MMM - Earnings call transcript Q2 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

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].

conference recorded, this XXXX. July reminder, a is Tuesday, being XX, As XM. would the President Senior at turn like of over Relations I to Jermeland, call now to Bruce Investor Vice

Bruce Jermeland

welcome and under some note comments, Thank Financial and presentation to call. then you, Officer. me Investor Mike Executive take Mike will call today's and are posted accompanying turn Monish slide XM's formal Quarterly release today morning, are your Patolawala, Officer; and everyone, questions. and this With our quarter Please that Monish earnings good second conference Chairman Chief make Relations Roman, earnings will and Please Slide website the we on Earnings. our X. to our at heading Xm.com Chief

year, which Slide statement will take place XX. have like your a read throughout would moment mark to October forward-looking we to take call, for on you done our earnings to X. Please calendars the I on Tuesday, next remind As the

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

Mike Roman

areas. was Thank as geographic posted you, business we growth strong quarter in everyone. second groups and across and performance all Bruce, organic XM's the morning, good

continues From global macro Our delivered We cases. and perspective, along robust team ongoing flow. oral margins end a economy care increased including over markets, the and general to uncertainty procedures. industrial, heightened pickup to home in in elective remains and many expanded due saw strength improve, cash with variant a in increase improvement, COVID-XX health executed well though care Delta the earnings, concern and

inflationary We work as chain as and to supply to automotive continue semiconductor mitigate build end ongoing rates as electronics. shortage pressures dynamics well and challenges impacting the such market

We slide. will beginning I also next in demand see the discuss disposable are to decline respirators, a pandemic-related on for which

advancing stay Looking on investing and emerging forward, productivity in will opportunities, we sustainability. focused improving growth

continue X%, face further for in and margins are to to environment. $X.X In along a second while billion quarter, earnings of of a posted through and executing to returning the I XXX%. growth X% ability full uncertainties to decline shareholders flow billion to balance $X.XX EBITDA share well strengthen us and of earnings $X.XX adjusted of increased Please XX% our with flow Strong to in dynamic second dividends We of our conversion year's cash free in share. expanded growth over of confident proud allowed to quarter, adjusted last per XX% We cash to in per execution and team's guidance am $X.X our COVID-XX raising to sheet rate our are organic repurchases. $X.X with we sales organic Slide the total $XX.XX. a delivered billion. to turn We versus XX% share year X.

performance. new We and ways our are improve customers for finding innovate to operational

burden therapy examples. long System to our we our transportation, to on capitalize execution, including In electronics Incision world-class their solutions internal market are our high-risk indicated building including health damage-free innovative device growth $XXX and surgical patients, first franchise Care, of In automotive with for in a are future is history hanging business. complications, help of electric technologies reduce on are automotive in system. and help Management of delivering savings expanding U.S. combustion care helping a and the clinical leverages cost costly now infections emerging us investing the solutions, XM's for adhesive consumer new site Command financial ahead. both outcomes our we to suite medical improvement, strong to on home day-to-day our FDA greater out serve Prevena improved for In both trends the even by engines, in opportunities line drive we above-market that share favorable want homes, impactful of building customer the innovations only electrification, fast-growing helping consumers our needs. to addition I million and platform few personalize the Health and display lower In

have We science win invest to and our we across XM apply areas. to growth, opportunities drive long-term increased businesses continue will and and those in

across variable health additional protect of As the $X.X capacity shifting XX% increased annual seen, all doctors onset care production while ongoing surge you have of first distribution lines, we pandemic, by geographies. COVID-XX and respirator fourfold nurses, impact to of have building the and billion is our idle Since to highly activating the responders. into

peak strengths QX year, which governments of from our stockpiling adapt One hospitals. needs. and marketplace to Global quickly of to demand its included changing in is reached this

demand COVID-XX continuing to a seeing hospitalization supply seeing seeing rates. increasing increased cases health overall a elevated health consumer the adjusting geographies and prioritize in in to workers care industrial our care production, channels now now and and are deceleration We while

we to we future we COVID-XX-related when needs As needed. are to or production the increase prepared meet overall response output in this, emergencies end-market we Like reducing do rapidly trends. past, in to have are

actions supply and address commitments. in we growth, challenges. COVID-XX addition taking margin to the also investing our pressures and ongoing along half, with plastic second strong on continue reflect while productivity I and growth, and half, delivered water am new the the building performance. pleased We navigate As and sales in significant flow I In to future sustainability, inflationary with sustainability good advancing with cash first must impacts chain and carbon, for

and science We unrelenting world. wraps generation. transform as customer on cash and will details and quarter ideas our solve on people, bring help focus turn driving the up opening to do would XMers operating we Monish? resilience and to guidance. together businesses, by like around That cover includes and your comments, quality, I'll my to more I performance, and this to lives which for costs improving an challenges, improve over Monish commitment operational thank it the service, updated

