MMM - Earnings call transcript Q2 2018

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Operator

Ladies and gentlemen, thank you for standing-by. Welcome to the 3M Second 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 [Operator Instructions].

As a reminder, this conference is being recorded, Tuesday, July 24, 2018. 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 second and quarter XXXX good morning, business

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

reception let as on remind your welcome a XXth. Also, be Investor Day, on begin, evening a read Slide available we be St. formal with calls statement for the held closer a the Please Before found investor our next moment forward-looking at mark program Please earnings to X. me XXrd. take calendars dates Wednesday, and More upcoming for on October will our presentation Minnesota in in X. XXXX, which Thursday, our November to the we of November will headquarters XXth in events. Slide our events the Paul, get QX details you of on

certain XX-K press risks presentation, non-GAAP non-GAAP subject in During Please I'll most can our measures. lists turn and to Slide Please references statements future hand and our certain Reconciliations of are note current off and important on Item of results found to Inge? views statements release. actual cause we'll factors financial that could Inge. expectations from differ Form make be performance These that today's about appendices presentation of to predictions. uncertainties. that the making today's events X, to today's and be certain call, the the measures assumptions risk some throughout to will most that XA conference based recent are XM's we future predictive reflect our and financial of of results.

Inge Thulin

morning, Thank you, good Bruce and everyone.

quarter and last As with as transition growth, my very you moment, all flow. cash me and of doing pleased worked a that, last on But have I to year. will turn and new In once a new I Nick my for am moved will orderly is the that few call and our to EPS Executive Mike, robust XM with Roman CEO Gangestad, now the I and as Mike to margin the the before good a quarter CEO and Chairman over role between see which we are aware, CFO, QX Board. Mike we I our would was the on organic again like growth, expansion, you had strong comments. make have

analyzed, last the enjoyed at would who to world input with over result, as in have XX,XXX and the I the marketplace. portfolio customers and I many covered, I recognize have thank XM. your you interactions of professionalism. have our and like all of our to would appreciated all also and your along I like integrity I First, to invested years. are Working six have together, XMers our your around and support. enhanced relevant we for more our am and we pleased what focused far We and contributions today, accomplished a always

began and transform to have and We our structure innovation for strengthed engine our cost future. XM improved the

of improving every every home, advancing vision company, our and for reached every life. have We enhancing

Mike as equally to strengths. the shareholders. returns continue is no lead reflected confident and in have future. Company person our for and customers our our and premium of financial our At for on building premium The of this time, I in we Directors in is and I am the that same CEO Board the created strengths have All value right our results doubt

it’s clear With the the and enterprise, our fundamental I over leadership, that, to market XM. call the to will I that across Mike? second Mike strength capabilities build to of As position, we on our summary of quarter. turn continue have look for

Mike Roman

good everyone. and Thanks, morning, Inge,

by and in me to my serve Officer the of begin honored like Chief saying to I Chairman. team role I leadership, the that our this new as incredible and vision, lead as for Inge Executive would future. ongoing am Let to gratitude Executive into express enterprise partnership his his

created six a Over progress in for the us. which playbook, building made we’ve great the tremendous years, last out XM foundation has

are continuing we our our momentum, ahead, customers our extraordinary focused and for on value for generating shareholders. Moving returns premium

X. increase had in quarter results, by and on margins. share, sales earnings rising and highlighted quarter, broad-based second strong starting organic record We growth along per our review a let’s double-digit Slide Now a with

the numbers, their that at accelerate business all XM. to We all with billion, that deployment, note points our added geographic of basis roll of time in quarter, We growth positive XX anticipation of XXX organic in second for all customers ERP out $X.X and areas. total strong delivered high the have it an U.S. an in States, across sales groups the upcoming we this United some all Please Looking the purchases. growth X% to approximately were and of that of estimate in decided results. growth

that all Adjusted continue $X.XX of share, Moving $X.XX with posted This earnings, the a above our on share to XX% year per compared strong teams to business margins were to world demonstrates groups were ago. $X.XX well. at XX%. up year-on-year. we around earnings per earnings execute GAAP XX% Underlying

and million the we another financial to building in quarter, CapEx. for are shareholders. second in development $XXX run, our while to results, Beyond and invested In the cash XM returning million research committed long we $XXX

this repurchases. There across is turn to share including lot quarter a to We entire and billion $X.X to both also portfolio. like Please Slide dividends our shareholders, X. returned

the and our with growth, X%, Safety margins. of where life nice good in was first biopharma in Our with strength Industrial along and X% posted are from Membrana Graphics team outstanding organic platform quarter. robust organic our another growth to Growth acquisition accelerate sciences. quarter of penetration broad-based leveraging pick particular filtration up we a delivered

review, XM model. a our a After decided and this have growth a of work over are portfolio Last Health portfolio the developing thorough has lot safety double-digit consecutive posted in This with also expand as market. second will the how X% in top markets utilize markets, our the margins. growth best to business communication This grew for a medical XX% future. in are quarter, last the group, invest improvement and in shareholders. this growth with done as those in improve business Energy continued growth selling solutions we to the of to For by and sale to continue our Care with industry-leading this X%, business. double-digits, Organic extend to business build good to our actively the to this example improved fourth areas portfolio business work in relevance to was of of in XM on business In XM is our portfolio Care, creation Electronics growth in several growth. quarter. investments great the month, last for Health paying a we led strengthen we worldwide year’s mid-single-digit it build continue we we organic sustained of and we continued our result that value This personal Within led customers on marketplace. and for years greatest we off. our to will managing is

