MMM - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the 3M First 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, April 27, 2021. to President call XM. of like Jermeland, to now Vice Senior Investor would turn over the Bruce I Relations at

Bruce Jermeland

and Monish, you, our Please Mike, will Financial With February. Officer. us earnings turn in our everyone. introduced Quarter we morning, website Chief Xm.com we'll Chief Executive Roman, this and Technology to questions. which formal Patolawala, and Investor new some with Thank your First our release today accompanying at John Monish our Please then to on our under note John Chief slide XM's And Chairman comments, are presentation joining Earnings along today goals to John me make welcome Call. today's sustainability posted is Officer; the X. discuss call Relations are Earnings. Officer; Michael and heading take slide Conference good that Quarterly Banovetz,

let XXXX read and begin, Please we statement July me XX a dates October of conference the X. slide on be forward-looking on will to moment earnings Before which take quarterly our held you upcoming the XX. remind for calls

to cause presented. financial based views of today's certain results Form be XM During reflect release. in can the Please non-GAAP some be throughout of now March the of off will these pension references actual today's attachments our and X, risk from in These for turn current that The will XX, periods I'll Please performance lists segment Mike. changed X-K dated that information that previously most XX-K our certain are of disclosed its about financial uncertainties. making Item to of could impact hand recent non-GAAP operating changes events herein accounting we results. future our XXXX, and for on are Mike? as XA all and today's XM's most plan risks reflects important our and presentation and factors the to to finally, time note, make slide predictive principle differ performance. measure found measures. statements post-retirement Reconciliations certain predictions. it our assumptions cost future expectations And the provided conference we to Form measures call, of statements and press to subject

Michael Roman

Good Thank and you, for us. Bruce. morning, you joining everyone, thank

was for growth strong quarter across geographic with and first organic groups The all broad-based XM areas. business

Our in We robust while increase a team along executed levels. many and improvement with well cash digit well expanded below our saw sales, double encouraging end of share. pre-pandemic record per earnings and margins remained markets, posted flow, in others

to We ongoing overcome supply exacerbated have and I XMers due disruptions challenges, cost driving Winter for macroeconomic factories way the across addressed keeping all of Uri, to the manage doing also of our trends COVID-XX, business. proud and of which capacity, and improving expanding chain and our running, am these our increasing are faced innovation up by stepped businesses. our customers manufacturing Storm

the solutions of with come world, to take We matter have we customers we we found around are will and out learnings ways where create pandemic. engage as forward new no the

of around we the uneven evolve ahead, be of as to the the continued the anticipate policies global pandemic, recovery the different stages Looking economy, in though strengthening we expect roll-out trajectory and of world. vaccines, government

behind full we per our flow. share, are as COVID-XX navigate us, one maintaining year and growth, confident are We in quarter and guidance earnings for organic we uncertainty, cash with our business

Growth led by and $X.X $X.XX Geographically, on XX% growth our increased our growth, an of and up XX% to States Company-wide our improving China We was with operational earnings driving up a our EBITDA on first year of X%, up up the organic XX%. conversion billion EMEA sales while per to flow and nearly dividend the Please basis. of XM Our performance, focused margins straight Asia-Pacific rate delivering team shareholders. XX% grew year Americas free expanded quarter, cash X% adjusted for total customers XXrd billion X%. United above X. turn to with business year in to on marking remains adjusted and groups slide XX%. organic increased with $X.X in XX% increases. X% was the share with growth with of all increased

long in the sustainability. investments growth, also and to term and productivity, build continue We XM for prioritize

personal healthcare, automotive science fundamental in these apply markets areas like The us leading related While our platforms we platforms, we in trends. and XM, COVID-XX, challenges capitalize we advanced biopharma grew growth home global includes position which other strengths are improvement, electrification safety, capabilities, win favorable manage end our market growth XX% to the electronics, in to well market to advanced This the unique and global opportunities filtration. quarter investing growing manufacturing, on and priority to brands technology future. of as into

We and better are strategies digital our improve to our and and analytics data accelerating data XM use performance. expanding of customers across serve

using from through provide which delivery is product example, material our better helping us raw new cloud-based supply into technologies challenges. the purchase we to are chain navigate insights For global current workflows

emissions, against significant goal we the carbon here XXX STEM new focused are a education, continues million similar help curve quality. initial quarter. the new water Cities. X the in will distributed COVID-XX use, commitments long same million with create in We first and At on opportunities launch efforts to to with way, XM the equity in as term Twin the improving time, our that respirators in lead programs fight scholarship a to new up with implementing stepping water we and leadership inclusion plan a and advance are In sustainability bend

additional governments pandemics. also We our to first Biden for pleased the expertise I To remain to insight the are we on it am with Chief engage providing sustainability. that John? as growth, as XM's John. with driving performance better will our Technology in on improving Officer, over world prepare I provide sustainability, how advancing quarter future last we productivity, focused Overall, point, now turn administration around the on and and

John Banovetz

to to development day, more science please and challenges, on bring X. to create Mike. bear lead tough XM turn company a and Good which we Every proud and to I'm Thank morning, slide applying more includes world. our teams. sustainability efficient innovation research and everyone, sustainable XM's a you,

investments have through may announced you a expanded years next effective seen, February capital commit goals. our to and air, the focus to and we and plan with make As in approximately water, billion on operations XX We more waste. over $X efficient both operating sustainability

become global our to committing across operations. are we First, carbon-neutral

our along the way: aggressive with by XX% by We milestones expect XX% baseline and to rapidly reduction XXXX, bend XXXX. and emissions as by our curve of XXXX XXXX, XXX%

decade, use Second, XM targeting reduce XX% plans water and XXXX. a to our XX% XXXX reduction over by reduction by the facilities next XX% by at

the that Third, filtration path. a higher science to at locations, taking our use These quality return after largest in we technology water will and operations. by clearly our defined installing driven even its are are and advanced environment action goals

by Overall, emissions identified example, that facility oxidizers reverse have reduce expanded by thermal our for that oxidizer will the Alabama, have water carbon, year. activated more system environment system our improved system and tons treatment carbon technologies we XXXX. is XM's implemented will with also investments improve underway. reduced Antwerp, water to from in to We enable and footprint we add our further a X million our quality by granular success as water technology XX% We the have return per already complementary by At to than in our And a quality work when thermal known the XX%. osmosis, we Decatur, has fully installed. that carbon thermal of intend and oxidizers

will accelerate governments, our and art including through progress. continue to further new of state We technologies advance to with others partnerships customers, communities, the