Monish Patolawala

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

last this up QX Second were items Included compared results. and year-on-year along to margins earnings organic quarter and growth, and as see benefit earnings a per ongoing percentage compared few this other GAAP year. to A margin to you share per volume year's and per X.X and adjusted impacted On $X.XX, strong with XX% last the margins $X.XX of to items, share share can components that slide, year-on-year. adjusted earnings in both operating points productivity, earnings efforts added were operating note. restructuring

the to of Court a $X.XX $XX operating federal percentage This to Brazil's income XM and should tax lowering in Brazilian margins added paid Supreme ruling prior years. or ruling during calculation First, earnings clarified tax, the quarter, favorable to points issued operating that essentially sales-based social share. that social have the million X per the

environmental other liabilities Next, of today increased as million by by in our $XX million you see will XX-Q, our and liability $XX as later part we nearly approximately regular review. our our respiratory

defense also in ongoing year-on-year legal we addition, costs. a In increase incurred

trial scheduled in part a of program along PFAS-related finally, the And in Combat restructuring approximately multidistrict next million in Michigan litigation, quarter, to charge as the pretax Earplug incurred step QX currently with last are in begin year. September We one and $XX we of we during a in Arms of trial in October. the second the with announced October, one

was materials for outsourced reduced operating by progressed. logistics basis the and raw experienced performance quarter broad-based per and earnings resins, and we headwind cost price both manufacturing and than as selling points net This as larger margins increases quarter XXX respectively. chemicals, $X.XX, Second share forecasted

result we a a trends, $X.XX forecast range the share in $X.XX full headwind of cost to logistics these versus $X.XX now increasing of expectation per cost and of year As prior raw to materials a $X.XX.

address As are have we been selling including cost multiple discussed, to these prices headwinds. actions have and increasing taking we

half we expect continued the in our As second of the a improvement performance selling price result, year. in

we anticipate up as the benefit net catching to the to price range third turn given selling cost a pace our XX to a expect increases, selling increased other of fourth margins headwind points, quarter price we currently in basis start which XXX actions to and the the However, in quarter and costs. raw materials net will of

Moving from was divestiture $X.XX and lost in earnings impacts. XX share. last of headwind to drug The year delivery operating a margins sale of points the basis to May to income of per

margins impacts, currency, by Foreign benefiting reduced XX basis net hedging while earnings $X.XX of share. points per

and per expenses, that items headwind $X.XX and year-on-year. a net were lower share of flow share Slide This non-operating impact sheet. to $X.X adjusted X benefit rate combined last diluted other delivered cash balance along of to for free included higher each of earnings result was count, flow by X another a versus $X.XX up neutral share had which earnings discussion Finally, a XXX%. from free robust We tax with offset turn conversion a per X% year-on-year, cash with our cash of year. quarter of second quarter flow Please billion,

and flow half tax performance last Our the million growth free free of approximately a QX, double-digit billion which of sales which year's traditionally of last $X.X strong increased by year, is billion paid was we timing driven an to versus by adjusted flow in mostly $X income, $XXX in income Through first the year. year-on-year cash offset QX. was cash payment in

Second quarter capital expenditures and million were $XXX approximately year-to-date. million $XXX

tracking end year, pace vendor capital projects. and to expected we the range billion, of billion of our of low the CapEx For currently $X.X $X the to given constraints full are

have repurchases. we shareholders of $X.X During million returned billion in cash the the to share Year-to-date, the dividends billion form we shareholders of repurchases $XXX of to $X.X returned and through combination share $XXX dividends of million. quarter, and

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

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

will position, cash capital pursue along while maintaining shareholders strategic strong Slide strong I to cash opportunities of to flexibility prior QX. X, Please will where to for summarize a to posted our which business activity business, capability, improving by with our return and organic I in financial our XX% growth with driven in Our impacts. the invest turn flow us net the Safety start continues year-on-year industrial debt performance provide and group business, Industrial generation and quarter, second structure. pandemic manufacturing

growth and fall starting gearing construction posted remains First, personal our protection business, industrial markets in solutions with we face, general end double-digit in and our strong. safety demand head, organic as

by portfolio, year's decline last year-on-year to as However, demand second than XX% this Within sales offset declined but an disposable business. due in overall X% growth in increased hospitalizations a safety our COVID-related declined. respirator our was our low personal sales respiratory single-digits sequentially resulting strong decline more for of COVID-related quarter organic respiratory portfolio

year demand disposable this through Looking into continued the XXXX. and balance ahead, we respirator of anticipate in deceleration

and basis increases Turning markets. Operating aftermarket, was XXX $XXX income second legal costs. as adhesives down was roofing million, growth margins quarter offset increases up the were operating by in last was year. granules, raw Safety logistics tapes leverage automotive Organic and and double-digit than in of abrasives, and sales XX% points by on electrical led Safety broad-based, Industrial's and materials, to versus rest XX.X%, growth year-on-year Industrial. ongoing more

truck semiconductor year-on-year OEM Moving to challenges was factors. in XX% organically compared light global and This to supply was auto business, XX% and increase led constraints. sustained our to several Transportation XX% car a which due chain growth builds. despite Electronics, grew outperformance up by from Organic

growth of and builds mix content we car year-on-year regions in per dollar in truck regional were vehicle. where have the high First, light

versus products Second, build XM rate. change a year-on-year of in increase in sell-in the