Going high in Energy, data forward, and automotive we and semiconductor Electronics to such will continue electrification, prioritize opportunities centers, as fabrication. growth

improvement, I in contributions. brands. In Finally, home the with thank our saw summary, our across organic second in Consumer leading and included pleased X%, We many continued am our which growth strong a performance was along season. the strength their quarter to start in to good performances with I teams back-to-school

just is and are we started. getting working Our playbook

We well more and into stronger grow positioned to are company. successful even an

people. our ahead, portfolio, Looking quarter. developing to the will take Nick innovation, while through the accelerate you and continue details optimize will of our now we Nick? transformation strengthen our our

Nick Gangestad

and XX were in growth you, X. positive XXX geographic the X.X% Sales acquisitions quarter. quarter. in morning Increases sales turn areas. in sales growth points contributed basis The points and all Thank Slide organically everyone. net to prices impact divestitures the in Mike grew the to selling across basis second of contributed quarter, and good Please to

Energy, All-in and the strong percentage Foreign X.X% and Industrial growth quarter currency safety and energy, versus by graphics organic In Safety X.X% one by EMEA West by was growth translation dollars sales U.S., Electronics increased last Europe U.S. consumer. year. driven and second in and point. by increased increased and was QX, electronics Graphics. that sales led X.X%, led in in

Asia X.X% organic in India, X%. Pacific Graphics. and and Care Organic China, growth Kong, and Safety by Hong while down led XX% growth, was Japan was both Health delivered

At by single Mexico level, a the highlights. both organic and America up which $XXX actions. P&L net Canada organic to Company-wide, $X.X delivered second were and quarter of QX Finally, was in Please Safety second Slide million Brazil quarter billion, Graphics. was for second in billion. Health digits led Care from growth turn and Canada growth. high X%, divestiture and income gain while related was benefit mid-single-digit Latin $X.X communication Operating included quarter the markets the X country sales

divestitures. net quarter the Second communication XX% benefit excluding margins from the were markets operating underlying

raw Selling Let's XXX year-on-year a to closer adding inflation, material actions organic the to more on in XX the portfolio points performance lower improved than footprint take quarter. our productivity benefits and combined price margin points operating a offset second at and look Leverage margins. of growth basis components contributed margins. basis

of basis Foreign points. by currency XX impacts margins net hedging reduced

points. settled the which decreased basis XX several during respiratory related margins care second oral by quarter, lawsuits, Lastly, we and

now earnings Let’s a at look per Slide share. for turn to X closer

$X.XX year-over-year. actions. the were divestiture for share $X.XX XX% adjusting earnings share, GAAP earnings net quarter per related markets gain of Second when were per up communication Underlying

year-on-year retirement $X.X the earnings the increase and share organic benefits reduced interest in earnings and year-on-year benefit of QX per me primary net $X.XX per lower Higher to combined growth, legal mentioned share. by per previously year-on-year drivers QX Let decreased expense $X.XX The settlements footprint share. by per productivity discuss of earnings quarter. expense and actions, share. added the The a portfolio earnings now in

share. rate from continued chain increased driven Our of $X.XX underlying QX rate by primarily which by per tax and expertise. was tax tax benefits U.S. the centers lower was XX.X%, supply The reform earnings our

to XX at Slide shares Please a outstanding our earnings. lower turn share to $X.XX per for performance. added Lastly, cash flow look

conversion flow was related gain divestiture This of cash includes year-on-year. communication was flow billion, XX XX.X% point business XX% actions. cash free quarter Free headwind markets percentage quarter. Second the the in up and $X.X

capital million, year-on-year. expenditures $XX million $XXX up quarter Second were

continue range billion to For the investments we year, billion. the in to anticipate $X.X full CapEx of $X.X

of in billion $X.X repurchases $X of billion billion quarter, $XXX stock half to to range dividends shareholders the $X $X and of billion year full the billion paid billion gross we now Through million $X and previously. share through shareholders repurchased to be cash versus to first we repurchases. returned year, During $X.X in the to the expect

review Let's on now business with sales our The up and $X.X Industrial's of business delivered organically. areas businesses. Slide starting XX. broad-based performance, all billion, growth across was X.X% second industrial geographic group quarter group Industrial

digit and single advanced quarter. Our abrasives, way the materials, growth led high separation in purification the and with business

