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3M’s Industrial Segment Continues to Rise

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3M’s Industrial segment performance in Q2 2018

3M’s (MMM) Industrial segment is the company’s most significant revenue contributor with a revenue share of 37.5% in Q2 2018. The segment’s revenue share fell by 0.2 percentage points on a year-over-year basis. The segment reported revenue of $3.14 billion in Q2 2018, implying an increase of 6.8% on a year-over-year basis. In Q2 2017, this segment reported revenue of $2.94 billion.

The segment’s revenue growth was supported by an increase in volumes and prices. The favorable foreign currency translations accounted for 1.2% of the segment’s revenue growth, while the divestiture had an adverse impact of 0.1% on the segment’s revenue. Sales increased across all of its businesses under this segment led by separation and purification, advanced materials, abrasives, and industrial adhesives and tapes. Geographically, the growth was led by EMEA (or Europe, Middle-East, and Africa), the US, Latin America/Canada, and Asia.

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Industrial segment’s operating income and margin

The Industrial segment reported operating income of $724 million in Q2 2018 compared to $568.0 million in Q2 2017, an increase of 27.5% year-over-year. The segment reported an operating profit margin of 23.0% in Q2 2018 compared to 19.3% in Q2 2017, an increase of 370 basis points year-over-year. The segment’s operating income and margin increased due to higher revenue growth along with portfolio and footprint action.

Outlook

The Industrial segment revenue is expected to continue its upward trend through organic growth. However, the US dollar’s strength against the basket of currencies could have an adverse impact on the segment’s revenue and margin.

Investors looking to invest in 3M indirectly can invest in the iShares MSCI USA ESG Select ETF (SUSA), which has invested 3.5% of its portfolio in 3M. The fund’s other holdings include Microsoft (MSFT), Apple (AAPL), and Caterpillar (CAT) with weights of 5.5%, 4.2%, and 1.4%, respectively, as of July 24.

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