lower slide $X.XX EPS. benefit shares

and which generate us allows continue return in the to shareholders. business to We a to operating consistently as cash solid company, cash invest flow

a billion flow XXX%. of quarter was Third $X.X cash rate free with conversion

For expect range in cash of the free flow XX% full XXX%. year, we conversion to the

we and CapEx, numerous to disruptive opportunities by encouraged Turning both in continue technologies. be growth to the to invest

we million. these $XXX Third expect for quarter billion $X.X approximately And expenditures were year. capital to be investments the

businesses, we our million in significant to QX, In up returned to shareholders million. in addition in including dividends, investing $XXX cash $XX

billion to now in billion full range billion repurchases expect $XXX We or to We to the returned share million repurchases, $X date. through of also versus to $X previously. gross be to shareholders billion billion year $X.X $X.X $X.X year

group. Let's Industrial's XX. across Please now by business was group, continued again up growth and once to all areas growth, our slide third X.X% review the in largest business businesses. quarter. all turn its our organically strong broad-based Industrial, geographic performance

industrial namely tapes, and businesses the and adhesives mid-single in automotive abrasives, growth Industrial aftermarket Heartland digit quarter. all – Our within delivered –

outpacing we basis approximately platforms builds Our OEM the global the increased on penetration auto car by automotive business across and as drive globe. XXX was up to X%, OEM points, continue light truck

way million XX. third operating improvement basis investments, quarter XX.X%, grew of benefiting XX.X%. from $XXX from mid-teens also turn an of slide advanced Industrial income incremental to strategic portfolio, growth led by On favorable the a increase with all in the Finally, quarter across geographic year-on-year while its materials basis, high other Adjusting digit operating mid-single comps. in a point Please was a with XXX for while were performance operating led margin strong Asia-Pacific, single growth with organic margins levels. delivered QX areas digits.

our quarter. sales personal the quarter was X% Third accelerated organically. in Growth Graphics safety by which business, double to Safety grew & digit led growth

our experience to on look strong safety fourth to build Safety and continue in quarter. this with starting Scott integration the We here of strength for demand solutions the personal

top business tough year-on-year up on mid-single solidly, granules of digits a roofing Our comp. grew

in month. posted by continue the grew an we areas, Asia-Pacific with increase its XX% as & across earlier Lastly, Geographically, business electronic organically transportation Graphics an in EMEA. and safety growth in Safety positive QX, X% portfolio evolve the this organic led of to monitoring sale increase all

slide year million margins on of XX%. Third Safety $XXX quarter turn up in to operating nearly were XX. profits XX% Please & Graphics year with to

business Health and Our Health grew organically. growth third geographies. in the across Care delivered Care all X.X% quarter businesses broad-based

particularly Energy saw in single America/Canada, and XM's $XXX segment Please care across sales high is America, U.S. markets, which in notable we Care operating led up up the in digit Oral XX% growth, consumables double Electronics demand in growth Latin by growth in by quarter. led continued for margins were Health was growth, posted remains particularly is Geographically, double organic high and products as Organic strength drug was Care's X% organic largest business, to international Health was was business. income within quarter operating Health medical delivery deliver and solutions the Kong, growth million increase date. developing XX% worldwide organic and turn a XX. year Europe. digit our in to up digits We Asia-Pacific, digit single slide Asia-Pacific, which growth XX.X%. growth was West Care as the strong. our Care, to quarter, in China/Hong delivered in strong Latin & Our and Health third

the on to to are business over streamline efforts the for portfolio continued and electrification. automotive growth relevance, The improved semiconductor year. to XX% organic grew few increase side as manufacturing, and to globally, years our past drive benefit management on data the platforms customer deliver of many from penetration organically, centers, business including Electronics track the This continues OEM our assembly, enhance We efficiencies. XX% team electronic business,

X% organically telecom. organic mid-single digits, while up were a America/Canada On led geographic by businesses a offset with electrical decline Our positive in EMEA in XX% Asia-Pacific, was markets by related a Energy and growth. also up delivered partially basis, Latin increase growth

quarter & slide million Third income operating for Energy of with operating XX.X%. $XXX margins XX. Please turn to Electronics was

while up for damage-free mounting U.S. continued Consumer tape. in growth high a a care, digits painters home was while saw three improvement, mid-single quarters. care, four Asia-Pacific, organic Third and in continue products America/Canada growth. was organically grew digit digits, and stationery positive Command namely ScotchBlue in Consumer our led double businesses, by home improvement Filtrete We strength delivered organic which and Consumer office XM. brands defining filtration versus to also single of in quarter strong and declined. Geographically, both health home the recent in sales grew globally. delivered be Latin X.X%, growth growth We Consumer products Category positive consumer

operating to were of Finally, operating income was strategic operating Please investments year, slide margins an XX. for XX%. year Adjusting with turn margin XX.X%. on $XXX million nearly

fourth Before want will Inge, few to over call a that turning the back quarter. items to the cover I impact

in First, divestiture a to electronic is business the the monitoring of of net $X.XX completed to positive impact have QX. expected earnings

the Safety $X.XX. to and integration by earnings Second, Scott income, reduce per expected share acquisition net costs, is of

charge will result recently debt tender a our earnings coupon in a of nonoperating debt. higher fourth estimated impact per retire $X.XX in to we to This to be an Third, the offer some share closed quarter.