Please Looking a geographic portfolio in growth operating basis, and at income of tapes, margins the the and XXX last up Operating Industrial quarter mid-single-digit by delivered industrial and to a EMEA, underlying areas. in actions. all million. quarter businesses, year's second and the XX% by aftermarket delivered other were growth adhesives excluding Industrial’s the the aerospace mid-single-digit $XXX organic our led rest with footprint On impact growth each portfolio, in second Slide was points, XX. automotive X% of auto increase basis margins followed turn Industrial of of quarter.

up safety businesses billion, $X.X and graphics were organically quarter and all X.X% strong Second across with growth geographies. sales

pleased performance personal mentioned, performing transportation while integration safety solutions the America and digits by $XXX with was organically digit the Please we our excellent businesses, of high business. high U.S. was the in were are up Asia-Pacific. and EMEA roofing digits. The led and organic of business our million growth up Safety the to growth, Canada growth well business income XX.X%. Commercial the Mike with As quarter. single Operating safety grew was Geographically, double increases in X% margins up Scott continued XX% digits XX. Slide mid-single the post to in single quarter. turn Latin in and up is with operating both both granules

organically. business X.X% Our sales $X.X second generated Health up Care quarter billion, of

care medical digits. was largest our grew segment digits Food with grew continued particularly in Oral digits, in high in information Care, Health Our developing safety business, solutions X% is markets. grew growth mid-single internationally, while QX. which mid-single health up single systems good

by basis, geographic U.S. business way, double high followed grew digits. income second digits led developing of and And operating by the strength our million. EMEA Canada saw Asia-Pacific low in in continued delivery increased On the margins lead new the Hong for Health year-over-year. underlying both drug legal Clarity commercialization We Care's over digits high to the the project-based our X% Finally, China, aligners. single declined in Latin just a up and impact X% X% for settlement up America the single Kong markets, were teens. growing $XXX quarter XX%, operating investments and adjusting

Next, growth let's the by $X.X cover second Electronics electronics and side business XX. was of growth solutions. X.X% mid-single-digit organic Energy Slide billion. organically, electronics led Energy Electronics The grew and in were the quarter. materials X% on Sales in sales

were organically by businesses led up X% up Our digits. markets electrical energy double related

quarter substantially remaining to of the led the EMEA of end Asia-Pacific, and America the both with the low single As mentioned, geographic markets and by in all growth, On portion followed organic basis, by the of a U.S we sale business digits. Canada up the mid-single-digit the high and single-digit in was expect communication growth close closed on year. Latin

Second with operating million XX%. $XXX underlying operating income Slide Energy Please XX. Electronics nearly to of turn was quarter and for margins

sales Second growth $X.X in organic Consumer year-on-year. were X.X% billion and quarter was

business improvement track home performance. continuing digits record Our strong grew organically, double its of

and stationery brands growth The continue and particularly business Filtrete, single-digit delivered in marketplace, the Command each low supply and to business up digits. in leading double Our office home the quarter. win both care

care health consumer While declined.

mid-single-digit growth growth products the consumer America, strong particularly Latin continue the followed demand in in geographically, In was second Canada. our see the in in quarter, Looking U.S. we by at by e-commerce increase X% Consumer, the to for led U.S., channel.

of operating review wraps up operating That updated Please the Slide and XX, guidance. to Finally, quarter our second income margins our XXXX cover million with I'll $XXX turn was XX.X%. results. of

be organic range of to growth expectations the range $XX.XX impact to EPS business. remain with $XX.XX. The reflects of versus year associated to X% markets to $XX.XX range range full update the respect With of in communication the full to adjusted in we Our income to expect year divested earnings, unchanged the X%. now prior a of the $XX.XX the

for X% that now now to sales attention your that note X%. your year please and will prior foreign that, expect you Finally, translation full we thank growth currency we'll questions. expectation take the of approximately versus With add we

Operator

of from line [Operator Instructions] the And our first Please Research. question proceed comes question. with Davis of your Scott Melius

Scott Davis

missed. be will you Inge,

something to deal level to in caught confidence not that that that precision? how You that? fantastic the and this a know, shoes in tell job but thing I'm kind you Can us, pull as as rollout great Mike, was segment? big that well. the XXX and did fill, There’s you and prepared just is of ERP was eye to big that Is sure of possible a is what’s it your you'll comments. just XX remarks every greater forward Is your do than -- have my one

Inge Thulin

a completed in on business of ERP as have XXXX, came now, Europe, our we in our are particular. the transformation, working for we U.S. years, been largely rollout we’ve West and globally, And number our focused into Europe, Scott, deployment deploying on we

a And out very our Health so business. a operations; supply by at over the plan by deployments very by so of months it's year. We U.S., specific laid XX in so next we’ve business, deploying did well the we now business the end and by of deploy last deployment are region, Care chain

next deploying the and as experience U.S. now the XX through And we the in that businesses go rest we months. business complete, deployment so with the already of in have we’re the

the view I pretty we with the good which time, how are deployment of a accelerated place at sales taking clear the of customers are very that’s clear have have on pretty now line which in impacted so -- periods think, and we U.S. deployment the with view So much in of

