How 3M Makes Money

3M Co. (MMM) is a diversified global company that manufactures a wide range of products, such as adhesives, building materials, insulation, lubricants, tools, medical supplies, electronics components, cleaning supplies, and office supplies.

Its products are sold under a number of brand names including Scotch, Post-it, Nexcare, ACE, Command, and many more. The company distributes its products directly as well as through wholesalers, retailers, and online.

3M faces global competition from companies in a broad range of industries, including transportation, healthcare, electronics, and consumer goods. Its main competitors include General Electric Co. (GE), Emerson Electric Co. (EMR), Honeywell International Inc. (HON), Owens Corning Inc. (OC), Avery Dennison Corp. (AVY), and Danaher Corp. (DHR).

3M's Financials

3M released in April 2023 its financial results for Q1 of its 2023 fiscal year (FY), the three-month period ending March 31, 2023. Net income decreased by 24.9% year over year (YOY) to $976 million. Net sales, the company's revenue metric, was $8.0 billion, decreasing 9% compared to the year-ago quarter. Total operating income, which 3M uses to measure profit in its individual business segments, decreased 24.4% YOY to $1.2 billion.

The decrease in performance is due to a decrease in sales across every business segment. 3M attributes this specifically to declines in  personal safety; industrial adhesives and tapes; closure and masking systems; smartphones, tablets, and TVs, as well as headwinds from supply chains, and carryover costs from raw materials, logistics, energy cost inflation, and investments.

3M's Business Segments

3M's operations are organized into four separate business segments: Safety and Industrial; Transportation and Electronics; Healthcare; Consumer. The company provides a breakdown of net sales and operating income for each of its four segments. Sometimes more than one business segment will receive credit for the sale of certain items.

3M provides an elimination of this "dual credit" in order to reconcile individual segment financial results with its companywide financial results. The company also reports certain special items not allocated to its business segments in a separate corporate and unallocated costs category.

Safety and Industrial

3M's Safety and Industrial segment generates revenue through the sale of products related to workplace safety and industrial work settings. Some of those products include industrial abrasives, autobody repair solutions, electrical products and materials for construction and maintenance, structural adhesives and tapes, various personal protective equipment, and more.

The segment's net sales in Q1 FY 2023 decreased 8.9% YOY to $2.8 billion, comprising about 34.6% of 3M's total net sales. Operating income decreased to $601 million, decreasing 4.1% compared to the year-ago quarter. The segment accounts for approximately 48.4% of total companywide operating income.

Transportation and Electronics

3M's Transportation and Electronics segment offers products related to the transportation industry and for certain electronics applications. Those products include attachment tapes, films, sound and temperature management for transportation vehicles, and large-format graphic films for advertising.

The segment generated net sales of $2.1 billion in Q1 FY 2023, down 12.4% compared to the year-ago quarter. It accounts for about 25.5% of total net sales. Operating income for the Transportation and Electronics segment dropped 36.6% YOY to $294 million, accounting for 24.7% of the total across the company.

Healthcare

3M's Healthcare segment makes and sells various health-related products and solutions, including food safety indicator solutions, healthcare procedure coding and reimbursement software, dentistry solutions, filtration and purification systems, and skin care.

Net sales for the segment decreased by 5.5% YOY to $2 billion in Q1 FY 2023, accounting for 25% of companywide net sales. The Healthcare segment's operating income decreased 19.1% YOY to $360 million. It accounts for about 30.2% of 3M's total operating income.

Consumer

3M's Consumer segment offers consumer products related to home maintenance and do-it-yourself (DIY) home improvement projects, as well as office supplies. These include home cleaning products, retail abrasives, paint accessories, braces, supports, and consumer respirators.

The segment generated net sales of $1.2 billion in Q1 FY 2023, down 8.9% compared to the year-ago quarter. It accounts for 14.8% of 3M's total net sales. The Consumer segment's operating income decreased 18.3% YOY to $179 million, comprising 15.1% of companywide operating income.

3M's Recent Developments

In May 2023, 3M announced its plan to invest $146 million to advance capabilities in biopharma filtration technology. The investment includes facility and equipment improvements and the addition of 60 employees in its manufacturing facilities in Europe. The goal of the endeavor is to help its biotech customers innovate therapies to use in the treatment of rheumatoid arthritis, multiple sclerosis, and certain cancers.

In May 2023, 3M announced a joint development agreement with Svante to develop and produce carbon dioxide removal products. The goal is to achieve zero net emissions and reduce global warming with these products.