I to impact have discussed portfolio plan by these quarter turn year, Please the to estimate incremental slide We we throughout optimize better And investments earnings to as approximately will Lastly, QX to the $X.XX. we our negatively Inge? in that turn now to our over actions back fourth per to continue and strengthen call share $X.XX take Inge. XX. footprint. will

Inge G. Thulin

Thank Nick. you,

our As very I and pleased our in I look the across year. enterprise, the throughout quarter performance with am

a terms growth you of organic X% earnings expectation invested to $X.XX our increasing $X.XX are take EPS, as prior respect a of capital earnings year. now and you anticipate range X% terms increase we for to XX% of to in versus we that growth today on now prior for conversion. can X% range result, versus to And per cash expect to X%. of to a XXXX a organic $X.XX. per As both of we $X With performance This your in see, We we XX% share, continue is share. of will both thank free to and your And strong I questions. on flow return attention. year With expect

Operator

Lynch. proceed limit And line first question One up. and Please Andrew one of your to we Merrill your comes the participation the of moment, Q&A of from roster. follow question. Please compile with while one Obin America please, Bank our question

Andrew Burris Obin

guys. morning, Good

Inge G. Thulin

morning. Good

Bruce Jermeland

Morning.

Nicholas C. Gangestad

Morning, Andrew.

Andrew Burris Obin

question. X.X%. top-down growth a of Top-line sort question, a Just

and As current as Or And you economic overlay your to X.X% it as that you is trying off? can economic Above right, to longer just achieve framework, environment? environment, describe average you I'm perspective, environment this five-year average? to one expect something we a over from think, your that would if in is this think, framework? relative term

Inge G. Thulin

of all, good Well, first morning.

it plan that originally to we five-year versus frame say on out lay the we maybe talk put and will plan that's what think the end we the is maybe But high the difficult, stand. about I you when thought it's I as into.

X% We've can X%, to now we X% range see have gone that a X%. You from we that move then also from. to

is speaking, X% of to we good. it's our move as well will And we talk X% XXXX, we more very year. very And XX But we that December I will commercialization about have the generally which are are which on programs the confidence for York. us. for high Now New into broad-based, execution going in say very, very

the to it's X% think X%. remainder end X% the the I year. this for X% – on I high I think So of about think would about of more to

Andrew Burris Obin

just And Terrific. a follow-up question. Okay.

more on growth, been has in devices, of the give Thank it, On adhesives. I'm could trying us Asian Electronics separate you. what drives increased to good. mobile just those how two growth. much specifically particularly color in sort if participation bit Or understand the content of you little that of you Can very it? semiconductor And cycle, just a sources your

Inge G. Thulin

to I all, if as industry something take we what so group, that we not on Electronics understand Well, back you're have & from the as how accelerated actions. take we to day visible and What all Energy that faster business step perspective. and a segments. think a Yes. done see we shifted investment really first always have of a And by have, some in not we growing also yes, portfolio day right is is is

element for So about. an important I think us that's think to

Now very on the electronics, platform are for we consumer global.

the say performance, base what So in devices. a there for specifically fast. that, global pickup. functionality will is penetration very on quality, I terms of are think about the are us, on And demand most you going OEM China about. it's for if and exactly we And those all we adding of in

on we very So growing that that means platforms. those are fast

So than positive we doing which is estimated, are had we things. better a there

three on years shift I growth. in data of the ago more energy And terms automotive course, is semiconductor, I part say think now us centers, also are driving this also of will focusing on terms growth, versus that in of we on growth. electrification, of grids

we had $XX just think the market a was if of billion, size where that came growth to to $XX continuing base are a So a have that give rate but years of growth during X% you you to to have last a shifted about facts, of we size the to We're from XX%. billion had it, market that couple But XX% there. X%.

to we I a more what group we that I are of think credit is our is relevant to the is there would fact there. are that So have are the they the what that business the customer, doing. expanding, to answer And growth coming, been doing say big margin

Andrew Burris Obin

these But drivers. as growth Electronics structural sustainable that is because would imply well, are XXXX into that

Inge G. Thulin

so. the ups quarters. you to It But in Yeah, think technology and downs But do you you is. look I well. business, we total between again, have conversion, have upon continue will can when It if is.

Andrew Burris Obin

much. Thank you very

Operator

next of your the with Suisse Our proceed Hi. Mitchell Please question Suisse. Good question. Credit line Mitchell from Julian comes morning. - Credit (USA) LLC of Julian Securities

Bruce Jermeland

Morning, Julian.

Inge G. Thulin

Hey, Julian.

Nicholas C. Gangestad

question Julian. Mitchell (USA) a around just Securities strategic first Julian Maybe Morning. Morning, - Credit investments. Suisse LLC

step-up talked year $X.XX being you that of $X.XX, year about a in on second previously the think half. I

that's XXXX? just just of through? based why date somewhat Maybe coming it into How it's that guidance. Is on that your background looking what returns? Now than a to happening. some investment less kind returns give are as on And to pushout

Nicholas C. Gangestad

for action, And thanks that Julian, really quarter business success. good third I to Yes, good a where same example actions position the doing margins. organic as have call at XM future of what time in the we're our question. we're strong growth, would taking for in model we

you earlier portfolio. but to actions the incur strategic investments And And the strategic include improving platforms, we As for to those tracking also growth and and between year. year for the investments things talked year full this core at we're of be beginning in right footprint mentioned, our of that we about expected our announced we addressing $X.XX $X.XX range.

