3M Company (NYSE:MMM) UBS Global Industrials and Transportation Conference Call June 6, 2019 11:00 AM ET
Nicholas Gangestad - SVP and CFO
- Nicholas Gangestad - 高级副总裁兼首席财务官
Peter Lennox-King - UBS
- Peter Lennox-King - 瑞银集团
Okay. Good morning, everybody. My name is Peter Lennox-King. I'm one of the analysts covering the electrical equipment and multi-industry space at UBS. We're very excited to have Nick Gangestad here, 3M's CFO. And I think we'll just have a fireside chat, no prepared remarks.
好的。 大家早上好。 我叫Peter Lennox-King。 我是瑞银集团的电气设备和多行业领域的分析师之一。 我们非常高兴能有Nick Gangestad，这是3M的首席财务官。 我想我们只会在炉边聊天，没有准备好的言论。
That's right, Peter.
Let's dive right into it. So, Nick, would you mind starting maybe with a bit of an update on where you're seeing your businesses from a high level currently? Certainly, some of the work we've done on our site with UBS Evidence Lab has suggested incremental slowing across a broad swath of industrial end markets in not only Q1, but Q2 as well. Are you seeing anything to suggest otherwise or how are you seeing the quarter progress?
让我们直接进入它。 那么，尼克，您是否介意开始对您目前从高层次看到您的业务的位置进行一些更新？ 当然，我们在瑞银证据实验室网站上所做的一些工作表明，不仅在第一季度，而且在第二季度，广泛的工业终端市场也在逐步放缓。 您是否看到了其他建议，或者您如何看待季度进展？
Peter, I think one of the ways I can start to answer that is just to back up for a second of what we saw in Q1 and then put that on trust to what we're seeing now in Q2. First of all, in Q1, we had three markets in particular that were impacting us and we ended up with negative 1.1% organic growth in the first quarter. Those were China, automotive and electronics, those three collectively. They represent about 30% of the total company on an annualized basis, about $9 billion of our revenue.
Collectively, in the first quarter, they were down mid-single-digits, and that was even more of a downtick than we were expecting as we entered the year. As we're going in -- as we're going through the second quarter and what we're seeing is everything is progressing in aggregate as we expected. We took a conservative view of our guidance for the full year, guiding negative 1% to plus 2% organic growth for the full year. And our view is things are progressing as expected.
Some things are a little better. Some things are a little worse. Little better side, what we're seeing right now in the second quarter, I'd say electronics is just a little better than what we were anticipating as we enter the second quarter. And automotive, particularly automotive in China, I would say, is a little worse.
But on the balance, we're seeing things progress in aggregate as we've expected. Businesses such as our Health Care business and our Consumer business that I would say are less cyclical for us, both of those are progressing nicely as we expected and we expect both of those to see growth in line with what we've guided for full year growth.
总的来说，在第一季度，它们是中等个位数的中间位数，这比我们进入今年时的预期更糟糕。正如我们正在进行的那样 - 我们正在经历第二季度，而我们所看到的是一切都在按照我们的预期进行。我们对全年的指导采取保守观点，指导负1％至全年有机增长2％。我们的观点是事情正在按预期发展。
Okay, that's very helpful. And actually, maybe if we could just come back to electronics just very briefly. You -- a few weeks ago, you'd said you're continuing to see weaker growth in electronics, now it sounds like things are a little bit less bad. I think it's decelerating or--
好的，这非常有帮助。 实际上，也许，如果我们能够非常简单地回到电子学。 你 - 几个星期前，你说过你会继续看到电子产品的增长放缓，现在听起来情况有点不那么糟糕了。 我认为它正在减速或 -
Yes. So, we have still guided that our transportation and electronics business group that were expecting between negative three to flat growth for the full year. So, just to put things in perspective, we're not projecting a rebound, but we're just seeing things not quite as bad as what we're seeing through the end of the first quarter.
是。 因此，我们仍然指导我们的运输和电子业务集团预计全年负增长至负增长。 因此，只是为了正确看待事情，我们并没有预测反弹，但我们只是看到的事情并不像我们在第一季度末所看到的那么糟糕。
Okay, that's helpful clarification. And I know, and I apologize in advance, I know you're not in the habit of guiding to quarters. You've indicated a few times that your growth expectation for Q2 on an organic basis is probably somewhere in the negative 1% range. Is that still where you're coming out, two-thirds of the way through?
