3M Expects Improvements In 2017
3M is poised to grow through prioritizing portfolio management, investing in innovation and business transformation, CEO Inge Thulin told investors at the annual outlook meeting on Tuesday.
“Over the last several years, we have taken significant actions to strengthen our technology capabilities, improve our portfolio and cost structure, and make us even more relevant to our customers,” Thulin said in prepared remarks.
Many of the past year’s actions involved the Maplewood-based manufacturer divesting of business groups it deemed to be “non-core.” Since 2012, the number of business groups has been cut by 40 percent—from 40 to 25.
Many of these sales have taken place over the past 12 months, such as 3M’s deal last week to sell off its identity management business for $850 million.
By selling off certain business units and combining others, Thulin anticipates the moves will pay off big in operational savings down the road. By 2020, 3M said its business transformation would deliver $500 million to $700 million in annual operational savings, as well as create a $500 million reduction in working capital.
When he took the helm of the company in February 2012, Thulin vowed to increase the percentage of 3M’s annual sales dedicated to research and development from 5 to 6 percent in five years. 3M expects to meet that goal in 2017, with spending on R&D reaching approximately $1.8 billion.
“Moving into 2017, we are continuing to increase investments in targeted growth opportunities,” Thulin said, “which will help us deliver another year of efficient growth and strong cash flow.”
3M predicted organic local-currency sales growth of 1 to 3 percent in 2017, a similar outlook to last year. (The company is projecting over $30 billion in sales for the 2016 full year). Free cash flow conversion of 95 to 105 percent is also expected.
The company is anticipating strong earnings per share of $8.45 to $8.80 compared to its earnings per share predicting of $8.10 to $8.45 last year. 3M’s guidance for next year fell in line with Wall Street’s prediction of $8.64 in earnings per share.
Following the outlook report, 3M stock fell about 1 percent in early morning trading from Monday’s close to $177.41.