Scott Davis

chains? last EM playbook raise currency to over And then you and the we've the in mean moves you Do volatility? I quarter. have prices? that in mean, there as you Do a playbook? some can go realign follow-up, manage some guys What to what’s -- big supply the pretty I what's seen

Nick Gangestad

of We on against environment. cost FX to hedges supply isn't going supply us layer of the longer buy on chain set changing. chain period adjust our there have end up time, then one, hedges we order financial hedges. we the the up have change the and we a in chain, time Scott, to a but underlying to that with hedges financial how seek that we And some two, over three supply our into competitive playbook structure, don't revised in really those top risk natural and years, currency for ultimately financials enter to out

So chain we manufacturing do offset prices impact. markets, adjust the we’re what term adjust And FX adjusting then especially in the in we often partially will short will little FX often to take on we emerging sources supply where That and re-qualify happen. time though, in we of have but change based that Scott. make supply And to movements. short-term, not a to tends our longer a to

originally on now guided, In seen half if through $X.XX see have accordingly. slightly months, changes $X.XX slightly And year, expecting dollar updates For meaningful and impact the the we we of few that we the last say, that they months first will they year guiding ourselves would we earnings benefit we end with that we rates dollar EPS we’ve we’ll the we I Scott, $X.XX. EPS that that our And seen stood that the by year, pushed see the that $X.XX. started the of few at were above the Through the the first thought $X.XX. benefit about to our FX. and year, below from strengthen, year positively provide FX more that weakened the as of

Operator

from of of Lynch. Merrill America comes proceed question. the with Please question next Andrew line Bank Our your Obin of

Andrew Obin

Look team. Thanks, working forward congratulations. Inge, to Mike. you the and with

of moving it Just make taxes I basically, as Can guidance, I a but adjusting that look X.X, from earnings it’s from income you at the missing tell X.X if the the And most the Slide before sort revenue X.X what X.X think for now you of we and move XX, to big just X.X, I X.X composition to are doesn’t think indicates prior question release and to on have X.X. is was pieces divestiture, outlook us range sense. on X.X. to press guys that

Nick Gangestad

a pieces Andrew, moving few there’s there.

of be you of that communications markets of as all, divested would generating been income division, the that we year that First that that noted, now the have seven is our months there last have what's some our in net guidance adjustment the is longer and In there, in also no expense. interest what generating, will you're about encompassed our there that’s year. impact particular, EPS to an from for talking

of So that this to addition out couple is in we in year, the parts terms that our beginning markets at of communication there bridge earnings the we a of today. announced laid moving adjustment

more First high the $X.XX now we guided the see that $X.XX would shares, benefit. of at of to that We originally end ourselves is, that’s positive. on back are and we range, be buying so that

borrowing net interest our so We money, going is up. also are more expense

of We year think our a flat be So expense guiding that now benefit interest $X.XX. net would approximately EPS for we be will started the that $X.XX year. the to to

Andrew Obin

pre-buy I guys question. anticipate this guidance second how your the sort do incorporated. about line shutting appreciate but a a pieces, think of quarter? the And the Did question ERP much Western was implementations undertake have comps these around, in top second, facilities, America from you in Europe to guys going terms just stuff I do while. significant are disruptions moving ERP back down is Western two So assume a because for the and moving you just of that more you there managing did negative and Europe, North in

be to to in will confidence the ERP you second it? gives How hits to you going half, there guys growth? you disruptions as what organic to So that manage America, are going not have manage North

Mike Roman

with start with, we’ve starts really lot the for maybe would it I with about and us. a ends the as transformation, customer talked business

where And Europe would that's benefits impact So we going for are as customers, We on focus our business transformation. we with to how the with deployed do in I we that say, in -- start. our deployments, was provide true. where best and minimize we’re

significantly for on But change to they customers a we the of with us. change that, asking work benefit side are together. the You is process how lot interact how other of

we’re impacted we doing And things that where it that other we dynamics Europe. the of so in the some even the business seeing transformation. and in things I saw we repurchases. we around And that way did deployment in think had I would of some we the think don't saw that you marketplace by That had and now growth portfolio. we’re was same characterize some U.S. the

of So and maybe about to the in doing what customers on doing the that's focus strategic how the degree that, layout U.S. there. -- and a part some But with of investments of things the we're now. we’re some a we manage

with We’re them as this scale progressing, engaging day-out, disruption working earlier scale day-in is the new with capabilities. about through managing up systems the down legacy and and we any and surrounding about ERP closely them very communicating how

managing our they its by, the customers we’re much we’re we them. accelerated I as how this we’ve communicating so expected and accelerated line what it’s as -- see, some making sense supply based with I closer, made working projecting would if buy much process, information are they with And how we those West say, to think that. the the deployed they’re Europe through what -- all it's we’ve up Ultimately, with would accelerated interruption we on and and calendar really of on the decision them. by seen in buy way that through got steps

job, track on well. are doing and deployments We’re progressing the good

Andrew Obin

second organic half? perspective, degree on is high So growth from your there visibility of in