好的，这是有用的澄清。 我知道，我提前道歉，我知道你不习惯指导宿舍。 您已经多次表示，您对第二季度的增长预期可能在1％的负面范围内。 这仍然是你出现的地方，三分之二的通过？
Yes. While we're not planning to change our approach to being an annual guider to a quarterly, given where we were in the first quarter, we think it's prudent that we just give even clearer direction of what we're seeing in the current quarter. And what we're seeing in the current quarter, we've been seeing since April is it would not surprise us if we see a continuation of a very similar growth pattern that we saw in the first quarter.
First quarter down organically, negative 1%, and that it's very likely we could see growth similar to that in the second quarter. It's like down slightly, down to negative one. I would point out if that happens; we've always known that second quarter for us will be, by far, our toughest comp. We grew almost 6% organically in the second quarter of 2018.
And so from one perspective growing at a similar growth rate in Q2 against a much tougher comp, we see as a bit of a progression versus where we were in the first quarter.
是。 虽然我们不打算改变我们作为季度年度指导者的方法，考虑到我们在第一季度的情况，但我们认为谨慎的是，我们只是更清楚地指出我们在本季度所看到的情况。 而我们在本季度看到的情况，我们自4月以来一直看到，如果我们看到第一季度看到的非常类似的增长模式延续，我们就不会感到惊讶。
第一季度有机下降，负1％，我们很可能看到增长与第二季度类似。 这有点像下降到负面。 我会指出是否会发生这种情况
Right that make sense. Yes.
We've also talked about earnings per share that we're expecting in the second quarter. We anticipate that our underlying core business operations will deliver EPS very similar to what we had in the first quarter. First quarter EPS was $2.23, and we think the underlying quarter will be very similar.
But on top of that, we've also announced in April a restructuring charge, and so we anticipate approximately a $0.20 charge that we'll be taking in the first quarter -- in the second quarter that will also impact our second quarter results, and that earnings per share -- that impact of that roughly $0.20 restructuring charge is encompassed in our full year guidance of EPS that we've laid out.
我们还讨论了第二季度我们预期的每股收益。 我们预计，我们的基础核心业务运营将提供与第一季度非常相似的每股盈利。 第一季度每股盈利为2.23美元，我们认为基本季度将非常相似。
但除此之外，我们还在4月宣布了一项重组费用，因此我们预计第一季度将收取约0.20美元的费用 - 第二季度也将影响我们的第二季度业绩， 并且每股收益 - 大约0.20美元重组费用的影响包含在我们已经制定的EPS全年指导中。
Okay. Okay. And just keeping on the restructuring theme for a moment, the $0.20, that's all in Q2 or--
好的。 好的。 并暂时保持重组主题，0.20美元，这一切都在第二季度或 -
Virtually all of it.
Most of it and that's the equivalent of $150 million charge, correct?
That's exactly right.
And then when it comes to the phasing of the savings that you expect, I think you said $100 million in H2 this year and that annual run rate of, is it $200 million to $250 million or--
Yes, well, what we've said and this is what we continue to expect, we expect savings in the second half of the year of $100 million. On an annualized basis, we expect savings from these restructuring actions to save us between $225 million and $250 million. So, the balance, the remaining $125 million to $150 million of benefit, we expect that to fall into 2020.
是的，好吧，我们已经说过，这是我们继续预期的，我们预计下半年会节省1亿美元。 按年计算，我们预计这些重组行动可以节省2.25亿美元至2.5亿美元。 所以，余额，剩余的1.25亿美元到1.5亿美元的收益，我们预计会落到2020年。
Okay. Okay. So, you reach the full run rate next year within the year?
好的。 好的。 那么，你明年会达到全年的全运行率吗？
Yes, we will.
Okay. Okay, that's great. Is there any likelihood that the program got increased other than in terms of you might spend, booking [ph] production?
好的。 好的，那很好。 除了您可能花费的预订[ph]生产之外，该计划是否有可能增加？
There can always be minor tweaks to it, but right -- what we see right now is not a major change to that of like -- I think it's very much in the range that we've laid out. What would cause that to change is in the coming quarters, if we see a significant deterioration in the macro environment, that, for example, would be a triggering event which would cause us to say, are there even more actions we should be considering?
