3M Company

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. At that time, if you have a question, please press the 1 followed by the 4 on your telephone keypad. It is recommended that you use a landline phone if you're going to register for a question. As a reminder, this conference is being recorded Tuesday, April 27, 2021. I would now like to turn the call over to Bruce Germelan, Senior Vice President of Investor Relations at 3M.

Thank you and good morning, everyone, and welcome to our first quarter earnings conference call. With me today are Mike Roman, 3M's chairman and chief executive officer, Monish Patalawala, our chief financial officer, along with John Banovitz, our chief technology officer. John is joining us today to discuss our new sustainability goals, which we introduced in February. Mike, Monish, and John will make some formal comments, then we'll take your questions. Please note, that today's earnings release and slide presentation accompanying this call are posted on our investor relations website at 3M.com under the heading quarterly earnings. Please turn to slide two. Before we begin, let me remind you of the dates for our upcoming 2021 quarterly earnings conference calls, which will be held on July 27th and October 26th. Please take a moment to read the forward-looking statement on slide three. During today's conference call, we will make certain predictive statements that reflect our current views about 3M's future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Item 1A of our most recent Form 10-K lists some of the most important risk factors that could cause actual results to differ from our predictions. Please note, throughout today's presentation, we will be making references to certain non-GAAP financial measures. Reconciliations of the non-GAAP measures can be found in the attachments to today's press release. And finally, as previously disclosed in our Form 8-K, dated March 22nd, 2021, 3M changed its accounting principle for pension and post-retirement plan costs in our measure of segment operating performance. The information provided herein reflects the impact of these changes for all time periods presented. Please turn to slide four, and I'll now hand it off to Mike. Mike?

Thank you, Bruce. Good morning, everyone, and thank you for joining us. The first quarter was strong for 3M, with broad-based organic growth across all business groups and geographic areas. Our team executed well and posted record sales, robust cash flow, and expanded margins, along with a double-digit increase in earnings per share. We saw encouraging improvement in many of our end markets, while others remained well below pre-pandemic levels. We also faced and addressed ongoing supply chain disruptions due to COVID-19, exacerbated by improving macroeconomic trends and winter storm URI, all of which are increasing the cost of doing business. I am proud of the way 3Mers have stepped up to manage and overcome these challenges, keeping our factories running, expanding our manufacturing capacity, and driving innovation for our customers across our businesses. We have found new ways to engage with customers and create solutions no matter where we are around the world, learnings we will take forward as we come out of the pandemic. Looking ahead, we expect continued strengthening of the global economy, but we anticipate the recovery to be uneven as the trajectory of the pandemic rollout of vaccines, and government policies evolve in different stages around the world. We are confident in our business as we navigate COVID-19 uncertainty. And with one quarter behind us, we are maintaining our full year guidance for organic growth, earnings per share, and cash flow. Our team remains focused on driving growth, improving operational performance, and delivering for our customers and shareholders. Please turn to slide five. Company-wide, total sales increased to $8.9 billion, with organic growth of 8% and earnings of $2.77 per share, up 27% year-on-year on an adjusted basis. Geographically, organic growth was led by Asia-Pacific, up 13%, with China up 32%. Growth in the Americas was 6%, with the United States up 7%, while EMEA grew 6%. We expanded our adjusted EBITDA margins to nearly 28%, with all business groups above 23%, and increased free cash flow to $1.4 billion, with a conversion rate of 86%. 3M increased our dividend in the first quarter, marking our 63rd straight year of increases. We also continue to build 3M for the long term and prioritize investments in growth, productivity, and sustainability. While we manage end market challenges related to COVID-19, we are investing to capitalize on global growth opportunities in healthcare, electronics, home improvement, personal safety, and other favorable market trends. This includes our priority growth platforms, which grew 10% in the quarter as we apply science to advance growing areas like automotive electrification and biopharma filtration. The fundamental strengths of 3M, our unique technology platforms, advanced manufacturing, global capabilities, and leading brands position us well to win in these markets into the future. We are accelerating digital strategies across three m and expanding our use of data and data analytics to better serve our customers and improve performance. For example, we are using new cloud based technologies to provide better insights into our global workflows from raw material purchase through product delivery. Which is helping us navigate the current supply chain challenges. We are stepping up our leadership and sustainability with significant new commitments that will bend the curve on carbon emissions water use and improving water quality. In a similar way, we are implementing a long term plan to advance equity and inclusion as we launch new scholarship programs and a new goal to create 5 million opportunities in stem education with initial efforts focused here in the twin cities. At the same time, 3M continues to help lead the fight against COVID-19 with 630 million respirators distributed in the first quarter. We're also providing our expertise as we engage with the Biden administration and governments around the world on how to better prepare for future pandemics. Overall, I am pleased with our performance in the first quarter as we remain focused on driving growth, improving productivity, and advancing sustainability. To provide additional insight on that last point, sustainability, I will now turn it over to 3M's Chief Technology Officer, John Banovitz.