XM's Our ongoing our actions and environmental commitment to demonstrate to our advance work improvement continuous stewardship.

by doubling two has last reduced emissions while our XM the Over XX% decades, revenues.

to XM's value through innovative turn generations. the the fully I'll to is powered XXX And details new by the to slide Monish. pounds are Consumer in our sustainability I electricity week have for XX encourage tons focused making Please on use in a and reduce difference plastic and business. as report years, helped be of progress emissions. XX% We electricity, five and Monish? climate annual future design you packaging sustainability XXXX released to May virgin commitment, over urgency recognize our by million of our to product known use X, made read over petroleum, XM way and priorities. our on a and last to new challenges avoid it today is innovations Our turn and by both our renewable plastic, of last product new environmental we and early world's in more and of customers also just committed our fossil-based million includes from on renewable XXX%. Every now headquarters global

Monish Patolawala

and Thank combined $X.X billion, points good and rigor basis year operating an of all were a morning. up Sales billion, up first wish year on increase sales with growth I or disciplined XX.X%, of organic with XX%, X.X% you, X% year. on an cost John, margins adjusted operating adjusted up income management year operating $X XXX drove basis. you very quarter of on Company-wide

per margins you impacted efforts were on the earnings adding management margins and to earnings volume GAAP contributors growth XXX earnings adjusted On points share. first see that year slide, results. earnings, along were with $X.XX operating last Organic year. XX% the year's both margins quarter to cost our share First and and components up productivity biggest share per ongoing quarter $X.XX, and adjusted per to compared can and to this basis

increasing Mike the strengthening Turning logistics pandemic, raw materials experienced impacts Winter as mentioned, Uri. with to cost prices markets, and the selling on materials, ongoing along COVID Storm raw particularly due end we to and for

year we raw year. net expectation a headwind flat XX quarter headwinds supply respectively. operating Therefore, we fluid $X.XX and full of In materials to points result, material now versus logistics remain persist. share selling share per of earnings and anticipate dynamics raw a basis for to $X.XX reduced and both global a margins our and materials per logistics expect start by As the $X.XX a price prior view, headwind to of raw at to and and the chain first performance $X.XX,

to Looking in range raw materials of at to price basis a the points. second quarter, we the anticipate operating net currently headwinds margin selling XXX XX and

efforts, sourcing price global address these and the improving are We ongoing planning factories, multiple yields actions our taking demand including dynamic in environment. headwinds increased increases, given to

move particularly in We expect traction gain year, actions the half. second as will these we the through

the divestiture to from income year delivery was was headwind neutral $X.XX to on however, the a impacts, of earnings. divestiture Moving year in to May lost drug year margins, last

points weakened dollar against as U.S. currency $X.XX most to earnings XX hedging currencies the of to on share margins and basis added major impacts year. Foreign of net year per

share per on $X.XX expect foreign Three per the to impacted for be an continue earnings of share our We to year items year non-operating full exchange earnings year. benefit other performance.

that First, additional our to position strong QX an opportunity of liquidity early to due us cash $XXX mature million XXXX. and give in debt flow was continued the in redeem

interest more of $X.XX than share was As last items net share per a $X.XX in versus incurred last approximately of offset result, pension year's year share. by expense $X.XX resulted we quarter. first lower year. non-operating Combined, net versus benefit QX higher impact per on these expense per This of year non-operating

based to adjustments a equity Secondly, The income treatment tax regional non-repeating provided a benefit along primarily favorable with last income of U.S. lower rate a earnings international was function to tax compensation. tax rate year per lower of share. mix versus and related $X.XX

remain expectations Our of in rate full year to XXXX XX% the tax unchanged XX%. range

year flow cash another Finally, robust free conversion in adjusted robust with reduced of quarter turn the were cash quarter balance shares cash quarter discussion average to $X.XX. up X flow operations per daily share by flow on cash earnings Please were flow first year, Cash free on of delivered primarily X% working XX% flows along our from with and year capital. by a of which XX%. our for billion, ongoing driven $X.X in with of of management sheet. We year growth up diluted slide

capital quarter million. expenditures were First $XXX

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

the dividends cash $XXX of million. $XXX During to the and million $X.X quarter, of shareholders returned combination through we billion share of repurchases

to QX continue quarter strong generation reduction structure. nearly debt, $X us our ended since $XX We cash the Our of and of in capital capital end year. the a net billion to flow disciplined last allocation enabled with billion strengthen

year a result, at net ratio our a debt ago X.X declined QX. EBITDA of to has As from the X.X to significantly end

our maintaining and a which includes I to percentage for business, return Safety slide Our net to while posted will start financial growth cash and to capability I XX.X% turn pandemic-related with where opportunities, the position to cash our flow shareholders business strong debt year along of respirator strong first generation from invest will with benefit on provide summarize organic a continues demand. strategic us in Please pursue in capital flexibility group our structure. year Industrial quarter. X.X result QX. performance the This business point X

anticipate Looking to ahead, continue demand. strong mask pandemic-related we respirator