它总是可以进行微小的调整，但是对 - 我们现在所看到的并不是那种类似的重大变化 - 我认为它在我们已经规划的范围内。 导致这种变化的原因是在未来几个季度，如果我们看到宏观环境明显恶化，例如，这将是一个引发我们说的触发事件，我们应该考虑采取更多行动吗？
Okay. Okay. Okay, great. And staying on the growth theme maybe a little bit on the nearer term impact, do you -- I know, last year, when you started rolling out the U.S. Business Transformation, the U.S. ERP transformation, you saw some customers accelerate purchases.
And correct me if I'm wrong, but I think that might have been some of the headwind that you had in the U.S. business in Q1. So, they were drawing down their inventories. Have you seen that abate? Do you think you're through that impact now, the ERP pre-buy?
好的。 好的。 好，太棒了。 继续保持增长主题可能会对近期影响产生一些影响，你知道吗，去年，当你开始推行美国业务转型，美国ERP转型时，你看到一些客户加快购买速度。
如果我错了，请纠正我，但我认为这可能是你在第一季度在美国业务中遇到的一些逆风。 所以，他们正在减少他们的库存。 你见过那种消退吗？ 您是否认为现在正在通过这种影响，ERP预购？
Yes. So, in the United States, we did see a buildup of inventory in the channel in advance of our go-live in the United States. And as we progressed through the second half of 2018, we were seeing that inventory level come down very much like as we guided and expected.
As we went through the first quarter, we saw some additional drawdown of inventory in the U.S. channels like, for instance, in our industrial channels. Some of that we think is a residual of what we saw happening in the middle of last year as far as buildup of inventory in relation to our ERP go-live.
We think some of it is also just some conservatism about outlook for end demand for that, and it's very difficult for us to say how much of it is one versus the other. But we clearly see both of those as being part of what we saw as a drawdown.
Right now what we're seeing is if there's going to be a further drawdown in the second quarter, I think there's a likelihood -- more than a low likelihood, I think there will be some continued drawdown in the second quarter. I just don't think it will be as material as what we saw in the first quarter.
现在我们看到的是，如果第二季度会有进一步的缩减，我认为有可能 - 超过可能性低，我认为第二季度会有一些持续的缩减。我认为它不会像我们在第一季度看到的那样重要。
Okay. Okay. And given the severity of the destocking headwinds that you saw, mostly in the U.S., but also I recall China had severe destocking in automotive and a few other places. Is there a way that 3M can structurally change the speed with which you can react to changes, sometimes quite severe changes in demand that you see intra-quarter?
Clearly, I think some of the restructuring actions are designed around this. Are you implementing more automation in your production process to be able to scale up and down more quickly? Or is there anything you can share with us on that thing?
好的。 好的。 考虑到你所看到的去库存逆风的严重性，主要是在美国，但我还记得中国在汽车和其他一些地方严重去库存。 有没有办法让3M能够在结构上改变您对变化作出反应的速度，有时您在季度内会看到相当严重的需求变化？
显然，我认为一些重组行动是围绕这个设计的。 您是否在生产过程中实施更多自动化，以便能够更快地扩展和缩小？ 或者有什么可以与我们分享的东西？
Peter, part of our objective in our whole Business Transformation effort is to continue to get even closer to our end customer of understanding the ultimate demand there. And part of what we're deploying is giving us added insight there to give us more ability to see where inventories are in the channel and correlate that to what we see as expected end demand.
And our visibility there does vary by different geographies and by different market segments. As an example, in the Consumer business in the United States, we probably have our very best visibility there of seeing what's in the channel and what demand is going out.
In places like China, we certainly have less visibility of what's in the channel and what's -- what the end demand is. And so as we continue to work closely with our customers and with our channel partners, we're always trying to advance that to get better insight. But -- and I'm not sure it's something we'll ever declare victory on, and getting closer to our end customers is always part of our objective going forward.
在像中国这样的地方，我们对渠道中的内容以及最终需求是什么的肯定程度较低。因此，在我们继续与客户以及渠道合作伙伴密切合作的过程中，我们一直在努力推进这一目标以获得更好的洞察力。但是 - 我不确定这是否会让我们宣布胜利，而接近我们的终端客户始终是我们未来目标的一部分。
Right. Right. And how -- what drives whether you have a pretty good visibility or lower visibility? Is it customer relationships or technology or just cultural differences?