XM we gaining to platforms. continue vehicles, Lastly, apply to new onto penetration innovation

with in double business with digits TVs. along namely centers, and continued and semiconductor, electronics-related up factory devices, electronic data tablets consumer Our strength organically, was automation

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

and to rest Transportation year-on-year. Electronics. Turning Advanced of grew commercial each double the and materials, transportation solutions digits safety

year-on-year costs. driven was by margins Operating $XXX up logistic partially in XX% materials basis and XXX year-on-year. raw Second leverage strong which quarter operating sales by was up income growth, were over increases million, offset points XX%, on

Turning to year-on-year organic growth XX%. health procedure decline. sales care in second was by quarter sequential as Health of elective which delivered growth hospitalizations Care COVID-related improvements our continued Organic and business, driven volumes

on driven as or leadership business activity Sales us $XXX operating Operating which from Information in medical solutions. product solutions organically in grew strong and XX% mid-teens to wound year-on-year. Care's solutions over with our build continued pleased as filtration second the finally, the food digits, grew am new levels. year organically for care patient more up decline vaccine performance our for with XX.X%, and due up visits in safety doubled The points. And single to growth grew business COVID-related increased with was in food solutions. along clinician income Our approximately oral excluding have nearly Health demand year-on-year returned introduction. returns, growth filtration safety advanced I XXX demand the organically ongoing XX% disposable Health up of therapeutics, a strong care. by from margins helps high XX% demand. nearly along XX%, increased it in million, separation improving digits Acelity, water respirator pre-COVID basis were for ago Systems than purification business as quarter double biopharma quarter

partially growth, costs, Second materials quarter in driven margins raw leverage were by which logistics with on increasing increased by investments sales was growth. along and offset

sell-out our with trends sell-in most for XX% year-on-year business strong growth was channels. retail and organic quarter across second Lastly, Consumer

comparisons. this home year's improvement franchises, Command, in last high year and category-leading a This Filtrete continues top grew strong our Our organically laps comparison Stationery teens on Meguiar's. of from strong demand to continued ago. perform to as up many well, cohort strong organically double-digits of particularly and a QX business related business experience office business in

Solutions see work please. Scotch home sell-in trends tapes branded improved as We consumer and for office packaging in and demand and in strength to continue and back-to-school shipping for Post-it to with along return branded products, prepare retailers Scotch

and COVID-related ago, Our last Health was we operating our $XXX up And supply finally, Home strong up with safety and low as Safety for products business customers. improved lap Care impacts business double-digits our digits was versus of Consumer COVID-driven income from was discussion year organically were along turn margins comparison. year's raw in retail single for up Consumer's a Slide as investments XXX manufacturing, for and XX% more million, outsourced along down our guidance. sales costs goods leverage full hard basis than Operating merchandising to advertising with points year-on-year. XX%, year a increased from materials, XXXX of logistics offset Please growth. X

remains, global growth uncertainty market expect economic remain and to we While end strong.

will number go all world the be we be that ongoing of continue half with there the wrestles to items of see fluid impacts monitor. and year. the However, as second that are a COVID-related we as need Therefore, navigated to through

strength market people and in to For more anticipate expect ongoing returning continued students example, returning and volumes. procedure care workplace. home health the currently improvement we we Also, classrooms in to anticipate the elective sequential improvement

focused penetration second converge reduce and we innovation auto end with Next, remain production markets chip the This in as to well-known volumes constraints chip and by electronics continue driving is the global our customers. and These semiconductor in OEM highlighted on half. electronics supply. automotive year-on-year to limited supply expected X

respirators $XXX second negatively disposable for year-on-year. million we demand impact earlier, to mentioned million revenues half by As approximately expect wane $XXX and to

materials Turning and to raw logistics.

pressures. in we per anticipate half due or to of to for to full the rising share second year-on-year $X.XX noted, headwind a As $X.XX cost the earnings year $X.XX $X.XX

program mitigate price we We remains increases help And finally, track. to the last broad-based announced on headwind. are December including selling of this a number taking restructuring actions,

pretax to Organic earnings growth X% range these to in up raising versus be factors, in due challenges Thus, with range and account of second the to in per earnings year. million program, from to cash to we can half range of range performance, the X%. $XX ongoing to to of as now X%, along of for to guidance to a prior a Also, see, part XX% This $X.XX. now this full We As to XXX%. expect the share. anticipate global adjustment incur previous million persist taking XXX% charge a expect flow in year expected conversion you $XX.XX share growth prior first half $X.XX are chains, our of $XXX free primarily XX% range the materials and organic raw both of we for this is into per of are which X% against time. is we of estimated supply logistics, to some $X.XX our