All of year. are now growth this to of that for part X% X% seeing the we organic outlook

$XXX generate million plan and over annual to million investing of supply – We we XXXX. a Julian, on And back, by course the $XXX better ultimately million when to of in point good $XXX few what benefits to we in million are footprint. to March that you about progress chain to XXXX our in manufacturing years between making XXXX, a be optimize I'd $XXX out laid

price second your that, QX. Thank that Understood. has was charge of debt view you LLC coming Securities tailwind range the a full the thinking. operating (USA) than $X.XX charge October, much as include tender that my sustainable quarter. to in raw And to up, the does - in here? picked portion? part question, trends That related and we'll we in slightly And raw Suisse closed larger be the materials slightly for in year Within sort you. just Credit QX do in then pricing been of Mitchell incurring in materials our XXXX, tender bridge from that your current QX. And how margin $X.XX So Julian fourth that hence the

Nicholas C. Gangestad

points, of core pricing, as materials. Most growing coming as that if company, on, total flat, I mentioned XX from basis basis The that or excluding underlying growth price the year Julian, the points. seeing We're Electronics. is the for raw up exclude XX Electronics, I goes

little So seeing we're our let The that just elaborate XX where a more points a price of raw But QX from we're for certainly facing strengthened. materials. on the market majority toughening. quarter that, is And materials basis raw as coming core underlying Julian. me is

We XX financials That hitting of material benefit seeing creating to points are work benefit. see prices we basis result our the that XX of the is basis costs the raw doing take we're not paying. we're of out underlying that projects market and points that and

LLC costs. Thank thing Credit that to material XX raw you. - take material Julian helpful. or basis driving example, biggest points Suisse That's raw seeing. product substitutions So Securities those (USA) very you're reformulations That's the out Mitchell

Operator

of question proceed of line next JPMorgan. Tusa Steve question. Our with your the from comes Please

Charles Stephen Tusa

morning. Good guys. Hi,

Inge G. Thulin

Steve. morning, Good

Nicholas C. Gangestad

Morning, Steve.

Charles Stephen Tusa

quarter. good really Really,

Inge G. Thulin

you. Thank

Charles Stephen Tusa

Electronics on the Just following commentary. up

sure an kind X%. just of high up guided You that to guess perspective? kind of right kind making math the singles, XQ year. from at implies organic for X% that of correct here, that XX% I Is get to my I implies,

Nicholas C. Gangestad

Yes, Steve.

sound pretty math's Your there.

Charles Stephen Tusa

you obviously. this pretty talked that it Okay. not about mean digit you're sustainable solidly sales the semiconductor saying And I guess double up year are I is mean, as sustainable. double I digits.

a not So quite doing kind of guys surprise are it's you there. well

you been on? line rate of it's do So sustainable? you more within over to talked devices digits? kind kind the of mid-single trend just mean the like that What did by when you last of range an several it's sustainable, relative of Or business you're you say mean years, of the about? the Kind that index

Nicholas C. Gangestad

when electronics. the see in Energy So, & Steve, opportunities consumer that there, Electronics sustainable we to we see for say penetration for we and opportunities continue

we're But continue we're faster our Places like paying portfolio & As Inge are those we Energy. importantly, occurring earlier, opportunities to of seeing market automobile seeing our in growing even there. more relevance our And grow to our consumer electronics. where repositioning places actions Electronics to after mentioned in the we're growth where be electrification. evolve results technologies going off,

see a after is really our electronics. But with underlying Inge few based ups us downs the happening what seeing So always what's you're higher minutes consumer model and of growth going we'll said some on demand business working, now ago, for – markets. the

Charles Stephen Tusa

investments of you're kind margins then playing just on anything kind was one little light. things? of commercial through. think And bit it? of I And a how Okay. just more type kind of more the question that's Is going guess on about there? should R&D and to that and how we investments repurposing

Inge G. Thulin

on. going there's nothing Well, Yeah.

you commitment As closer X.X% made research from X%. in to we and investment to know, have increase historically, a development

We it's it's just the to X%, abnormal commercialization there. those move nothing not But at normally from activities. running on are going so

for as and and past. us We as forward science, and are committed we driver to us, sustainability is for have key And research in technology, the move very development. been

that's as is we invested you from And commercialization. basis see, year, So additional point those to coming. for where basis Commercialization, when no XX to XXX expected there we $XXX million growth. the it's shift R&D point

So that. we're with very pleased

Charles Stephen Tusa

Yeah. Great. Thanks. Great Congratulations. quarter.

Inge G. Thulin

you, Steve. Thank

Nicholas C. Gangestad

Steve.

Operator

comes Our Please next line of Citi. the question. proceed Kaplowitz your Andrew with from question of

Andrew Kaplowitz

Good quarter. Nice guys. morning,

Inge G. Thulin

Morning, Andrew.