对。 对。 以及如何 - 是否具有良好的可见性或较低的可见性？ 是客户关系或技术还是文化差异？
Yes, I think all of those come into play there. Some parts of the world have more complicated supply chains where there are multiple levels of distribution partners that we're working with.
Some are more streamlined, but there's also sophistication of the technology that our distributors, our channel partners have and their ability to be sharing that information. And as we work with them, we increasingly are getting better and better visibility there.
Okay. Okay. On the re-segmentation effort, so for those who may not be familiar, 3M is re-segmenting from five reporting segments down to four, and so the question to you, Nick, is have you seen any customer or operational disruption as you go through that process? Or conversely, are you seeing benefits already in the relatively early days of the move?
好的。 好的。 关于重新细分的工作，对于那些可能不熟悉的人来说，3M正在从五个报告段重新细分为四个，所以对你来说问题是Nick，你有没有看到任何客户或运营中断 通过这个过程？ 或者相反，你是否已经在移动的早期阶段看到了好处？
First of all, Peter, we haven't seen any kind of disruption with our customers or our operations. It's -- the way we operate is not -- would not lead to that disruption like that occurring by us creating -- going from five segments to four segments. We've built these four segments around our vision of creating better alignment with our customers through our go-to-market models.
So, as an example, our transportation and electronics business group is really built around a spec-in model of solutions for our OEM customers. We have a retail channel that's largely around our Consumer business, the Health Care go-to-market model with our Health Care business, and we've built this to create some similarities of alignment on how each of those four businesses go-to-market that we think will create some efficiencies for us in how we process and do our activities with our customers in each of those channels.
So, right now, it's a little early to say that we're seeing any financial benefit for that. We're still working through that. But it was really aligned about how do we better align with the different models we use with our different customers.
首先，彼得，我们没有看到任何与我们的客户或我们的运营中断。它是 - 我们的运营方式不是 - 不会导致像我们创造的那样中断 - 从五个部分到四个部分。我们围绕着通过我们的上市模式与客户建立更好的一致性的愿景构建了这四个细分市场。
I see. And is the move fairly invisible to your customers, presumably?
In most cases it will be invisible to our customers. In some cases, we think our customers will see this creates even more alignment. Whereas before, I had to deal with these two parts of 3M, now I deal with one part because we've organized in a way that's better aligned with them.
在大多数情况下，我们的客户将无法看到它。 在某些情况下，我们认为我们的客户会发现这会产生更多的一致性。 以前，我不得不处理3M的这两个部分，现在我处理一个部分，因为我们的组织方式更好地与它们保持一致。
Right, right. Okay. So, moving a little bit farther out, in terms of the timing anyway, so given the company's had some top line challenges and the environment has been a bit difficult, that put pressure on guidance over the past several quarters, what indicators should investors be looking at to gain confidence both in this year's guidance but really in the long-term targets that you've put out in October? The starting point -- and its early days for a five-year target, but the starting point now is substantially below the midpoint of the long-term target.
是的是的。 好的。 所以，就时间安排而言，进一步向前移动，所以考虑到公司有一些顶线挑战，环境有点困难，这给过去几个季度的指引施加了压力，投资者应该采取什么指标？ 期待在今年的指导中获得信心，但真的符合你在10月份推出的长期目标？ 起点 - 以及五年目标的早期阶段，但现在的出发点大大低于长期目标的中点。
So, first of all, we have the three market segments that we've talked about that are all three down cycle and noticeably impacting our total company revenue. You see, as people work towards overcoming some of those challenges, first of all, looking of -- based on the guidance that we've laid out for 2019, our ability to deliver in line with that guidance and/or coming in on a higher, better end of that guidance, I think that can be one proof point that can -- I think can build confidence in our capability going forward to be delivering what we laid out last November. So, I see our delivery quarter-by-quarter this year as part of that confidence building.
And then going forward, I think it gets back to more of the underlying 3M business model around our Investing in Innovation, our fundamental strengths around science and technology, around manufacturing, our brand and our geographic capability and the ability that creates.