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

First, I expect we health high the expected to continued Global improvement be anticipate reduction global across of elective sales in year-on-year of are continued digits year-on-year, to in most Relative car down single due care demand. $XXX while $XX to currently volumes year-on-year. to shipments global in parts disposable anticipate light decline smartphone truck million procedure million builds, world. respirators, be to a X% we and down

mentioned higher anticipating from a XXX logistic As prices, points we quarter third costs. points to year-on-year and headwind XX basis are operating earlier, materials basis margin raw of net selling of

do can flows team capital delivered more growth, execution, that costs cash half part progress. With productivity higher the higher being as strong has investments operational always $XX will in charge of with said, a $XX first program. a the do. quarter, QX To of On finally, defense we the this I pretax robust million enhanced there's sustainability and up, we in discussed, structure. front, And range in broad-based million proceedings which we previously wrap good expect and to our as an restructuring legal and growth a expect along including performance,

vendors and focused our to remaining our while daily for employees growth, to and thank I questions. perseverance delivering capital for and thank customers productivity want their dedication, and opportunities times. you prioritize these operating rigor on for for to their take uncertain now especially our greatest and your enhancing in we execution partnership sustainability, your customers, attention, will and ongoing With that, improving loyalty continue and We management. for our I

Operator

Instructions]. [Operator

of comes with Our Melius Davis first Research. the question line Scott from

Scott Davis

points the Mike I Slide in on I'm last my based on at just this points quarter. notes, Asia basis up XX XX into XX morning, It looking this Good like and be was little about, of price appendix, the price basis data. you And Monish. some headwind looks but can of us I might a color give kind What was -- real Pacific. quarter, the mix. -- think, know

So what's impacting price to there's issues some the comp dynamic, perhaps there.

it that. I'll leave at So just

Monish Patolawala

Yes. question. It's broad-based. right. little first but taking raising of a Scott. And bit everywhere. prices are Sure, it's as you're we time, I It's great But said, a

second that just much with the that get that we the do in said in To You've have fourth also extra seen we which volume, answer on guide price had the in quarter, rebates as the was on what is where a comp that. you, but second you when came question accounted your and strong quarter for the volumes this than pretty you we'll of drove in lower quarter, quarter. some piece But specifically pretty we from second on we issue one had It's the point, came and slightly hit thought. it. third reflect gave the year-over-year that

expecting were we So this.

Scott Davis

impact a sales was on just held an impact Or cost there was supply explicit logistics that on chain back supply it Okay. And more sales? chain a then issue? sales,

Monish Patolawala

a impact supply general, definitely the I to would exactly were we of market say, figure say, the to can. XM no hard they factories The out in and of I customers There was team different Scott, running can sure our job we impact, it's what an really was making as where in keep and trying marvelous larger care are taking quickly constraints has the best was. done would there. the as

ongoing to we inefficiencies as as just with as fluid through we customers more through to say deal have overall, have had piece, our second this done would our watch process. were this was thought Scott, raw half we'll I that process. out. whole plays how to material keep But this that best would But have So there not is we have itself an the

we're only the not this but the also seeing raw by and half. second shortages, markets end You're working some as us of just going material through keep impacted we to getting go

Operator

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

Joseph Ritchie

talk wondering durability the to guys you kind now forward. the XXXX-ish the in is this back a little like if about margins? Impressive Can of Health levels. this XX% kind like going back type of to a just bit baseline Care I'm We're quarter,

Monish Patolawala

Yes.

think, Joe, a I question. that's great

on we has also of up think time. at with all nice job The done year-over-year keep just while last start sharp increase this to QX I still basis of a looking investing year. you team drive by year really the saw the that the in is would of increase lot versus the business. a of that a I volume driven continuing margins QX

are would look does I it and has that materials like volume say specific costs, I answer the it remarks to logistics your forward, would down respirators volume -- As does the I think in still where and leverage starting down. I question helped, to to all comes be? business. out invest in to to prepared going my on Third, by got slow disposable turn said continue ultimately what hurt we we but raw

You're year-over-year a QX half. seeing million $XX $XXX the to impact basis million million $XXX to and second a of for on $XXX million

should of Care that most the -- hit many -- Health segment. Some

elective So we think we'll increase But and go is as keep secondly, how plays up. itself investments driving see where procedures we volume see out. I much hospitalizations

all in improvement. we Overall, say I it's team and going believe continuous be trade would So between a think to the that. I I,

to can. much invest efficiency and cost, right driving in we So we as we're the it's continuing investing to to reduce think as SG&A where driving productivity keep going place

Joseph Ritchie

to Maybe is that, helpful have just on following it that context. up

procedures maybe as Should in of did of elective As being offset mention and I fact, mix-accretive? issue. the elective think think you that's perhaps respirator we the about some right, have If, that just respirators? and business, that in potentially increased to Care offsetting are weakness are the going increasing procedures Health

Monish Patolawala

tell would about way I to got think connection a have don't between one-for-one you, we the I is, go electives as perfect it we electives. up, think