Mike Roman

to Yes, absolutely. the related deployment, ERP

Operator

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

Andrew Kaplowitz

X think should rollout. ERP color So us with sales your and little about guidance your at guidance X, there’s but growth annual obviously is been If Graphics Health you here guys there, you’re how talked a look and about more at we But maybe Care, Safety above. give you noise the way segment. by to and a organic can little below trending little more we a trending

So other in the about think of the a then how year. line that there? segments it? trade-off bit is should for And generally Is there we

Nick Gangestad

few ERP far see Electronics as U.S. impact things, on and the Just way of and impact and impact the on go-live this as Industrial, no our really different It’s in impacts not consumer its our these material business the a Energy healthcare impact primarily We impacting business. groups. and Safety Graphics, segments in really having a and

how of in terms impacted. about and that in really it's three fourth the and the think third impact So that were businesses those you second quarter quarter quarter,

of and which X% Health or of terms the X%, in that see closer probably originally original we the providing range. the total for the guided guidance. total guidance in the see and than X% we industrial end X%, -- to guided that graphics, aligns growth to possibly globally higher to see to guidance the we do likely we updated bottom year, at we our the had high company X% safety half originally for of see We that continue Now April. we’d that year Care our in most high end And with at

the see we solidly ranges and The Energy, others those in that out. first are Consumer put that Electronics we we and

Andrew Kaplowitz

pricing you to know for When But to I year I raws, cost QX better could that pricing. QX. year elevated price quarter? you you the less in accelerated said was there the strong are last material an updated ask be on it than the could time in you look then maybe price particular headwind obviously, than versus be markets about versus at And it end for $X.XX strong? particularly or do pricing, is actually where was quarter. the any this you And $X.XX raw very going pricing think

Nick Gangestad

won’t really $X.XX out broad. $X.XX, the And quite price that’s as where growth really updated raw just point headwind, Andy, The it’s actually, far is. to just broad as one driving material price and business, results geography, Andy, to these the as or that. clear, that deep it's I growth, we one quite be

continue see think of margin, we the impact that earlier the on positive I and halfway year terms to year. that In through I said for

to price offset that continue than year. highly material for headwinds increases the more see confident raw that we will our whatever see We for

Operator

line with question. Our of next the question Please your comes Julian of Barclays. Mitchell from proceed

Julian Mitchell

of -- of business the in outlook, particularly had first been maybe also very the your Energy, Any end on and earlier but business? soft the or materials thoughts market. terms CapEx where within bifurcation automotive updated the device question there top electronics the in was sell-through Electronics year In Industrial this on strong. was And

sell-through? Just wondered how CapEx the device you’ve with portion And happening about are you decelerating recently. what's worried seen that the playing out EMS more or given

Mike Roman

starting to we So globally. through continued, relative automotive, strong growth the the build rates with we year-to-date as the first half, continue to see

the business, on the automotive relationships growth, globally. and So continued relative focus remember to the a key into with we’re spec-ins our global and year-to-date performance OEMs marketplace account seeing And around managing good rates. so good we’re penetration build

second X%, total robust and again, are performing rates. when and electrification around but in second the always the applications watching that, year there; rates line over well; automotive our in number; very ups downs up projections, bring what X.X% build our outlook quarter in see a the with continue quarter; and and over you at in outgrowing still improvement that, technology IHS we capabilities for together still to we're and doing build slightly X% quarter-to-quarter Some looking

is data see, in and of modest we electronics Electronics middle that continue electrification, say, and would been as growth and year to fabrication, strong growth but continues the what we've I automotive I growth general much stronger around of semiconductor out our I part the our in at say, down in as the much shifts higher right for the in centers, with semiconductor fabrication to it is turn beginning of growth expected consumer in here playing electronics the would behind, seeing your Electronics line way significant playing the portfolio there you there as quarter or growth we and talking the more, If of the electronics, year laid out part opportunities us. say, would the range I question high Energy some, pretty would about some Energy, to The that the business, growth out There laid of forward; say, as being move at segments. rest well. we around out those CapEx was spent, segments, pretty beginning we that in where still electronic is the in of

Julian Mitchell

And the then just presentation. way if my look would EPS meeting around, outlook December X, be road your Nick’s you Slide from map from second at back back question