was performance year growth the manufacturing last markets. strong which to contribution continued year our primarily of quarterly continued last for Personal The low-double strength year double demand resulting grew as pick-up Industrial activity respirators. QX, organically housing Industrial drove QX will granules year's Electronics residential to Safety However, good on adhesives by we roofing general end growth across due to year digits driven double posted Overall, lap up business the on sales versus ongoing the and improve in growth and in year. across decline digit organic digits tables in portfolio. comparison. demand in Industrial a market during

the first year offset and Industrial declined business sales on driven digits increase the of Industrials organically, operating our costs. were digits segment to Closure was quarter Markets leverage which high-single partially margin by Turning business businesses, XX.X% low-single while year. raw year. up legal Masking Abrasives rest mid-single was margins points up Operating Aftermarket on and grew basis Electrical were and materials, Safety XX in and digits, Safety year and logistics, Automotive by the growth on grew

automation, supply centers to Electronics, and along a which electronic despite of the was strong business semiconductor constraints, organic X.X% Moving tablets up with with semiconductor, year quarter strength continued with first start delivered factory well-known growth demand and strong our and devices, sales, namely organically chain Transportation high-teens Electronics-related TVs. the for data to in consumer

global up and XX% the truck business on light Our car Auto compared was in year XX% builds. to OEM year increase

electronics ahead, Looking potential its impact monitor to industries. the we chain and global on the continue semiconductor supply automotive and

builds Materials, Advanced year Commercial while a largely to costs. slightly. basis strong was on year raw up were increases year declined digits Solutions year which of points COVID-related Electronics from finally, materials were and first Transportation Transportation on and as our and increased automotive margin operating and on XX.X%, sales on write-downs quarter of partially which in mid-single prior-year asset XXX Turning in the year business leverage result Safety flat year, growth by benefiting logistics offset increase

healthcare volume Turning of time, continue headwinds remains to cases than protect the respirators decline demand providers experience volumes. to Healthcare business, frontline be pandemic-related workers to the elective for procedure ebbs to which At from levels. we in challenged offset the still below our and COVID-XX flows as healthcare more the same continue procedure pre-pandemic from elective strong significantly

continued Solutions delivered growth business last As sales driven a digits quarter demand. Healthcare organic high-single versus result, our by The of year. Medical first X.X% strong grew business respirator

Systems primarily on on basis up business offices year. Safety up were organic improving with the volumes. filtration points strong filtration manufacturing last procedure The year due XX.X%, This therapeutic mid-single Excluding to solid related digits business returned year sales and Health year Oral our impact is Food demand their organically for COVID-related digits respirators, Care solutions. solutions quarter comp for for was to digits, comparison. increased started year on and demand business along low-single dental business mid-single vaccines double year's year Organic to Healthcare's COVID Purification operating development ongoing water for last organic growth last This biopharma year. this and year's during down due on in low to first experience continues low-teens growth, declined doors versus Separation increased digits result year. closing while year. QX positive trends as margins Information of XXX

offset were leverage costs. on and and margins partially logistics growth driven increasing quarter by supply disruption raw sales First was which materials chain by

solutions, channels adhesives, up packaging strength digits strength Lastly, growth shipping tape. most Home across Consumer by improved products. consumer business double and with and demand to first business, Filtrete delivered year led by with the led and organic in business office materials, in organically digits last low-single up This was growth also Organic digits, driven goods returned Scotch increasing ScotchBlue Office to growth lap business brand school organic in merchandising. remote painter's ongoing raw be e-commerce. Stationery our XX for Improvement on hard strong quarter guidance. for sales to by positive COVID-related growth work on retail X.X% our turn QX, Home year continued outsourced was for a mid-single to for Consumer's quality advertising growth air comparison. Command demand sales finally, versus organically Care slide last XXXX investments similar for year trends. strong leverage year, Please year's tapes, XX.X%, as manufacturing, the start increased And we impacts was up logistics, and or of full margins offset to were from as costs operating by and and in discussion our

results, can we start year. a are our see to you As the QX off to from good

Looking ahead, with markets continued trends. strengthening economy of the we opportunities along as in global end Mike mentioned, increasing with expect favorable

However, ongoing pandemic. XXXX as we will the uneven of fluid we foresee through and that given remain the the impact improvement go

As of to will result, be go we that as the navigated anticipate we through a items year. need number a

healthcare, For evolving impacts example, starting procedures, from demand, supply including shutdowns, elective with COVID government and chains, respirator, response.

impacts of constrained Next, chips automotive to and electronics supply consumer production. OEM the related and semiconductor continued

proceedings we productivity, investments X% cases for share year of with it Thus, progress. logistics along constrained earnings raw some year, managing legal guidance full think conversion organic materials growth, In And taking to being the addition, per XXX%. growth, maintain and availability. we in legal of $X.XX and of year prudent PFAS to ongoing it flow XX% in to the along costs finally, our the sustainability increase expect and costs and through these expected increase in and in with cash other as free items $X.XX, early X% of to into account, to

the second let highlight quarter, to a note. items of Turning me few

the First, XM uncertain fluid execution and team we in the strong by a environment. of very expect continued face

As I full increased mentioned during for from remarks, logistics have materials raw my we the headwind year. expected and the

to increasing on the headwinds quarter little go prices a gain to year taking actions selling as of anticipate operating XX materials These points several And points costs. and will robust related a raw of margin we pretax take we million announcement. year. including address for time basis execution, start delivering operational a range in a to basis growth, are Therefore, based prices are of XXX from To $XX selling through we net traction. logistics and to year $XX actions We second higher million these expect year finally, restructuring to XXXX our charge to we flows. our the we the continue wrap up, strong as headwind December cash broad good off actions

We and questions. our now for daily we are opportunities that, focused management. With productivity, and operating and sustainability I on for will growth, prioritizing customers, thank take enhancing capital attention, your your to while for improving you delivering rigor,