Joe. depends which the demand goes So of piece on it up,

it's So or believe I really and will as where us as hard give up perfect leverage of What it's getting have not. the mix generally procedures is disposable volume whether the an to you How more will respirator goes on down elective also volume you see up, answer go because and that. much picks it comes from impact.

it's one quantify exactly. me to So hard for a

Operator

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

Deane Dray

that to parts, assumptions the want Just for helpful the assumptions all quarter. for third year moving say Slide especially and is with X the your

appreciate So And allocation. first I those capital my all on question is specifics.

got the X.Xx shape, leverage. in net You good sheet balance

increased. buybacks, And still like count start looked there, be -- more restart not but Why would please? doing did it can You share you looks buybacks here? we

Monish Patolawala

Sure, Yes. Deane.

that's biggest first our from capital between is always allocation, for and of CapEx the we investing organically think I our R&D you, return told priority because priority As money. our

The second dividend. is

is second shareholders. we It to seen It's dividend increased You've up. XXrd that matters dividend. in row a our year priority. That's have our

believe part we the XM. priority third the where integrating is will nice a do the Our we're normally of integrating going and acquire being that. now, to Right from can that area a job team M&A, that and is in Acelity, are M&A busy we target we benefit doing

things. the of buyback. of Acelity near then of is share the number but And active of acquisitions allocation capital our size pipeline an last any have see a in don't discretionary we of use we So future,

the is and depend future for back as give be, depends on on And needs year-to-date, in we generate done capital would or we take. $XXX that. million, the the depends of cash continued going have that share on have what So the share what year, flow I as buyback that volume we will say uses to well

So posted we calls this say, would you we during do. much how as continue we'll I keep program decide and quarterly these

Deane Dray

day-to-day macro, Terrific. follow-up, commentary about regionally it any especially all July like helpful has seems as And would the then a how given be the started, changes, in here? just

Mike Roman

start the I execute the seeing. going that some of dynamics. we've I year. Dean, go And no say, as of few Monish to we to first about we're is outlined the that weeks half a the into say, I surprises expectation Yes, would would the July. as with we well continue second the of so number far, start team talked

the expecting uncertainties It market to are as half. end the and talked the global strength remain about look continue. will We fluid. macroeconomic we into We second

as We and we strong. generally health go world in in about the and we about care, procedures impact seeing expected the And uncertainty to geographies, where we're broad-based expect The broadly, that. continue continued We talk is increasing any second in the COVID it. seeing are it half. elective the this and half, disposable demand across areas seeing are supply. decline the that saw increases are improving in increase even talked and we more in home as on Industrial, there around growth remain respirator improvement, in cases first to respirator expect hospitalizations. globally, we There certainly -- we're areas we some

of one that things second going impact the geographically And across the half be so world. to can that's

expect pandemic-related COVID while we areas to So expect we stronger some -- overall plays decline, demand respirator we'll see demand as out. we

So how half. that world gives you a of bit of the around we little look view a second

Operator

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

John Walsh

clarification. curious QX if your kind in change you of the know through behavior look vary same growth-on-growth around organic to if price across for I And that as give seeing just question plan second by you any at of us inventory? commentary a what And then of in growth, if could the put have terms understand of increases portfolio the channel you're first you product I looking if any customer is, you're one, line. it Maybe at and QX. there? of obviously, product an order kind magnitude to wanted probably will in Was

Mike Roman

that's some Yes, fairly it seeing it's what the we've and -- John, inflation us focused, second talked has Monish to been I year. broad-based. to price on as would -- We price the say price about, get ongoing half in talked about, we're And in -- been taking through our implement takes help teams as inflation. offset changes gone and it ahead -- of challenge as inflation we takes time an are

would we go each to inventory how we beyond a expecting But stronger to raw fourth we're the look continuously about view demand a in we're measuring the specifically. visibility know that sets. what visibility third snapback snapback second channel asking clear course, is where get is. this start shortages, into it's today, get visible, -- with -- market levels and are and And We and that as of a to inventory. difficult that, of economy, they're are we're dynamic plays bit dynamics, aligning sell-out channel the where inventory appropriate chip uneven to visibility NXX in we We've market With say, areas, impacting on into level we the There broad-based It's see it's depend ongoing you in dynamics something assessing price see really we talked given quarter our where putting the and quarter, and every channel the impact. And right in demand, So on respirators we that fluid always our the quite semiconductor to to positive get it's marketplace, region volumes, ourselves. sell-in levels today. very I at some see world. are the a is price out as the on get in really production on inventories our if the hard half and going in the are of the in through that.