Nicholas C. Gangestad

you. Thank

Andrew Kaplowitz

forward? expect mid-single second acceleration but growth And you previous you've about is easier the this of in the is did saying you your can I that markets? can acceleration. business now moving digit in growth talk in comparison Health Care an see half But whether Health you really impacting growth really spending simply had Or sustainability business? this an about acceleration Care, the know talk notable. in been you growth You

Inge G. Thulin

Yes.

investment course And all, – for off. the Care the time Health we of called in that's they first think search. And business those developed quite some core economy based economies. investment invested where made Care. in the also specifically we we developing a was Health in based we that have And additional broad that X%. XX%, And First broad I that's for in lot but was Health of off. Care developing we can paying grew had of quarter, for And see grew paying

So our grow United is that we Europe. we specifically and very, continue planned. in And in base economy strong very in developed, well States there. And as very to the coming see West developing then is you can

the I have So we X%, that range then say about of a move will be doubt as when to I talked in plan. that's that. we have range realistic will about X% no we forward. And

Andrew Kaplowitz

right. helpful. All And then... That's

Nicholas C. Gangestad

me. Andrew, just add thing. Hey, excuse one I'll

XXXX. Care guiding the growth the about for months X% solidly X% of X% X%. through we're the results year, to first And range in the to the For We with nine X% see Health we're year. ourselves

Inge how of and growth the mentioning, is in to as longer see was course the just in we term, Now business. X% X% that

Andrew Kaplowitz

Thanks then for is And Nick. follow-up just pricing again. my on that,

closer do helping you rebating pricing back positive Consumer pulling stronger and it's And or on flat pricing much to just to performance get it the discounting, the Industrial XM XXXX? last back be You the you? of U.S. markets doing. appear think in Nick, U.S. getting possible year, U.S. talked the back for But versus pricing in how quarter, about does to better which was to in overall

Nicholas C. Gangestad

our environment into U.S. we a pricing incremental the in we on seeing see it growth pricing where continue And we have see that's Andrew, one ability happen. of slight that – we causing part for future. improvements model, I been it's in to the in our that have price where pullback It's to wouldn't call kind there. improving increased any business Yeah.

to As XXXX, I'm on about or that down XX. talk more far an We'll that as on December declare one. not up ready

Andrew Kaplowitz

Nice All guys. right. Thanks, Appreciate quarter. it.

Nicholas C. Gangestad

you. Thank

Inge G. Thulin

you. Thank

Operator

question of line from the proceed comes question. of next Please Robert with your Our Stifel. McCarthy

Robert Paul McCarthy

– quarter In the you and businesses? the then about of Safety. price to on road part But you're the Where in kind the year. a context much Consumer, just catching XX your want talk you see the perceived about years the And maybe Industrial. think talked years? any get quarter. wanted excuse up solid, three that. a quarter, right you're road. Just structurally you not debate strong little I – around getting the could mean about about But Yes. feeling points. itself down thinking just are? of structurally perhaps going next on fairly more but of in been cited me, where question or rubber what moats fourth pricing the what will to could obviously, it? you're the the over now, not in pricing as contrite how is of follow to transparency I up of Obviously, about much as to to very as kind lending I strong of bit you third the pressure event kind around And as is is beginning echo your two And you've how a back well. talk And the you've maybe basis half xylophone you meeting

Inge G. Thulin

if our on as if much should very think as ahead, all, that about leader Yeah. about based Well, are not you XM you in in. move and the if categories scientifically based business we it's we price And you look model. most, historically – think

our improved about So it's drive for to new efficiency the and/or for we customers. in if that you are providing, products, all order the us, solution productivity new think

model. understanding customers' about is business model business Our our

commoditized We are by definition a company. not

to discussion. we and So go just on fight and the in in make them making We better. go don't things is primary different try businesses where price versus

is better. That's also can things you the But price. when drive do do when real you different. So where the time it you value

why is – wave years, versus to So have and have and as also seen they can add That's can the we sustainability that much that forward. work don't businesses portfolio five portfolio. our have we continuing to the years you more also see, commoditized. done that We there years, have them science, other as are is And you three four our commitment value here been exited think technology, companies. last

will our would I relative be there forward that to So say strategy change around moving pricing. no

business you in can pricing. to we fact very, as things between again, us. it's around part of is no important to due quarters know know, it's our for very change It's big important and And relative the Now our But change strategy there slightly. model.

Robert Paul McCarthy

and as your you continued around and maybe it for But for kind about of we thinking kind you should how electrification. take suppose you initiatives term obviously the a commercialization. talk outlook – talk is? longer the maybe could the about portfolio your could top around follow opportunity I most be quantifying Could be electrification up of meeting what from just where the And about the messaging opportunities? growth will see

Inge G. Thulin

talking electrification, specifically? you Are

Robert Paul McCarthy

autos. for Yeah,

Inge G. Thulin

Yeah, of course.

about do, you that can of area terms If that have think and the what trends we mega specifically. three into in we elements

We are strong in automotive. very

We have over that showed time.

year year are We quarter and within quarter after and as build outperforming quarter automotive after this well.

So into is our very connection automotive strong.

are there together, leader traffic them And ahead. you in elements to in forget contacts a traffic platform then us to easy global the going. utilize through & that strong exactly together, capitalize take other a thing and in to that pull is move And trends electrification, those if big then technology build we have as we safety, our are the platform our is Electronic order safety. that's where we We And those Energy automotive platforms. is that for

today that to – also automotive thing I you safety see in road things space. a of and will the it our we of But will certain about think drive the cars. come perspective relative that would will as evolution I that say in So

Robert Paul McCarthy

Thanks for in. squeezing me

Inge G. Thulin

Thank you.