And more recently, we've talked about our 12 priority growth platforms, and that's been a bit of a change for us as we look about where we're allocating our research dollars, about how do we maximize the impact that's creating both for our customers and for our shareholders.
And so those are places that we have picked out as places where the markets are growing faster than normal, places where we think are the market is willing to reward science and innovation and advancements in technology there, places where we think 3M has the ability to be creating solutions for the future. So, some of those as an example are automotive electrification.
Our view is this is a very interesting time around automobiles of the future as more and more of the components are becoming digital or electronic, where we're taking our capabilities that we've built out often around the -- our electronic business and how can they be building relevant solutions in the automobiles of the future. So, that's one of our 12 priority growth platforms.
So, in the coming years, I think one -- some of the things people can look for is how much of an impact are those having. Are they delivering with the success that we're laying out? We laid out last November that we think there -- it's a -- our current revenue is approximately $1 billion in those 12 priority growth platforms, and we see them having the ability to be growing 10% to 15% in -- over the next five years. So, clearly, an outpaced growth to the rest of 3M.
因此，首先，我们已经讨论了三个细分市场，这三个市场细分都是三个下行周期，并且显着影响了我们的公司总收入。你看，当人们努力克服其中的一些挑战时，首先，根据我们为2019年制定的指导意见，我们有能力按照指导和/或进入更高，更好的指导结束，我认为这可以成为一个证据点 - 我认为可以建立对我们去年11月提出的能力的信心。因此，我认为今年的交付季度是信心建设的一部分。
我们认为这是一个非常有趣的未来汽车时代，因为越来越多的组件正在变得数字化或电子化，我们正在利用我们经常建立的能力 - 我们的电子业务以及如何他们能否在未来的汽车中建立相关的解决方案。所以，这是我们12个优先发展平台之一。
因此，在接下来的几年中，我认为一个 - 人们可以寻找的一些事情是那些产生了多大的影响。他们是否正在实现我们正在制定的成功？去年11月我们认为我们认为 - 这是一个 - 我们目前的收入在这12个优先增长平台中约为10亿美元，我们看到他们有能力在下一个增长10％到15％ - 5年。因此，显然，其他3M公司的增长速度超过了它。
Yes. And are any of those programs growing meaningfully above 10% to 15% or conversely, meaningfully below and--
得到它了。 当你考虑新市场的新店时，比如说，在2018年与过去几年相比，你现在将达到几乎一半的州，我想，在明年年底或今年，有什么变化的 意识水平的速度方面？ 从最近的过去看，似乎有些东西从品牌意识中得到了提升，或者概念比过去更快。 只是给我们一些你认为不同的观点吗？ 您的想法 - 因为在新闻报道中说这太棒了，所以，我只是对这些概念的意识水平的不同策略和不同的上升感到好奇吗？...
Some are growing meaningfully above, but I'd point out it's because they're at a very low baseline. So, as an example, one of them is around our Oral Care business, what we can do around clear tray aligners. And so that's clearly growing much faster, but it's on a very low base for us. And that's progressing exactly as we expected and for the ramp-up that we projected for the last two years for that opportunity.
Something like automotive electrification, we tend to measure that a bit more on what's the growing size of our order book because as we're working to find these technologies that are of relevance into the cars of the future, in many cases we're working to get spec in, and then production will start in another year or two, so we have a growing order book there.
But even the automotive electrification right now, that was approximately $250 million revenue in 2018 and it had been growing approximately 20% over the last two years. So, that's an example of something that is outpacing the 10% to 15% that we've been talking about.
And it's presumably one of the larger--
It's presumed -- we see it as -- it's one of the larger ones in that that we're laying out.
它被假设 - 我们认为它 - 它是我们正在布局的较大的那个之一。
Okay. And how big do you think the clear tray aligner opportunity.
We haven't expressed externally the size what that is. It's clearly a large market and we've been week-by-week adding cases, treatment cases there and finding a high degree of success, and we'll continue around that.
I think in the next year or so, you can probably see us start to say more about how big of an opportunity we see there. But right now in the first year, we're letting that just follow the path that we internally laid out.
Right, right. And how should we think about the margins on the priority growth platforms? Should we be thinking that these are accretive to margins in the segments in which these businesses find themselves? Or are they dilutive but you'll making up over time?