Operator

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

Scott Davis

the order of Good like for morning, panic Anything? of rebuild? just me that's far the as I'll unusual? operator. would equally that. you it ordering it I kind seeing any segments, strange Anything here. patterns you, Are letting in Transportation Electronics, Electronics patterns Transportation Thank in imagine guys any probably and and but or leave all ordering you perhaps inventory would everyone. in as on Thanks see at

John Banovetz

and see us and we for orders certainly say chain pick-up your strong have our from impacts Electronics unusual the the in say QX. Overall reports, we the improving, Transportation recovering markets still wouldn't shortage would low. supply see growth at about were channels to what for we inventory that see I with we say channel relatively we written just them in and I there, you a with reacting remains in a in in Scott, Consumer, to changes Electronics comes it's pick-up Elective semiconductor is the see markets anything disruption you with there. we're marketplace. very measure happening line I Industrial trends. that's it's from due when what's Transportation mixed the shortage. still. and When below semiconductor pretty normal what a case. with much and procedures with inventories, seeing steady, the impacting the responding there. It's us some challenges so a good Healthcare's pre-pandemic, look would see end in trends well

have demand We seeing Improvement. We're in high Home lower there. levels

little with which it's reflected lower little line what pick-up, would levels see the expected we broad our much a better I was were say based to ordering A responding unusual. You Otherwise, the pretty expected. otherwise the marketplace. in trends March but in really you see when than we in nothing but growth

Scott Davis

on to the Or That's there $X.XX helpful. that is just on logistics, you're what just And material is magnitude? for full with then supply $X.XX issues, price, you net year? of whatever to chain some not clarify price offset that the raw expect amount to certain yet of the opportunity

Monish Patolawala

is a just to $X.XX $X.XX Hey, Scott. great material That's logistics headwind. raw question.

As in price are improving we factories, we well with chain remarks, our the increase, I as yields impact as my prepared reduce supply can. as working to as partners after much our in going said

as take basis to of time see price traction. I've increase, we also in these can going points first for to and a it's had quarter You gain bit of said, the XX actions little

expect the on the that will first be the than second price So better perspective. we half half

Scott Davis

Okay. Good luck. Thank you.

Operator

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

Jeff Sprague

lifetime Thank other can I of the like Seems we of that programs us you. a whenever Saint Paul, don't John price the mind, throw that at size since have outlined could actually in wondering and on on we of if priority were be Probably him? maybe ago. if morning, you one when could Good were Just kind cost you but everyone. us line, for tons update currently the questions, was.

the and that the can always tell to my on, I the put overall? rate And I little just on finger development, life us commoditization you on think what's of at bit difficult, going end portfolio was it's end. kind a things always low of vitality it is One of XXXX. flip of the anything new side the product try the of

so effort that, have counter color there, also. to be would the any And interesting that you if

John Banovetz

for Thanks, Thanks Jeff. the question.

PGPs on they as so, last X% continue quarter the a our growth continue us, to first platforms the So that would Mike growth platforms, I and overall customer about about know, of part areas. those continue those you a maybe portfolio they're in to grow. growth of I to or our as We've would priority and as spaces around market and growth And growing platforms expect seen those over we XX% referenced. they sit think, the in quite for say bit high we on so solutions approximately find

lot years, the of MP MP value question, That's without that. talked about as well you said MPVI the take being commoditization, that. you kind impact is our about of average for years I over a say the definitely of value in overall. XM Second pretty COVID's be near last an for whole we've things if which had secondary the us, roughly around kind metric guide I as the it. then a And profitability our so, a good the comment in five forward. as and trends growth it's of metric vitality is think personally that over past. obviously of don't obviously some primary but gone And mid-XXs term for on last the also part in an We've or about to important I'd and XM think few for the a the here trended have

resources our customers solving our our can for to and and our Are margin be aligned solving order making needs? in and that I to we Are think ROIC? about, to our we are customers profitable issues we and our sustain toward customers? geared and able grow deliver growth customer R&D those with sure solutions technologies

Jeff Sprague

Thanks.

follow-up. Just five-year a mid-XXs three-year that time Was kind or span? quick number? What of number MPVI

John Banovetz

five-year It's about a number.

Jeff Sprague

number. Five-year

it Appreciate I'll pass on. Thanks. it. Okay.

Operator

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

Deane Dray

walked legal expectation Thank headwinds of about morning, sized leaving despite terms you. costs. liability? of them you framed that you're the having frame quarter for solid And that something could there's or the or might and list Hey. beat a Good brewing this Monish exception product guess or remediation surprise operating at item for signaling potential I unchanged. everyone. in with guidance either the them Because all a least the costs if us be of you're all of it's either last this us Could here. just certainly size be what quarter through Thanks.

Monish Patolawala

Sure, Deane.

and to in start we with whether prepared I also continue I've this some -- As flow. taking all rigor, continued remarks, the headwinds same of I said other the cash think just the my first time, At I'll that all operating free to that drive mentioned. operating raising are actions rigor, it's price, driving

with will bit the that some time partial take first a headwinds, So little implement. all I'll of offsets that with to keep

legal of and see there regards can file we couple it are things. our a you fees, As but as Q this more morning, this

second mask what the in around and is respirator see end second up You'll be this approval million. up of the $XX prepare $XX some the of But Arms the our in for trial these see year MDL cases the PFAS approximately we is will is, as of up year. picking the half Combat this also now, the of that well prepare expect on trials up of for fees during these or we in that other with start predict exactly to To reserves between are then that's do as legal quarter quarter, legal we to is quite PFAS, fourth million half going example to the what tough. for right trials, as the cost go some Florida will

