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What Boosted 3M’s Safety and Graphics Segment Revenue in 1Q18?

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Performance of 3M’s Safety and Graphics segment in 1Q18

3M’s (MMM) Safety and Graphics segment accounted for 21.5% of overall revenue in 1Q18 compared to 20.2% in 1Q17, an increase of 1.3 percentage points to its overall contribution to 3M’s revenue. The segment reported revenue of $1.8 billion in 1Q18, an increase of 15.0% from $1.6 billion in 1Q17.

In the past year, this segment had seen some divestitures and acquisitions. The growth was primarily driven by 6.9% growth in the form of organic-local currency, and favorable foreign currency translation boosted revenues by 4.9%, while the acquisition revenue of Scott Safety from Johnson Controls (JCI) adjusted to the various divestitures in the segment increased by 3.2%. From the business point of view, all of its businesses grew led by personal safety, commercial solutions, and roofing granules. Geographically, all regions performed well led by the Asia-Pacific, the US, and EMEA (or Europe, Middle-East, and Africa) regions.

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The segment’s operating income and margin

The Safety and Graphics segment reported operating income of $483.0 million in 1Q18 compared to $399.0 million in 1Q17, a rise of 21.0% year-over-year. The segment reported operating profit margin of 27.1% in 1Q18 compared to 25.7% in 1Q17, an increase of 140 basis points year-over-year. The increase in operating income and margin were primarily driven by the higher revenue growth.

Outlook

The segment’s revenue is expected to continue its growth trend from organic growth. Acquisition growth will be supported by the Scott Safety acquisition. The favorable foreign currency could extend its support for another quarter.

Investors looking for indirect exposure to 3M can invest in the Vanguard Industrials ETF (VIS), which has invested 3.9% of its portfolio in 3M. The fund also provides exposure to Boeing (BA) and Honeywell (HON) with weights of 6.1% and 3.4%, respectively, as of April 25.

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