Operator

Research. from Melius Please proceed. comes of Scott question of next Davis line Our the

Scott Davis

guys. morning, Good Hi.

Inge G. Thulin

Scott. Hey,

Nicholas C. Gangestad

Hey, Scott.

Bruce Jermeland

Scott.

Inge G. Thulin

back. Welcome

Scott Davis

you. Electronics, changed a region on crack to I the sales brand a while. obviously. finally is success? back. time this It's what was code mean you've it years And you in get to the your Thank But boy, know was mean it. Appreciate had you take good the awareness? for there. China. you seemed nice what mentioned just Inge, some be I do most of it pricing pretty of marketing? call. mean That to of I guys Does earlier that attribute couple you strategy? I you tough up And a and outside for have

Inge G. Thulin

Yeah.

Scott Davis

But if talk you through could that. just

Inge G. Thulin

been long you time So a for we've all, first as of in China know.

our have of capabilities wholly we there. center time. and in subsidiary there. have a good research in And made over think and there started we terms we XXXX I And also owned good investment manufacturing have development

being would additional Now is it looked talked markets. not before, what China like for there been had – there investment that as and have shift. we call we in a But domestic about

to is they're is for speak we us for brands. happening will consumers And Health our then there order Care that Consumer and becoming what And functionality quality, going specifically. us relevant. is benefit on more that in as in into right the think more I and OEMs, be performance, the and and business that So demanding model on

we So are capitalizing on that.

IPI (XX:XX) two also GDP times of And have think terms more that the Care. And additional domestic produced portfolio a commercialized the everything to Right? shifted there. Safety Health grow we in in it We couple made and in quarters. we in about also have you investment of markets. last So is and

initiative. us own that's our in helping addition So

efforts So of, air lot I trends Chinese that's and would automotive And quality, electrification. have of you type say, addition, quality, on a water like. if in made we, mega then

nice that it's are see. take together, you coming. growth So And very to

a commitment long term think brands are you demanding that quality, So presence a start becoming and a under much performance, because say, very I as functionality. and now I think the has off of then for pay important. and more focus, focus, to it's And more a

China, take in China. XM. quality you If quality stands to for air equal XM it's air in

in they like talk products, et things that's interviews, about in into some about our respiratory and will actually brand filtration, China. China to travel do our cetera. you if you And So

coming it's quality able to think I the we're country. the So back brand to provide in and awareness functionality and

Scott Davis

And been to that, sense. of makes up designed is just mean to locally That the things the doing, Inge, one of trying in more each regions. I get on you've follow products

Inge G. Thulin

Yeah.

Scott Davis

grown, same structure, mean you've things. the and you've as taken a so on it up guys duplicate as I meaningfully For guys in don't America, Whether for total working complexity? time manage working up China percent same example, you quality, spend. how spend, spend. you've it have And taken R&D whereby Asia, do a on make And a revenues really just got not projects? you developments. be air Europe, you that But your Latin as total U.S., at guys how sure on got do U.S. manage new the the working have you you've that in

Inge G. Thulin

that duplication. we Well, around is research development, local things. combination There's And there think research. very managing and And President overall global a manage world it, little centers science and And that's them. of the you that the to if about are order in have off locally do Research four about you from are think you you is we Then that. have our will only for the business have research, structure to of the and Vice Senior there division development. based doing how capabilities – four the Development the relative

there not So duplication. is

But can – when very, sometime And be replicate other for it's see us some can is someone think is to some the And solution time a local places. find I we you honest, duplication. seldom. and for time on advantage market, that something very

So much terms will evidence And there it's the I'm is result. I outcome or will. the sometime? in not there be But there the think all. sure duplication of at Yes,

Scott Davis

good Thank work, you. Excellent. Keep up the guys.

Inge G. Thulin

Thank you.

Scott Davis

Take care.

Operator

line Our Deutsche Please the next Inch John comes from your of with Bank. question. question of proceed

John G. Inch

Good morning, you. Thank everyone.

Inge G. Thulin

John. Morning,

Nicholas C. Gangestad

Yeah. John. Morning,

John G. Inch

Inge. Morning,

on you thought that $XXX in you guess going I spending maybe we So there? Nick were did over investment could million. be – can what's talk And $XXX going Maybe was about $XX quarter? quarters. But million. I doing to the million two about

Nicholas C. Gangestad

Yeah.

track for investment and we're our according continuing we're for having a million, play going We accelerated And would had of spending this investment for ended of total total some to It's for for quarter. spending. actions we investments. that the XXXX. how mid-$XX out For $XX third growth footprint the the expectations year the to execute plan. XX/XX the million It's roughly mix on up

as planned it it we've So year. the for just tracking I see

John G. Inch

So, Nick, you coming didn't quarter? fourth through spend less than you had planned in no? Or the that's third quarter? the in And

Nicholas C. Gangestad

on total share quarter footprint to $XX we strategic to on the $X.XX to expect I'll to lap the up That we're heavily in million roughly of on terms. In of in That'll incremental can – ourselves slightly to go $XXX some more later per be investments. million be I the or $X.XX growth XXXX. earnings growth now be put with started to fourth focused Because starting growth. cents, – investments side, will John, than that we that