Deane Dray

back-to-school, And it But outside as a quarter? is for second going a seasonality. is just you in that how return-to-office might That's interesting encouraging. we're it to tepid, then helpful. contribute expectations be the but talking frame -- Okay. the question, is it's of Can second about very of the much terms us in

Monish Patolawala

It's Stationery our from workplace he Office return areas degree. a where it return the How when? And talked workplace? question. How one to Yeah, a first That about and is mentioned. the end we're That at Monish to out. in will the school play indication Deane. we the drives that digits, What seeing school? will is to related answer return your we're quarter, return to up being pick-up looking to did those to mid-single a up first and of big a to in see big the COVID, growth we what to as business uncertainties return how

the wait expect in signs saw We're though. return and going that vaccines. economy to encouraged workplace how strengthen, to see plays QX have and would we to to school So good out we're the the that the to I pick-up say by we

Deane Dray

Appreciate that. you. Thank

Operator

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

Nigel Coe

Thanks. to me, combination see right supply see normally Can ramp XQ. seasonal of cetera, guys? constraints higher thwarted you've the et XQ that Some limit to normal XQ you in of you now seasonality. seasonally Good I'm the than hear seen wondering et ability the the morning. chain, if cetera, might production,

Monish Patolawala

think Nigel, around Is question? that the breaking you question was up a correct? were but your I little QX seasonality,

Nigel Coe

Exactly. Yes.

Monish Patolawala

trend seen. that any quarters Nigel. be So that pandemic my just I here normal, been with seems think three we've to in I'll the I've start don't

compared that monthly to the to just with seen to start as completely quarterly cyclicality, piece. has compared so as I'll as past abnormal to compared You've trends first the be that seem what well been cyclicality

is strong in execution. on thing say you one us second I definitely can is QX would The count

with stationery. quite going does going confident our Graphics business, just to one pick what happens How to in? what work to about are be impacts Stationery just things, what of end the important quarter going to Signage Mike a I the It And come but return that people our is still to they're happens but return mentioned to up, are we're also The markets for impacts work be watch. think it second uneven. And not business business. the that I impacts course We monitoring few think there. spend and

semiconductor well-known plays see that how it world, supply of costs about think second procedures the piece. continue a it below pandemic is raw shortage, playing impacts out disruption, The parts elective how chip logistics The chain auto, is as When of consumer pre-pandemic I've levels. quite impacts bit. piece to the you about that course and is is how costs one We'll be in material electronics another out. talked

availability one keeps there available and from suppliers of to to our making is course product continue other is sure product manufacturing. The us

suppliers Now, they keeping suppliers, done this, the we job work have factories you as to with the to to much supply the as thanks done our to I'll disruption amazing the has also tell sure chain running, are delivering minimize and that the our we have relationship making us partner an all appreciate customers with team possible.

in raising We bit are take it's to also The but of little come inflation faster. has prices, time. going

points is the going price versus to XX logistics. to which basis you're of net basis see inflation headwind and of So XXX points

As it's I also million mentioned, the in we're told charge $XXX you between announced restructuring, going to which We $XXX year. do was somewhere of QX XXXX. for to million

at we $XXX are quarter, As million. of first

million remaining $XXX of for year. approximately the the $XXX to got million to So we've go

is see all economy continues If to XQ The is then XQ. about outlook that going other indirect cost, $XX of going it and million guidance. headwinds why will it's goal balance your charge. answer the follow hard Any up. place. in is, keep is, up in keep into maintain travel will we our to as of also we question, go million to regards as compensation. prudent growth second put mentioned, productivity will That's normal this tremendous with play. one-time and things is talked areas the seasonality our go and want trends the Mike restructuring it that investing And run Also, legal costs long we cost, some has felt can invest all for have these to that The goal in in. it way come $XX quarter to to we we sustainability And to

Nigel Coe

benefit way in that $X.XX to assets, the Was that's original very guidance. for to My Thanks. clearly. you question Right. follow-up pension FY was out the the very, like seems or just change back the going That's understand XXXX. that is you the really guidance? seems in uncertainties of a color. about change year-over-year the But just great the guidance account like I to additive range, laid all

Monish Patolawala

presented. as stated, we have would years are I Nigel, we have that the restated say, all

impact of year-over-year $X.XX. that the So is approximately

took up, to of to $XXX was Right impact share for answer that's things. That guide impacted million that, and couple for plus We as saying are up, dilution other we an interest has The pension. in have million though your had So zero. the share $XXX financials offsets our to to had that quarter. specific have XXXX. we our $X.XX, buyback debt opportunity impact for gone total or then in we even clear. was The that redeem question $X.XX originally the now, a of on it's gone prices of go on repurchase, be $X.XX share due of done quarter. the And

Nigel Coe

color. Monish. very Great Thanks much,

Operator

Thank you.

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

Steve Tusa

Good morning. guys. Hey,

mentioned just just a give think number normal Just XQ impacts the would I that guys are from up raws think sequentially seasonality. mechanical to the the of to maybe items couple Can questions I us you kind break see XQ following that fine. That's up you last be the a XQ, usually like inflation? that XQ including and total on here, you the and of you whole host

headwinds Just all-in obviously of what upside, XQ? -- seasonally be So can a like but to going kind like XQ is is we the to from big just XQ XQ are weak. then

where kind we to from trying should start total in out mechanically. kind figure So of just of

Monish Patolawala

That's question, Steve. a great

before. comments made that same Just I

leverage volume know, biggest margin XM. you is drives piece for As the that

that remains, the of on to and the volume industry about, Stationery is uncertainties whether whether whether assume depend normal The would in semiconductor should elective strength get. it to lot a going You XX% is gas Consumer, of procedures, oil chip Auto amount for XX% I've whether that leverage and the it's up. availability margin you picks talked the

that to lot second all pieces. and on Similarly, figure an I have end chain course we inflation cost the all which basis growing. basis you So these material perspective. that say, supply headwind in markets would from points we end logistics product inflation We'll happens raw will the and have. have we've out about price One of sure market term, of two between is as with told quarter of long cost the to well as XXX points what availability a disruption, of there XX making that and the are

the that's other, So I would say, XQ. headwind to

Steve Tusa

What is you sequentially? would just Can it already kind what headwind that you've What about that and absorbed in talk of sequentially? first quarter, headwind be?