Operator

Instructions]. [Operator

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

Julian Mitchell

I we look to back suppose in to I it's the Industrial Safety aggregate QX try in of outlook. could your that if and just sales possible segment down and wanted circle because at year-on-year that respirators. be

the any wondered sequentially up implication think, perspectives QX, softer, that? on your business also, over. S&I rolls they're amount. XXXX, margin a good Just as the and were margins I respirator And in year-on-year

we for expect of quarters? few out play headwind sort should that So a to mix more

Monish Patolawala

Yes.

and Industrial. Julian, I think, on a great question Safety it's

to out volumes. the we And basis. million, year-over-year it $XXX in that could have up $XXX impact, a health answer to which question yes, first if part a range, your So to XXXX, respirator billion basis? a range be of of the $XXX have the we half, could higher there negative reminder, the said, we come just definitely to told $XXX be a And and revenue been million, as look end negative as specific a that down respirators used as doing go this we you to on year-over-year is of see What of As is at we to doing. care the on we disposable million due is demand million due in waned are answer has which where and is to I went XXXX. on hospital risk from of production approximately moving think second actively we been lower COVID parts, in industrial would is electives channel increase governments, disposable the which could to have $X.X hospitalizations we and you which different volume

of other Industrial as quite our face with of our growth Industrial, our our us seen with roofing mentioned and segments in and in abrasive in increase head portfolio safety is, whether whether The piece and we you've QX, Safety in in masks, business, I portfolio, few it's other a adhesives our seen respiratory business, have Safety granules.

aftermarket, out, term, is assumption see in economy current activity the how have those And the those seen as our and itself segments, depending automotive other on back. plays continues, you come will So growth that areas. industrial long increase. as should continued long markets all And

a I by To COVID as in we right, plays XXXX have answer the get how you're your benefited we think on got itself it's did going a 'XX, half, that in versus question out. second depending on and seen lot leverage the fluid second little Safety Industrial. to margin, across be we volume

in go. will volume lands on where half ultimately, an So where margins impact have second ultimately the

reserves logistics We third and cost working say will activity by second have the the is or in that up offset. -- in that invest on fees offset the industrial segment. 'XX 'XX, is one. increases, is growth, legal to last one broad-based continue what is going in goes taken, invest and much I are sustainability and because do productivity price And the how third in raws and especially growth, as segment. It's actively price then the of be we're one we that and ongoing to And we would that

So where put land. we to see how that's all going that together, are margins

Operator

line question comes of the from next Our Stephen with Tusa JPMorgan.

Stephen Tusa

you we trends? getting maybe sequentially, kind and is about of sequentially, XQ worse other of -- stuff to else about, X the talk Can kind what -- just you auto XQ do think than when X headwind the mask like of kind expect

Monish Patolawala

I So markets, Steve, end to everything feel just remain of the will I back say, we put strong. would total, context in in would

with to you're see we happens think going COVID. half second through I as volatility with what the get

to it procedures note. But a you world, So go to believe parts the see some quarter-over-quarter. items go We up continue of elective in that will of could couple down.

right, does to on X% if third in still in fourth would year-over-year show I an memory down say increase. the be And the projected Secondly, X.X% it's auto a quarter. is It's quarter. headwind, my down

impact the shipments an semiconductor it be on on that what to where where see there, out. will shortages I plays a happens lands Smartphone supposed We'll see and itself quantify are year-over-year basis. to tablets are also have benefited think down year-over-year also looks be were then basis, a hard a on And like basis. which last year, sequential sequentially. exactly to tremendously down but TVs, on what projected it and we'll

mentioned how overall, prudent that had prior we office together, now, we pretty year looks -- why school, at chain supply I question, But quarter. that when stationery I that right call and to ahead. to have retailers a impact. trends supply and Safety shortages out, year what continues. the versus us is we lot said as that's that to but we And could And You have have workplace, the the plays have there variability also onto there's said industrial world sell-in put that seeing on are depending of people kids the in you Industrial, a think all more X% like. put -- -- earlier. X% across go an second we where demand activity an the the momentum then increase in to in to as I on pandemic in currently, the people assumption But X% the That the seen planning for are good seen return are X%

Stephen Tusa

I up kind But be I half, the saying of there they’re at i.e. XQ anything second the a guess half XQ. think of seasonally, to lot think there's like. down, a of this mask high kind makes sequentially? semi guess pushing bit I end which from And the versus of are year a normally, is parts kind down sales because I seasonally, of in to sense shortages of moving and little the demand dynamic. better the XQ modestly range, seasonally first You're

and masks? So then of it's kind kind the of normal including seasonality

Monish Patolawala

That's we'll right, Yes. variability. Steve. is you There posted of a in But there. lot keep

Operator

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

Nigel Coe

Yes.