I in update think two the on of terms any of very the productivity thorough maybe so chunks thought that's How the of manufacturing trending and in footprint on laying are you guess, productivity the transformation accelerate you’ve business savings optimization, savings terms plans? that, you in line given -- piece. productivity? the In to various half of first the the sales how I in -- what gyrations causing expected? tracking any from some the the what programs And those versus would

Nick Gangestad

we EPS. organic other is updated growth we of tax roadmap growth, price, provided a components the for the Even then that Julian, in our color from give But it our to are we XXXX last it. which see expectation where accretive year in on total expected. roll-down reform, we in let coming growth December I the organic year, terms that more with had me staying little and January the after of

XXXX. of organic charges charges earnings washed in Julian, remains those our and incremental impact optimization, benefit, There’s that we much XXXX. was largely on unchanged; growth repeating took just So not in some that, the some footprint

be benefit in coming true XXXX of majority and the to expecting XXXX. We’re

that as original that noted, expected. from both as expected. we is adjusted I that they’re that Business we exactly performing put range and are down of progressing that productivity, Raw those as to So materials, we guidance. the transformation exactly in we tracking

Operator

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

Deane Dray

saw specifically, some address dynamics of of -- what in How more we like has auto this you saw And specific the It did directly there. down I’d Julian that on looks the that the business to like the is growth. quarter? follow the in some first started Mike, competitive there? And talk follow will the And maybe can line we care, the that then quarter up Clarity how questions oral aftermarket channel in up calm compete launch. U.S. bit did with a distribution and are Invisalign. the do market total about versus

Mike Roman

Coming starting businesses. that. the leading with out broad-based growth in we saw that there. And the and in came of the through business growth year, We our looking projecting we QX, demand at Industrial, expected saw marketplace saw saw of growth for developed end U.S. in some of saw we mid-single-digit to market. leading but automotive particular, QX, industrial, went in all question, to we’re our the We the economies, We aftermarket out total growth geographic nominal So areas year We soften all highlighted marketplace. as in automotive as was pick of We hard improve really opportunity the up starts that QX. we aftermarket pick saw across the we demand QX. across up.

with saw we line with aftermarket, expected started total the at projecting in we the beginning. improvement year automotive and So we’re where we the

business is us. an care, important oral oral to care Turning for

material We’re and leverage to ahead. to business of It recognized this positions, move in we does as we leader as and number grow And science. strengths. leveraging a our look really innovate our continue invest

growth what again, Show announced you down and worldwide improvement to and improving in the and aligners U.S. did the the overall Association the through believe solutions American expecting at by orthodontist move as still some some introduced year; our at U.S.; is orthodontic developing May. set now actively onboarding this to We the now. as second in If for we improvement and Clarity globally; across we we’re ahead. improving we look Orthodontist quarter; have in to the in us go in we're again of QX X% room right markets, go positions that slightly over but broadest platforms, growth, And led see

broad-based suite So in for the orthodontists to a of the -- it’s play market. have really for global help us solutions a

good We’re getting far -- so and positive feedback. getting very

Deane Dray

be this escalated? the what’s the Does cost. And as get forward risk on up Nick in to and on announced and may price have tariffs, enacted? that tariffs maybe the can that just positive points as follow expect And that include a look been clarify potential

Nick Gangestad

said is that enacted. I that guidance tariffs of inclusive been have The

So tariffs, a there’s have aluminum impact having that security immaterial fairly under been national number X, as list we well the and impact us. enacted, that of those already a see on we’re when steel talking Section tariffs the first, act. And as two the XXX

approximately the penny annualized that on share basis, of or estimate we and a an those to So $XX million, of indirect impact tariffs. direct be

and XXX with prepared list those. are changes we’re enacted. impact assessing changes, And if X, supply actively changes pricing implemented any and were potential potential those retaliation X occur act sourcing that if to the and with monitoring could and from We Section

So happening. stands continue we raw tariffs that see statement pricing if offset will and initial think my impacts we there to that material expand

but prepared of quantifying not they impact of with since impact We’re latter two been yet, are we those the minimize haven’t the enacted to actions that.

Operator

Alexander comes from of Laurence the line Please question next of Our Jefferies. proceed.

Laurence Alexander

material in Two bit peak something acceleration ones, in dynamic. there raws Health there raw pick-up secondly on else you out the price is raw think and pressures the price on the offsets. is price, maintain can or Asia, going you parse specifically QX? Consumer trends -- pace little quick to on that And just growth the versus Is the do just can QX a you material Chinese of first, certain out, mix China, or there? of If same amount the driving the from

Nick Gangestad

price prices selling forward and really to a likely to changing. our seeing projections prices the to act. that again, on going the we’ll a likely change commodity And more more And seeing price are at offset with part have increases. estimating in that there that what we see our we’re materials, commodity pricing the start our of commodity price peak price our and our selling raw with increases we’re for anticipation consistent now don't are projections, increases if we that level. Laurence, that’s than commodities, prepared continue And -- world our we prices will stable be

Mike Roman

China China, continue to, I based second as Laurence, growth with OEMs. in had well say, we there, including we very taking would quarter. strong Electronics companies the at a look win And just performed business

We facing their a what China the is to domestic domestic businesses. strong strategy line had We’ve also to businesses, develop economy. growth prioritize saw in economy our facing growth in with doing here

group in is of performing so big year, also, the domestic example of business portfolio, growth Industrial if you first you tapes And look at even and business, that adhesives well China. consumer would in well well. the half our very and that Graphics doing are really Industrial doing part noted, we performing our -- Safety facing leader as business And businesses very a good Health and business our have that a Care of be platform industrial the strong too with our well.