Monish Patolawala

Yes.

of Steve. it quarter, first piece absorbed in the a got So

May. plays have itself we'll and think how see April to out, I

As to provide it's is sure we the suppliers to availability, relationship it's at that something that product but supply suppliers with get working look they're too situation goods changes over early we're overall the can, our much because our say making dynamic very chain are Again, as all right the helps quarter also able world. have that the a again, the the us day. as we we every And with now situation product in on. constrained

million $XX restructuring. The other headwind is $XX to of million

this So announced we of overall program restructuring part a the is still in QX.

QX to take the Indirect going in million million balance We're another have up QX. $XXX $XX QX. in come to QX, We and in costs. and $XX to done will million

start QX. a you up. open to hopefully So as travel headwind going That's starting are the see to up, go to to are economies

starting up, continue the economies As QX. I frame and productivity we that's growth pick see to will increase, would to are how investments so versus sustainability starting to our in QX

Steve Tusa

Okay.

of like some to a that's quarter. year-over-year year-over-year? And is that absorbed again I you kind Just it me material the piece raw looks seems of basis, like know, the on issue, it don't $X.XX in like, to but biggest $X.XX just first this

Monish Patolawala

points a to basis It's basis XX points XXX headwind.

Steve Tusa

Appreciate color. the for Thanks right. it. All

Operator

you. Thank

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

Julian Mitchell

Hi. Good morning.

slightly than with in in really for that was and that's And economy. The headline points respirator QX. even QX on tailwind focus Just QX wanted Industrial. QX improving XXX than to Safety the perhaps basis organic lower your less growth there

headwind headwind so this distributors segment activity become So really for Do to kind reflect you year, and over-ordering the forth certain just does this assume understand, comes after that last of guidance that or in wanted seen aggregate write-downs some the balance XXXX? the in for We've over of that year? for at year. what respirator and/or XM tailwind later that a the could

John Banovetz

Julian, thanks for about QX. the question. We talked

demand see in million strong few to demand and industries. We And it's quarter, I and depend first increasingly workers to delivered responders continue QX. XX% would XXX that as we on going healthcare The going say essential in to still forward, factors. the a respirators move

the demand going as protocols those the pandemic in depend that's I out been in respirators, would And first and use there's one and dynamics in respond pandemic. of of how The plays is governments how changings example, healthcare, what's to on in to the say to going be dynamics. for

on demand this is into and said, all There's world And demand over strategies uncertainties. there economies and the the Industrial we're where supply one consumer that we're recover. is areas Monish in through demand. increasing As the as of continuing those. working around to working And governments stockpile then

more impact some each we high Healthcare be year. in it overall relative the the into go we're to from into XX% demand than to That's we more over as depend demand how overall, time So forward And continue is Healthcare and to to through shifting much of going shifting go see on as Consumer see and the Industrial enterprise then priority out. and the the how going SIBG? we on play But to expecting to relative those Industrial Consumer.

Monish Patolawala

To are other down, answer Julian specifically I'm on question, the growth lap. is your slowing sorry -- -- rate why to starting we

So right, time. even QX there had million if of that my my company memory disclosed was is XXXX respirators the of $XXX disposable before

starting pandemic-related my disclosed see to the year. on slow remarks, because lap it's Julian, prepared all amount, went said through the you're if year last down, to percent, going to year. you're respirator going at demand looking actually the we You're year that as in we as I the

million a it's $XXX comp. year QX, So year on

to million we year. million $XXX So and million. from $XXX In we $XXX Last $XXX QX million. step around were

decline. contribution on year So growth the year to going is of

Julian Mitchell

of year? given capital Yes. around think we sort the And you Understood. second Cash of deployment do question that times. much. leverage the X.X very likely around usage? just Any around balance Thank remain background rest maybe just yet my to Leverage good low the aspect. you is updated the again. the is sheet through Or thoughts very fairly flows

Monish Patolawala

a our changed. to I again Yeah. back just Prioritization go hasn't priorities. great It's would question, Julian. capital

the it's R&D. tremendous Home is priority first even have we about that John investing Mike They're Improvement, believe Biopharma, keep can few, Healthcare. opportunities we about we areas in. mentioned Safety, whether think talked Digital, as Our invest always Semiconductor, just we Personal a that in and

in long run So return. give that's best the priority our think is us that I first the will

dividends X% year. second is did the We increase. this It's The dividends. increase of priority consecutive year XXrd dividend

is priority third M&A. Our

in believe And it's and complementary said prepared you are any well We don't of size know, our well add did doing in as have last to XM's looking strength It's integrating then near XM. XM the And in the well where are Acelity. acquisition busy we but $XXX value Acelity remarks, we share for million my see I and as synergies. as is of into future, repurchases. we repurchase. we integrating As share very opportunities can

us right when gives of needed. think flexibility way now, I opportunities well the X.X have a to leverage deploy we that as Julian, of lot either as net strategic us to go strength givens

Operator

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

Andrew Kaplowitz

Hey. Good guys. morning,

in next even the segment on I absolutely So of out you improve like chain quarters? high Electronics this see a for they high could given easier concerns. the the that at digits. more at your know you range, color of the a there get or end do expectations? how very give is supply seems for comps you And versus Maybe wouldn't range of high to had be any the range Electronics outcomes and point strong Transportation to the Auto perform starting the said know amount year, as despite just low fair reason and that high-single end why couple obviously particular continue us