I but know year-over-year the and on do that's you peak? peak expect whether on in So those when on you cetera, raw sequential expect et when mats? raw the see a a that's food your based mats, Monish, FICO basis to whether on do or basis, don't purchasing, to inflation convention commodity

Monish Patolawala

one commodities, it's if asking So call. really hard a specifically I you're think on to

tell whether other seeing in and when $X.XX, what here some itself I be demand, but to et think, gave on recovery need has that our is to itself would supply $X.XX, into we commodities, also to the to out. and start passed. inflation. be we would $X.XX polypropylene, Where a that at we are that which labor all the outsourced For not ports, resins $X.XX have wrong will a all I a think it we supply pretty now in V-shape based -- in lot commodities there's peak? enough demand with stabilizes congestion that continued then of seen just until cost, you, may broad-based out, point, the strong are settling guided to And I And logistics There's example, to manufacturing headwind. first getting my guide cost to I increase been see the our you, view go has goods, is continue going in not cetera. of I -- chemical, tell

have seen months. up lot into to prices where inflationary. have remained heavier crude in the X strong year. has last gone we up had or gone We much rates Polypropylene Ocean the thought coming a heavy, have X than

when down. when start So hard for coming to and it it's back and us come really peak say, does it

what So we we've taken know.

of And a $X.XX, we had put come we factors with of to to that We $X.XX currently going our broad-based We've I've as know. that best everywhere which where guide where inflation But have up prediction in we these this. things is be. mentioned, are the we of increases we price to is think think go. taking have help said, could the offset all mitigation with

increasing yield. also are We

We which anticipation it get quarter, price see quarter, XX positive, price are of is the cetera. will be working basis means et in -- the so to to And with material our XXX suppliers to a third flat raw able we'll prices, And that inflation. headwind our versus fourth to should points then to raw. reduce be in we offset

Nigel Coe

helpful really That's explanation. Okay.

on I outlook. half second here think the I'll stick with you

legal half in year. You're second costs of calling the out costs, legal the defense

around that. number a give didn't You

concerned not also it's not Falls the of in assuming just litigation but you do announced? think necessarily. I'm that are you I'm how defense So about about back that that settlements and here costs the thinking earplug half? if just settlement the material, just magnitude Hoosick I'm

Monish Patolawala

Yes.

So of I Hoosick think first one part a the Falls the our was that reserve. settlement

a ongoing was will it's say part would I litigation. -- we -- calculus that already. we are So of the

the of this case get October It's in well of the with PFAS Q all for the coming we will got Arm at we up your use as on X should that update later we've look benefit, year. as an and you up. the cases. SEC the But of material there, a coming If in you trials day, all give that got and the Wolverine PFAS Combat filed file just

and that's is will cases we as as cases, we cost in ourselves these go the those would what for. what the for is to you So prepare fees. tell what increased that's spend being legal incurred I through is cost required defend And we

Operator

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

Andrew Obin

Just a sort of longer-term question.

strong in nonwoven global change you And landscape particularly do How term? are vis-à-vis it has sort key players, new terms post sort Asia XM of XM COVID? emergence historically, strategic sort think, of Does global of of players? position I capacity out of capacity very seeing in of longer for your about you think technologies. players

Mike Roman

we annual of we as Andrew. probably NXX -- least through rate of we respirators near By were peak basis. We saw billion on QX. X.X demand, as an XXXX. at a run term, built as -- And the Thanks, in end we went year, Yes. highlighted the the we you of in my capacity remarks, prepared I at additional know,

the we mean, emergency so year. demand quickly. lines into And And some that's changes peak. of And respond the come some comes the to of manufacturers you idling off build capacity them process we well up to their as capacity to next to Other pandemic. idle as think or see we'll I ready ramp well the in begin that for the COVID-XX. as be I can capacity

volumes. we personal be of and can the really in that's have normal capacity leader markets, is protective serving to And in times, idle times markets, so that we health that's surge our in a personal broader emergency. markets, the where be equipment industrial care in consumer serving to serving strategy and position our then and safety, a we So strategy manufacture for

be the we're the would governments we come of underway the first we position a That's it's to than that see we're commitments to efforts year. good supporting in that add, before to a of through better around half on ever their been as a through pandemic. I something globally to think I number have able respond to world following stockpile. And

the So next for that, world the better emergency, next the I think, prepares pandemic.

think respirator end it up depend. with we to we pre-pandemic. -- When We look above somewhere where it's at we'll up So will were going end are demand? going where to you

around As that. protocols serve we'll the be changing use world, aligned to are and well

-- brand We've really PPE around and and the position brand of in take leading position that a advantage world. strong. Our can will got be

got we've think I so well the aligned. And model

I available. that in will the capacity there's demand that. a both surge think of of be I we're said, think on ready like comes future that any kind we're How part I emergency. our for much And -- will depend

Andrew Obin

filters, of question was industrial and I this was I and capacity was A used actually. and by generate automotive, just term. incremental these expect if just guess was you go question brought is air technology into on longer adjacencies my That of wondering that the to broader sort global your lot this competitors more competition.