John G. Inch

over That's... correct? $XXX million year That's Okay $XX year, to so million. incremental

Nicholas C. Gangestad

John. That is correct,

John G. Inch

receivables is response products sort that's, little looks short actual it fill. of a sequentially a pushing It a that? as that of moved sales maybe sources. through? could is have be – that inventory function this and channel Or of from to that new like a as bit. is presuming a Is up pull-thorough company, variety What you're Is I'm that cycle

a company, there? of that is of obviously it's Is reflective giant hard going on global up? You're picking sort parse fact just so But what economy out. in that to the actually

Nicholas C. Gangestad

There part that's economy. the that of is Yeah.

balances biggest where receivable going seeing accounts of we're So up. an accounts the receivable driver from perspective, our growth is certainly

things now. typically our we of our a the of I'd for build go-lives to what transformation for On effort, growth. of supply add different do the the an little customers geographies one prepare advance bit The that's we're ensure also around top of case we is thing seeing inventory, can chain to business in of in undisrupted is a only the the as inventory have world, right on we some That's in that function them.

Inge G. Thulin

I definition. important, is by no us. don't see anything channel is there John, the We for in abnormal is But channels fill think that

in So I well. think place important as put that's to

John G. Inch

still was anything Consumer Consumer have by in way? is Inge, the have if had So fill, actually that what going down Well, price point, should right? your to channel on? And

Nicholas C. Gangestad

in out channel channel We business to in our we are the by contraction of office case price group. see continuing And the in don't typically U.S., supply the there. put

at seeing that John. half in the year, not same level first the of Just we were this

John G. Inch

Okay. year? year? vehicle this the last spending down? margin down is what's that will Gross up on you're margins, to first they back ask because do complexion gross why businesses, electrification of actually be last start I'll took one today your versus Or are year on to ultimately pick Like, in OpEx quarters about questions. thing management? for of again just the versus more, three think the XM Why were all going you XX they based And this up? they going

Nicholas C. Gangestad

at looking be gross all-in must you published think our on I basis. margin John, an

John G. Inch

yeah. am, I

Nicholas C. Gangestad

gross doing have are our that impacting margin. to XM. we costs of we improving are Part number Those of actions. out, what see strip supply been margins these chain we've been a doing this year is we for When continuing slightly footprint gross

John G. Inch

– at an a does up trend to when look that on kind And do you that Nick? all-in? When of alleviate, start

Nicholas C. Gangestad

In million and chain terms ago we a of our that half footprint supply view of originally actions, $XXX on year we investments. million out expect a and laid $XXX between

the done in have that, XXXX. We majority, more of half than

XXXX. that So seen than be a – a will still than XXXX. lower what in see level footprint some It just we there on in will we've lower expenses base action be

So flip XXXX. perspective from it'll become margin to a tailwind for in us a

John G. Inch

much. very Appreciate it. Thanks it. Got

Operator

of Please comes the from Sachs. Goldman next of Joe proceed. Ritchie question Our line

Joe Ritchie

and good Thanks morning, everyone.

Inge G. Thulin

Joe. Morning,

Nicholas C. Gangestad

Joe.

Joe Ritchie

deceleration, like growth, it really touching on good X%, guidance call on quarter current good look of organic I'm implied anything in growth. acceleration. you bit quarter maybe to you clearly, roughly you're a the rates. if wondering rates kind and at nice little exit the the whether a guys comment through But So of fourth quarter just and interesting still like guess maybe of I can X.X% seeing

Nicholas C. Gangestad

change for trend. will What be terms be we're the the is for in into quarter, comp the of entire noticing trajectory in three underlying guidance quarter seeing no weeks deceleration our fourth continuing third in fourth trends our the Joe, our the no seeing revenue. we're the first throughout year year. But sales toughest in may saw of quarter that you we and the of

Joe Ritchie

following as progressed, Nick, maybe Or was the quarter? just change quarter the pretty was And it. throughout on quarter there, Got even any the throughout? there

Nicholas C. Gangestad

throughout trend was it quarter. There very was quarter. of pretty third was discernible strong It months different Joe, the between the even the the throughout weeks quarter. no and or strong

Joe Ritchie

it. Got

over guys & this maybe the a Clearly been bit where capital allocation. should couple be M&A to where about like thinking I'm down shifting dollars just the bit you're as guys an moving putting you the Graphics prioritize Safety you buyback little perhaps your across years you're maybe taking And think Great. have little Okay. portfolio, year. last forward? M&A Looks area invested. wondering then has you gears a just

Inge G. Thulin

they first couple Well, & Safety all for of the been specifically we but it, And all, smaller. illustrated have very talking Care, also acquisitions Graphics have in even in years. Health pipeline as if now I correctly think done last good. of you have businesses is the I'm

have Safety for Scott in in Capital and & we base the very have everything that We're sure in are franchise make & is the to with brand aligned we to Safety where to safety. in I in businesses. we had additional added which than in we four that Graphics that, coming manufacturing Graphics implementation that as now personal as a capabilities, our in of now, are Safety there to some continue reach, strengths, a more focused and execute said, order integration we important that that business for do growth. now good to open have But add position that thing. order But say on strategically to our we can us accelerate equity. and interest geographic think fundamental we Safety technologies, I businesses, strong group see is and those five groups I all would business And

fast So for are very are in strategically they we can fundamentals, return four a good our a interested. those drive and if position we faster in return portfolio, ourself to and