John Banovetz

at reflected had shortage certainly had company. still Andy. end in And wider markets, the we and a Electronics much and uncertainty beginning a in its the the off into marketplace, the of that of to the looking like and which both an good Electronics year chip We start, year. Automotive. range start It's those at that came on the we rest year. were question for the facing too, as talked uncertainties and the important to us the They're strong we dynamics Transportation impact considerable about some we really

think TVs of say start. the see Consumer kind dynamic. Tablets rates, dynamics and really I in to off changing build of much it is lot strong you driving Electronics of a that would reflecting I a that.

are say year? it depend pandemic a And how on also it So going it's to still reflects the outcomes. would how I to play out range these the trends plays out. through going wider And is of

Automotive Electronics But the growth came to Some the the into uncertainties in of and Consumer and key range market we wide general. off of these build wide are there. on start. would the rates that impact a impact dynamics the range being its these rates I our view economy will pandemic segments. say driven that we a how above by of still year, strong the have again, build above

us So we the with well year. take solutions, dynamics We'll and positioned. market we're our winning see we're the the in how go as through marketplace

Andrew Kaplowitz

these all more on see at automotive like like electrification? electrification of continues in obviously into sort you Jobs if of strong shift American context your think ask I you something the growth on in certain the Mike, priority to money Do whether Biden your forward? Plan. Focus change XX%. Do it's you growth -- increase. areas a new platforms? money was out How growth to you there there, wanted quarter, more that in about of There's automotive lot moving the of do focus of some

Unidentified participant

year we that other also about seeing in were for us, I we doing big we invest to future it threw And not what through about that investments Andy, our at talked opportunities we the platforms about XXXX. were priority obviously and would year accelerating, but that we in that were Home Improvement last were strong. us on were we managing only talked other while challenges trends things in in areas Personal that and Safety trends but growth all going market were pandemic the say, the are

can unique as and platforms So on to trends, represent both value. market that's strong Priority how create we're where we those, the differentiated mentioned of prioritizing markets, growth John growth tend earlier. based These those out pandemic, of investments then growth we make we are trends the opportunity. stepping as we're in we and higher have the the segments. that the up market see coming And

a in platforms XXXX, we So priority those growth based through front on together we're our that started. plan see for year that go put the the we us growth not we driving opportunity of really as on before in locked

drive is came as XXXX. what the outlook that see the for it the we an and as year had opportunity into growth we we to growth So

Andrew Kaplowitz

it, Appreciate Mike.

Operator

Thank you.

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

Andrew Obin

Consumer Good stocking on deal Yeah. inferior you masks morning. that XM have product. Kimberly-Clark be I we to one with because Yeah. up this reassure can will

So I Safety want Having you guys tell on that, dynamic breakdown. that. very useful to in just and gave quarter, and said you just Transportation Americas the the think Industrial in and Electronics the I

channel? in sound there's is you channel. dynamic Industrial One about of Can XX%. happening by end assume because does broader up one Just What's OE, some happening? X%. I it's the it is talk dynamic? think I Electronics just this Safety. distribution sub what's and more market, Safety pre-stocking and down OE, America, more is in but Transportation

John Banovetz

the been and of is businesses. talked Americas, Yeah. and in and business general. We mineral it. industrial We're with U.S. products It's Safety a driver. seeing a the Monish strong Personal Industrial the performance Andrew, highlighted markets housing about Safety. other in strong We're in seeing the Industrial growth. adhesives you're portion Industrial industrial in the big demand tapes by right. driven in and growth increasing some recovery residential

the looking look contribution. in what's additional on point. part Electronics. part strong even pick Transportation build up and the safety from and All it's products. Commercial for about segments, flat obviously OEMs. year. economies solutions some as centers, not data Those end of I and our semiconductor on rates in strong growth, And Electronics, that going the at. globally, in Transportation we talked graphics How and in are a at in talked in one are the group. see as big of business key you are those the about we're that's get So year-over-year across The by driven and is markets side the the saw, and growth go Consumer the automotive would uncertainties automotive uncertainty going the and of the driving the of we're market answer that the fabrication, Safety still U.S. in are of demand earlier we'll We're spec-ins. that business Americas U.S., of that, in Americas the that Transportation we recover picking are the as areas transportation an at things Electronics Monish decline to things particular. up recover? will that those to as drivers Industrial be in good U.S., is winning the TEBG, this performance the in driver say spec-ins I seeing what Those

Andrew Obin

a just And U.S. Andy plenty you. semiconductor up on. the going touched years. I visibility on Got have we But it think a several next question CapEx of follow-up the seems in little bit over that

you supplies your outside past this of just of decade utilization the America given in Given already have play just in overall place? capacity better nature need and process is has to of capacity America North assets over the you growth? Or to capacity do it footprint and sort the adjustments margin your in America, make semi the North been on North to added any manufacturing

John Banovetz

Andrew. Yeah,

close and users, we of our across segments customers, because regionally close build semiconductor center demands the stronger end are As the areas a the also critical to U.S. that's out those capacity in enterprise. that be to the States in have serve in exporter you around know, strategy areas that end some the There where net customers. portfolio of of in world, footprint broadly of and of one where a invest the is the to close world. fabrication key and goods to We to with. of product that's true market is the more have we're key the here, out meet a true United much we we

Asia, example. resources significant we So in have for

Europe. We portion also some even it in supply U.S. a the of in capacity from significant and capacity

been see the as So capacity the we and going invest play build take that it's we're history, time up and to to well shift us around it's that change shift, for And I throughout if market case has think we'll positioned needed. we to as see dynamics out. where world,

we start we'll So add and a segment. in place but time to adjust have to market relative capacity, that good

Andrew Obin

you your Thanks answer. Thank a for lot.