So it's centered broader broader and growth in the Health is market. than really around just occurring Consumer, the where Care China

Operator

Our comes of next proceed. Research. Wolfe of question line from Coe the Please Nigel

Nigel Coe

taking some the you’re in Is on The mix actions this broader, the probably $X.XX? terms to that $X.XX with business. of or what is gain comms maybe of E&E the segments just color with just the and associated restructuring comm

Nick Gangestad

are taking divestiture costs actions the business. left the that that CMD are Nigel, to our after address of stranded we’re

of there’re the forward. QX could that those to a year stranded to had negative is been started offset those more company structural addressing costs have if So going in we left the this in what leaving. actions costs impact expect and in we take We the divestiture second half

Nigel Coe

would be or bit quick longer? relatively a XX month that payback, little And payback payback,

Nick Gangestad

We that be us for expect that will year. next back paying

in other the start will level not business. charge XXXX. and I’m a sure our in to been cost this you’re entirely happen. in is if terms taken But actions those to of Some into we’ll saving Energy next this benefit and thing almost at when Electronics see that asking one not earlier, starting of trail year be And corporate Nigel,

Nigel Coe

first And on terms particularly the guidance, at when set of Are on P&L the about the question, and half. comes those think half half the get way second is questions range> us the getting then What’s second if half just a second at versus we up comms half. coming somewhat the FX to the way midpoint backend follow and to we still guidance through loaded, better in the of guidance in the the the first

Nick Gangestad

the year-on-year second will prices share we than fairly than first expect better half For and first of We benefit the Pricing the that half do the what half will be do a first half. be expect than commodity will that saw likely from half. the the first we repurchases we’ll we of seeing that saw the half. the think second more in terms between in in basis, year, in productivity be neutral better in then from half And second we be half. second the in

Operator

Vertical question question. line Research. next the with Jeff from Our comes of Please of Sprague your proceed

Jeff Sprague

Mike. last dental. forward pull Care in clean perhaps been ERP soft from has But business? a the sales bigger on year then in maybe the for on a up Just quick little me from U.S. picture there hangover question and and are growth it's side quarter, from observing the healthcare Health year-to-date on some a we healthcare

Mike Roman

impact, where the Jeff, seeing there. our way we and you’re is U.S. leading growth medical the broadly, solutions business the healthcare strong in had

we've health care around talking consumables So too, been in integrated maybe our about but business economics. just it's that this it medical the and And portfolio note much is in past, as a focused value-based more a really about on that. --

we And QX ahead. that then from business. a broad-based in as to quarter that food second slightly. in stronger Oral based and be Again, the So our saw medical decline bigger way. as us was we in talked drug project will was so that in and I’m position going talking and good We impact, asked… saw U.S. business. information. U.S., the down solutions, move drag bigger business health about leading also safety We was the The growth delivery so the about care you growth in well

Jeff Sprague

working on been And you're will view you’ve here is Inge under want CMD And then, that I be the and all internally out relatively guess of always to portfolio the things there Obviously, Mike, way portfolio. now, with working review. reevaluate? stable, or on more do was you the as along. But closely

Mike Roman

If at playbook where we focused are you we working. ahead, move is look as our

opportunities each are is levers, playbook of that portfolio including Our working, management. those there three but

we an portfolio. portfolio at be utilize XM the a and working look have manager do our And value our best now optimize pipeline for how model and of are model around We active we creation. portfolio we’ll robust to the

go. with an going we’re resources. be to active continue So our as go we move to M&A. It's about And it's also portfolio ahead. prioritizing businesses about we reviewing as about we It's where targeting manager

as see a priority it's step very I much as the part that value So I creation role. future And for me into of our opportunity.