Joe Ritchie

valuation? limiting Inge, maybe is how factor much of right now a

Inge G. Thulin

looked it to use. We add can acquisitions – we Right? where real company. for on that, think about for strategically. Right? the So I it's can always mind world-class to talk then to it paid it. we you you some we is Right? you not are like of upon have are There's whenever value I There's make important my and it's a decide – And have really it. you see think to always the limitation – always would made, – in there we now. have there

forward. integrate and We are companies can interested that to drive we buy world-class

So then not but you much. more, too need to little bit pay a

Joe Ritchie

guys. Thanks, Okay.

Inge G. Thulin

you. Thank

Nicholas C. Gangestad

Joe. Thanks,

Operator

Please Our next question line from proceed. Steven UBS. comes of Winoker the of

Steven Eric Winoker

guys. morning, Good Thanks.

Inge G. Thulin

Steve. Hey,

Nicholas C. Gangestad

Steven. Hi,

Bruce Jermeland

Morning, Steve.

Steven Eric Winoker

two Hey. keep to I'll – I'll questions. just it

The you skepticism to XM a first ability of its I lot faced over hold one, Health Inge, around time. think margin operating has Care know

skepticism that strategic And high facing for proven sort the level you've another yet the as far wrong. investment before we're quarter. So of margin

how So going you're do maybe a to Health that globally? little And Care comment the on bit to your continue And conviction in that? withstanding the time. ability over in pressures business' forward

Inge G. Thulin

to right. population very know. you're think all That, Yeah, time. in The for a first I attractive trend, all, be in for et business of aging cetera. we've business It's a reasons long been this that we

Europe I and in back provider Care value we there Industrial, German is provider. then in what you act. very things. we I area Health think those win just, things. into was what I was specifically. One benefit And capabilities had logistics. be myself, the ourself, the to then That the doing. Care, And and for able early of two in do. that to second, to And that's add those XXXX the like don't you still important model can able know, than the And the but in benefit is manufacturing are our efficient do in be for even And we lot value know was a provide care thing to XXXXs, terms again, when segments. that of health patients right you're if the and at I know in And a two is is to is least a you pressure prove for will the to portfolio XXXX what which for part, different through very of an patient. Health

about a see they rate, can it's businesses growth my perfect it's margins & sold Safety as business outcome had papers is first will regulated, And as patient products for the making always when see terms And that economy you and our what the that one very cost treatment same the Not And do sure that they pay based business writing of for goods the The high soon the specific acceleration about developing the you XM you point. issue how margins, is opinion for economy XX it's and again upon we safety, system, it's you Care, look upon the of the the people respectable at soon in plus leaders is model is never but look Graphics, should So that you in of to money. XX%. if that purchase Health best. patients. the on world available, It's percentage. in are developing And quality, worker around are in of was becoming or SG&A, of money almost compare rate best get on in the our you mind. key as our into the growth margins, that.

Steven Eric Winoker

the EBITDA? on then up, Okay. That's showing I once leverage for think You're about secondly, on taking repeatedly. question forward helpful. growth forward? that's quarter I debt thoughts a also strength And to one incremental that net time any given revisiting you've in below going tackled think But the investments again going

Nicholas C. Gangestad

That that guidance the capacity Yeah, that leverage course five out we XXXX seeing expect front we between over our over path. nothing that in you progress Steve, laid progress on have what for on XXXX years. of $XX of changing we made in of We've that of time. and for adding and know $XX leverage. that add on There's to leverage billion the billion

Steven Eric Winoker

Okay.

Great. you. Okay. Thank

Inge G. Thulin

you. Thank

Operator

next Our Stanley. Please of Nigel proceed. the comes of question Coe from line Morgan

Nigel Coe

Good gents. morning, Thanks.

Nicholas C. Gangestad

Morning.

Inge G. Thulin

Nigel. morning, Good

Nigel Coe

so lot keep – ground, I'll keep of covered this it I'll a very brief.

on And Or I'm And in timing more was just understand pricing know differences sell-in any data. there broad good it might some what the sell-through. really maybe good of were the course? question have demand? or terms and Consumer on assume you this the to the in do increases trying you rebate portfolio sustainability in there organic sell-through? in that that caused know versus days have your obviously distorted But sales. intelligence tackled XQ. acceleration. got But continues. in doesn't of was we've So I XQ versus broadly guidance But Industrial just sell-in market of end channels, I Health what about And Care concessions any terms

Inge G. Thulin

retail consumer sell-out we this relative On the But and to was market the the often in commercialization demand sell-in no And specifically quarter capitalize is that sell-in is of and talked relative This something there nothing very on. good much terms there lines. and the and specific supply for of in in difference to us terms in is in into system here terms sell-out as same of pushing us office channel. any well, activities. about

said I around we earlier, value for OEMs business and model the creating and end the the our is customer for in As industry. –

is there based. the as that can pushing here nothing else you And broad see, up. is growth So it's

think & you business group] XX%. [Electronics have we about If EEBG Energy of

then And Latin APAC, upon you have X%. at and IBG Care Health of X%, X%. X%; take X%, if And business you Consumer, then We group] you And have at Electronics, X%. [Industrial Safety/Graphic still and And America/Canada look geographically, United X%. it's out Europe/Middle XX%. East/Africa, States,

is based broad and encouraging it's very which for businesses, it's all So very, us.