Mike Roman

that mean areas, we are I Andrew, like have leverage -- speak Yes, us. can nonwoven we other that other we in I air utilize products about that our capacity, do and filtration.

that for see there to So is much? that we some the safety, that air focus We and and we've can in in take know that take them uses with to to an continue capacity technologies one world. opportunity other for find the it don't do -- for around even is give of others innovative And we're world filtration our something us you that's of grow, capacity trends built a respond I other air the I'm Will broadly. filtration. a be how to of areas. How in that view advantage markets pandemic, able be personal perspective. do use we of and will will The that? that sure and those. that to

So the grow. to demand is continue going to

grow into demand -- demand time. the some degree, we forward as the -- So the to it will capacity over go will

Operator

line DeBlase the Deutsche from Bank. of comes question Nicole from next Our

Nicole DeBlase

down kind macro always color about noise what seeing you're of and guys in a of talk about just you things your pieces China Can businesses? falling across there's a So to lot different a with China by in respect of been helpful data. of lot give geography, kind little bit of you

Mike Roman

and Last grew Care the It's in second was market Sure, growth, our over we the And that Health first I of mid-single-digits broad-based Auto, Consumer Industrial saw some like of OEM us. portfolio. business, half. the broader we revenue. growing by had businesses. and quarter. highlighted general and as It's came our electronics. quarter, Nicole. for growth I abrasives Safety up our X% our the including Electronics, through growth for in was -- are led growth strong XX% we double-digit It and year, Transportation segments our industrial, there, an growth. XX% total saw important our

you world. start if the of recovered, And regions when get other the little around China look at you So remember, challenging. to half, a comparisons second ahead more

across with for we've through we expecting significant continue in I And areas -- we're air in basis. water We just serve see say, even we be opportunities growth our of see same the global like expect smallest business, our the focus, businesses consumer there. and a so to some on will areas Automotive penetrating business, there. challenge still little that comps, we would And a especially Chinese it's more to though see quality. year-over-year see a OEMs highlighted to our opportunities consumers

So it's maybe opportunities, comp, a challenging opportunities growth. -- more year-over-year we but see still for

Nicole DeBlase

lot And kind to follow-up price just boil XX% and it if that in Mike. of clearly Thanks, XQ I margin moving in to it. pieces just growth still incremental be investments, on Maybe range Got XX% could to down, expect here legal costs, with of do XQ? margin the There's second you half outlook. cost. a guys

Monish Patolawala

that just So the us biggest I Nicole, gives driver is would volume say, leverage.

efficiency basis. given on is so volumes well half the supply I to we've where The million across all there. continues as operating the million range land The $XXX So chain. to that's volatility, the productivity step uncertainty driving down be #X think question to going does $XXX with team the that's a out are respirators disposable second year-over-year on as drive rigor and you

that increases, be quarter, we should -- after going and our are We the price logistics the cost fourth offset the price in impact. and is raw to anticipation able

people our boil sustainability, indirects team. saying productivity hopefully, continued logistics finally, half execution snapping ability to to back, what pressure the a these good on we're depend and the would to margin going plus increase, second price of raw decision start then down price start through in to And by will on it productivity volume, are, lot much traveling. that as and XM -- the incrementals growth, how invest and depend will come on and I will the in our So the what down offset

up. But we've we come seen the that back. very volumes volumes of fees legal right didn't to through. one half back what the these snapping of first You've think back start and we been is disciplined And do to making go in, then what indirect continuing going those coming see in sure we the is ourselves as ahead as to you're cases last see spend protect

ultimately all factors will incrementals that that's the the be. impact what are So going to

Operator

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

Eitan Buchbinder

Can This is growth for as delivered in Kaplowitz. as year? Eitan half update your Buchbinder well outlook in in QX. you platforms the the growth group faster-growing on back how for performed QX the of Andy XX% the businesses on Priority

Mike Roman

The in priority growth Eitan. platforms growth. about well. strong second talked it We quarter Yes, also as QX, had

in over up were they XX% quarter. overall, So second

attractive. are our areas seeing strong that over And Now highlighted revenue are that growth of and $XXX dynamics million a I as group. market in a couple other of businesses sequential

be them, are came broadly about well. aggressively we Part that staying call priority and in XXXX, and spaces. platforms growth even platforms, we PGPs, market investment part attractive an these continue in growth growth areas the been as talking to So growth and of in through focused priority that performing priority important as investing we've

Eitan Buchbinder

That's helpful. about The year-over-year, XX% sequentially Group Electronics down X%. Business was but up

in constraints So could ongoing business the chip sequentially lead to QX? supply decline

Mike Roman

a half, pandemic. we for a the to the And business it our home of comps. the get I and we than we're -- teens dynamics, low as areas first challenging it's other think still some the end in markets. in up strong the second growth was say in as And supplies saw, I cleaning more And the I dynamic. business. half, Well, not -- went only see strength to add, We some were said, consumer the saw other as it's to we overall, would maybe going -- we would start one in the seasonality improvement we more really thing through also sequential

So other to the watch. dynamic that's

Operator

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

Mike Roman

growth, quarter taking ability continue wrap market cash invest our we in margins us. productivity strong, second I'm challenges by to Thank advantage you we joining And stay overcoming and and performance increased was executing in marked flow. growth, while sustainability. continuing broad-based well and on confident robust navigate our for trends will To up, COVID-XX focused impacts. supply of as to

Operator

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

3M (MMM) 27 Jul 212021 Q2 Earnings call transcript