Operator

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

Steven Winoker

into want in just little the more price the point, important a to bit X.X% I quarter. that dig

You implying about through new relative the it. if also I mentioned of rest repeatability big it it was not we’re the but other next operating of am year on versus for that year-on-year sense driving just a existing trying items quite time business currency to into get looking and the of number broad. too? robustness underlying later the only But as talk year, and out taking to impacts product, you usually impacts a part splitting some and of pricing

Nick Gangestad

vast XXX points. price now, see see said, question, on XXX impact. electronics And basis the points Part potential growth based; up your to was there that If benefit and FX to that’s on of business, better about underlying we points; you’re was EMEA basis And estimate basis of as is normally over pull being going out, new coming It’s Canada as majority Right don’t of our is transformation for global And it look this see there, that was from the The is our of see in of down we coming ability geographies or a only Latin depending electronics how price our we XXX pricing, core that points; that here. of our And was points we Steven, underlying The you as here. also Steve, and XXX XX starting it’s far continue enabling. we I’m -- our we really management value driven price that down. XXX partially that U.S.; growth America initiative up was control from inclusive XXX, governance are XXX broad reflection basis basis which the and it's business I improvements FX. is model. A-Pac have XX create basis a part and price what customers. making is price point growth. up we by as in at, seeing to change up better points. that and what

Steven Winoker

a referred of expectations transition. in the Scott are acquisitions? range just the soon, Jeff things What to What the And looking pipeline through expecting and size as you be right going or change should you’re in now? anything we on side. it Mike, Safety terms be hold the the all great strategic play of Should bigger portfolio on seeing think are divestiture was the at on acquisition, for But side the you guys. at

Mike Roman

growth For remains our ne always, organic coming as priority. first in,

M&A And Scott maintain pursue opportunity to we’re unique continue managing strategies to that in been, think, focused we Safety. I mind additional prioritize an to R&D, the commercialization. product in on very like investments though and we’re to looking And to opportunities our portfolio, in our strategic have With going XM. acquisition value, as leverage strengths creators clearly so CapEx at to that value create flexibility we’re going fundamental

create these market successfully doing integrate leadership in acquisitions been safety. positions to personal Our like we've ability to and

are active. we So

integrating and Safety said, With those strong Our we with. active. time. are Safety Care all and focused that at our And five are very on be us I to have work Industrial, ahead this Health Scott continues top businesses overall as Graphics look a much to priorities, pipelines for priority,

differentiated really we that where are And it's so value. me to identifying for and those those linked ahead about create strategies moving clearly opportunities can

Operator

question. Our J.P. next questions Tusa your of come Steve from of Morgan. proceed the Please with line

Steve Tusa

of moving on seasonality. just to here, Nigel's So back some understanding question the parts better the

quarter. You sales pulled the in forward second of a here bit

just between rate, up rate in XQ half also quarter, we second how X% second about maybe quarter quarter. EPS, split aware Anything half that range. a here had the and You whereas tax got in pretty on like little the organic? comp though lower in this a And steps third half quarter. the on tax was thinking first low be of, QX you than that on is the of you earnings bit third range it should sequentially a that quarter, then we’re quarter? end second Is comp that Will grow the low first third looks like

Nick Gangestad

impact with amount fourth between we're U.S. the growth, Steve, give in Mike system terms and of revenue. talked and quarter. third growth how me seeing our some about our the guidance ERP of the of earlier let on the go-live

a that be basis guidance tougher sales basis. quarter. as to That very the impact be impact quarter, we're the expect XX not given see the so terms is year. noted quarters, as two that to to And the of quarter-by-quarter to the some seeing you each than the surprised in quarter. I'm in between of QX we the with third So I’ll for all-in, continue But the EPS for to to for be on ourselves we then fourth of giving But the the back on if our what of are aligned year. the an third it’s being two our X% the year, between the half a X% expect giving looking comps going in that to disproportionately year, of firmly us in we in X total total have lower avoid them both quarter, expectation adjusted to quarter, fourth third X XX.XX the -- And third EPS for we growth we and and number XX.XX delivering guidance. that to of at with the far line quarter lower try to second

Operator

comes Joshua with Morningstar. question. question the Please of next proceed line Our from Aguilar your of

Joshua Aguilar

digits quarter delivery, drug long remember comps. down about? of generally the More And can year-over-year, future you you trends XXXX excited said. were your guys I was and compliance. term, in analytics the there Investor you're delivery Obviously, in case talking patient this like low last update as drug of drug from some with advantages still what are So businesses optimistic tough the and you delivery? project-based think is about you us give single And same guys more Day about an about I

Mike Roman

the of a some that business. positive to growth And see move a we project-based we we ahead. It referring business. business as will opportunities you’re Josh, to for see in that to growth take be that business to continue opportunities

be quarter-to-quarter, lumpy and can up So but opportunities. we it and down do see

We and have ahead. some that imply we unique there capabilities technology move as we

Operator

conference our closing the call portion back answer comments. Roman concludes now the call. and I'll some to for That over question turn Mike of

Mike Roman

we To per organic by growth, quarter, a in double-digit performance share. wrap had up, and expanded earnings led broad-based increase margins a second strong the in

for you and We again are deliver are day. joining this playbook Thank a us to executing XXXX. have positioned good our and morning, successful

Operator

your we Ladies participation. And for for and gentleman, you that ask thank lines. does your call that the conclude conference you please disconnect today,

3M (MMM) 24 Jul 182018 Q2 Earnings call transcript