Nigel Coe

in Thanks, No. Nick, just for does on No your detail. $X.XX XQ. then post team. benefit by great Obviously What job raws, the we've plan hurricane? the on That's great XQ, of the the – seen question. Inge. given And inflation embed

Nicholas C. Gangestad

that, Nigel, could And, benefit $X.XX repeat the from you what?

Nigel Coe

Raw materials.

Nicholas C. Gangestad

will in – Yeah. dynamic QX benefit will be mixed a and flat we there. a that We bit to materials. little of some think that think raw for From us probably

we've seen continuing to As benefit. said, I pricing

we'll see price from from benefit raw still So a increasing think material, I our prices. selling

to as us. likely a that we're surprised the until That earlier. down continue now, quarter. fourth tougher sustain. material if that as will benefit by benefit raw – wouldn't offset been Up be doing, comp the came net we tougher benefit, projects I in for the from came But it's On I see mentioned slightly the and the

Nigel Coe

it. Got

Okay. Thanks, guys.

Operator

comes of the Deane question Capital Markets. RBC of next Please Dray Our line proceed. from

Deane Dray

Thank Good morning, you. everyone.

Inge G. Thulin

Deane. morning, Good

Nicholas C. Gangestad

Hey, Deane.

Deane Dray

And changes share here, ongoing it the you Can by talk you Hey. picked I'll stocking and this question. I more might how commotion? one any the to overtime U.S.? that's so up you causing know restocking? about been have during oral impacted keep we're were in And market distributor care into

Nicholas C. Gangestad

oral in Deane, demand And Yeah. for for we're picked business up U.S. in say in pretty you say slightly share that we The I it's that stable our or channel I declaring oral haven't is wouldn't – the where quarters. strong the us quite are a might the position us. business recent would of other for care see us. market emerging months solutions lots And this we're we oral around parts of seen biggest a care we've our globe. talking where business. world. down It's is for is our been our demand about. that the driver care business a in fluctuations in The we markets be and global

Deane Dray

Thank you.

Operator

Mr. Please Okay. Your the with Please Laurence of line open. proceed proceed with Hello, Alexander from next your our your of And question is line comes Jefferies. question. question. Alexander?

Laurence Alexander

guys. morning, good So

if ones I two quick So may.

Inge G. Thulin

Yeah.

Laurence Alexander

in your in commercial business, the spots soft safety the protection. office stationery solutions the and The and the and

Inge G. Thulin

Yeah.

Laurence Alexander

driven, the trend those how core? do To extent mega that were Or earlier? fit still driven, you they in are describing science-based what macro growth

Inge G. Thulin

Yeah.

Laurence Alexander

technology your secondly, new are And your adding criteria materials for XX to platforms? what

Inge G. Thulin

building, using say a division all relative technologies. the that's our of brand of core it's businesses. is management – & to I with our but divisions, that that films Graphics, – if have precision the for film is equity this division also If you a we start is will one and the equipment you for for case, same very if light strong are type in Yeah. decoration, two that Well, in asset with Safety

strong in very underlaying XM. capabilities to product, to So core that's the if is order for that business upon those produce that's us. a And look you

you there have the So Tape, we is is question the that where Post-it. question about That's and around no either. cetera. is supply office That no Scotch there where et And business. have

very, earn big that are margins them good money customers well. brand those our with. very with are And equity So good we on businesses as

think solid are also XM products, that you based those a stationery enterprise. businesses technologies they about perspective, on are that very if for So from in as an

a So not question not. there if relative to they belong or is even XM

answer. that that's So

have cases, In ceramic terms In to will we out of we look we some that. one we in need during something, XX you if couple of a – had the And couple of them out said. business building think platforms, I last that a upon around as bought One latest years. company build defense of we technology million. have is business, the the where fact $XXX

a what broaden filtration that What and technology we And was divisions. (X:XX:XX) actually already many purchased in that did and platform had filter that that. cetera. a So really (X:XX:XX) ourself one could we we built we'll be that deepen in we we capabilities many, non-woven ceramic. purchased many, And used et the Lebrona is capabilities, for into that

us, we the future. add. doing to demand and, and we we that do self not are built should will from go we try But see what sitting again on the the our market to out and can add something It's or we upon not the look take need if internally for time what for and where So too a look see yes, that. going it's us market long for

Laurence Alexander

Thank you.

Operator

the I closing some will to comments That and conference back call the our call. turn portion question Thulin over concludes answer now Inge of for

Inge G. Thulin

joining Have day. we Thank to you on wrap meeting. up, margins. third XXXX. executed team earnings is per forward our and in To working, December organic you. going playbook York very XX Thank enterprise XM are quarter, us. for delivered outlook you seeing growth, look New a our in performance into for across all The increased well and the and including strong another share, robust I well-positioned And rising great

Operator

ask then your the call for and gentlemen, conclude you and lines. please conference thank you We does disconnect Ladies your participation, for today. that that

3M (MMM) 24 Oct 172017 Q3 Earnings call transcript