Operator

you. Thank

of Our with Walsh John next question Please the line comes Suisse. proceed your Credit question. with from

John Walsh

morning. Good Hey. Hi.

So a But et to margin. the call to lot logistics of chain details to kind any if curious and out. already you the it your to want and sales around relates supply EPS ability as feedstock, that of impact raw cetera, get there's

of midpoint little full just stack three-year at your trouble Just printed. just kind and the because having a even if the what of reconciling you deceleration two-year for you look the growth guidance year, from

Monish Patolawala

the lot back about. supply we've on QX, make a of just material suppliers the say, than flowing, product uncertainty of our is just making sure costs course would product. making that logistics other sure I in markets there John, the It's So, is the and raw talked the point chain to can

it's As a of situation day. every very right as I that's said, dynamic now, changing

total second state to we'll we've So that the called as year. that are out be this quarter have of hopefully the the we that's to get and and better in that see got in the uncertainties second the quarter, year, we through through where navigate why a we for is one

quarter answers -- that you're about and earlier. second me talking your hopefully Since memory question. the my So failed

Sorry.

is world were where the And you're for QX is for quarter, XX% Again, currencies that on XX% we the looking just is the which as we'll for if our also a to at plays in see be first rate to at from point $X.XX. still perspective, benefit out. earlier FX the XX.X% then question see and Steve's year. tax versus $X.XX move itself QX We year. plan QX, So another

talk would the items John, other the are as overall quarter those So I second about about, its impact. I and talk

John Walsh

here. Great. And question then maybe a broader

of talked a kind bit new vitality. You little about product earlier

to a commitments. for technologies to You're operations, stuff of that? there actually about doing you're either science? way a and and around interesting doing you're customers bring take other the monetize your you Or some can your what of enabling XM the or talking sustainability own technology the that actually Is material out commercialize to that lot

John Banovetz

that about leader our sustainability. our in customers our would technology expectations difference that ways a helping the being And, for you platforms say for and every in customers. one is them, make a sustainability we of and leverage advantage us our to our an and one an technology also making has of John, our a difference requirement Yeah. That's new products I improvement, see in and can for

fundamental investing strengths lot also a of the operations, company. and you innovation in we're our at of Now, look our

about as can quality sustainability Our as manufacturing for think have that manufacturing There expect along, are certainly there. to we to about in commercialize lean customers a our we those competitive our impact, product we companies ability. where solutions in leading example at capabilities of as sustain property foundational we and look, that in manufacturing our are can offerings able intellectual leverage as ways part we really good for be innovation as own a of to can expand our all be and We'll we And we one-third opportunities opportunities well. sits own our forward our advantage. technologies, operations, performance process and that

John Walsh

you. Thank Great.

Operator

Thank from proceed of And Goldman with the our your next question Ritchie comes Sachs. Please question. with line you. Joe

Joe Ritchie

you. morning, Good Thank everybody.

trends about going You've things that this a fluid now, XQ? quarter. seeing the can got are talk XQ but back maybe just fully very And far little I that maybe to moment. in question, so first my for recognize comps easy you're right So you a

that see expectation what saw growth in you're you'll an based versus least acceleration the at is in So you what seeing today? on XQ

John Banovetz

QX no surprises far. in Yeah, Joe, so so major

about challenges So we've side. the we the through But to of started availability what April would have some well. it We're pretty continues thought working strong, it's whether we cost product talked on similar be. or the The team to execute in get out, what you higher the pointed basis we major year-over-year on than should currently a pandemic. of from And a will into you year-over-year see the comp growth saw you the therefore QX. basis as first on a quarter basis

Monish Patolawala

QX I were we up XX%, organically and XX Joe, we as QX. last a down believe, reminder, in lower, points in year were basis

So amount fair the comp a is easier.

Joe Ritchie

That makes sense.

material an just that that on then of that side? account type Monish, all-in you headwinds the talked clarifying you discussed purely Is taking comments. volumes? you've Just Just volume can decent that clarify about number, guess those already on wanted I you some Or have to to the is into clarify and XX% incrementals that maybe my volumes. raw second when XX% question. comment?

Monish Patolawala

a it's question. Joe, great

leverage. would people should year of beginning in fronts, term Similarly, what we I say as headwind. is year that's beginning we traveling, I unusual. talked the in on guide a XX% our when one should start that the you long is about indirect would in the the at the XXXX multiple of get think so you XXXX XX% we Unusual comps, up. we go general gave investing, reset So to start hopefully costs of in as the snapback the

last $XX approximately property sale gain fourth of a year of in a had million quarter that's We non-repeat. of also

year in be out sustainability about, playing headwinds that productivity, we of all one-time can of investments the see the into talked as growth, term. longer we in some coming will increasing we continue our thought that XXXX us that to those we and the So grow help trends also in

those a say normal proceedings Combat and but I as price that we odd Arms managing the the for is the these has logistics our reasons. XX% raw term. talked costs that's other headwind. to it's as And see proceed any the just come as why should to whether XX% PFAS about and by That's we long so I've investments are as And in long increase would to partially is trying all seeing that the keep is and the other some we have increases little cost legal XXXX term, second make offset of the in then well want and through yield, do, that opportunities increase, we as third the then material growth costs you

Joe Ritchie

you That Thank makes for sense. clarifying.

Operator

Thank Michael you. conference the Roman some I now our That concludes portion comments. of call turn back to the over call. closing question-and-answer will for

Michael Roman

well up, am for and in We flow. executed to with wrap and To I investments and through the sustainability. performance quarter strong drove growth, we growth, future productivity, build continue as earnings, our first pleased cash

remain We and are positioned our for for returns XXXX Thank on our delivering well a joining you value successful shareholders. customers focused and for us. for

Operator

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

3M (MMM) 27 Apr 212021 Q1 Earnings call transcript