是的是的。 我们应该如何考虑优先增长平台的利润率？ 我们是否应该认为这些增加了这些企业所处的细分市场的利润？ 或者它们是稀释性的，但随着时间的推移你会弥补吗？
We don't typically comment on margins on a specific product line. However, I would say that the fact that these are 12 priority growth platforms, these are something that we see opportunity for new products that are at strong margins for 3M.
In the early ramp-up phase, can we see it being dilutive? Clearly, yes. But in the medium or long term, none of these are in the positions where we feel they're -- where we're having to live with lower than normal margins.
在早期的提升阶段，我们可以看到它是稀释性的吗？ 显然，是的。 但从中期或长期来看，这些都不在我们认为的位置 - 我们不得不以低于正常水平的利润生活。
Okay. Okay, great. And what's the -- you've mentioned some of the ways in which you consider whether a product or an opportunity should be a priority growth or not. But what's -- what are the actual hurdles for any given product, the clear aligner maybe as an example.
好的。 好，太棒了。 什么是 - 你已经提到了一些方法，你可以考虑产品或机会是否应该成为优先增长。 但是什么 - 任何给定产品的实际障碍是什么，明确的对准器可能就是一个例子。
Yes. So, I don't want you to think that we've overcooked it, but I'll just lay it out to you because I'd say there's some art and some science. And this is going to sound more like science, but there's clearly art to this, too.
First of all, it has to be part of a market segment that we see with attractive growth rates and something that over time will be a sustained growth rate higher than normal GDP or industrial production growth.
It has to be a market segment where we see the relevance of 3M technology making a difference in it, and something where we think we can be rewarded by that market for using our science to create advances, and it has to be something that we see sustainable, that it's not a quick win now, but then abates in two or three later, but something that has a longer term sustainability to it. So, those are several of the criteria we look through -- looked at when we are deciding on these 12 priority growth platforms
是。 所以，我不希望你认为我们已经过度了，但我会把它给你，因为我会说有一些艺术和一些科学。 这听起来更像是科学，但也有明显的艺术。
它必须是一个细分市场，我们看到3M技术的相关性在其中产生影响，我们认为我们可以通过该市场获得回报来利用我们的科学创造进步，并且它必须是我们看到的东西 可持续的，现在不是一个快速的胜利，但随后在两三个之后减少，但是具有长期可持续性的东西。 因此，这些是我们看到的几个标准 - 看看我们何时决定这12个优先级增长平台
So, a combination of high growth but long-term secular drivers, I suppose.
You're right. You're right. On a related note, research and development. We've had conversations and occasionally, we see the assertion that 3M is either overspending on R&D or is misallocating R&D dollars because the growth isn't what it could be or margins have hit peak. This is feedback that we get throughout.
How do you respond to those assertions? And is it something like, well, R&D both supports growth and supports margins or how do you maybe measure your returns on R&D?
你是对的。 你是对的。 在相关的说明，研究和发展。 我们进行过对话，偶尔也会看到3M公司要么在研发上花费过多，要么研发资金分配不当，因为增长不是可能的，也不是利润达到峰值。 这是我们贯穿始终的反馈。
Yes. So, I'll just take one step back and then jump into your question, Peter. So, 3M's business model is really built around innovation, about creating solutions where we use technologies to create solutions for our customers that -- and solving problems that just typically could not be solved. So, it's really at the heart of 3M's business model to be making these kinds of investments in research to be advancing science.
As far as the benefit that we as a company see over a period of time with this, it benefits multiple things. It does create the ability for us to grow faster than the market by creating those solutions.
And then -- and so we see it as having the ability to enhance our organic growth. There is a component of our R&D spending that also enhances our margins. The fact that we come up with new and improved versions of what we've created gives us the ability to sustain margins and, in some cases, enhance margins that if we weren't making that investment and refreshing the health of a product portfolio, we'd often be finding ourselves falling back into a more price-sensitive, more commodity status.
So, part of our investment model is to keep ourselves with innovative products and more out of that price -- more price-sensitive model. It also enhances our relationships with our customers.
By the fact that we are Investing in Innovation, investing in research, that creates a value for our customers where we enter into partnerships where we're being asked to help work with them to use our science and our technologies to create solutions that they are looking for. So, those are the number of things we look at.
As we looked over a period of time, we've also looked at where do we think it's working, where do we think it's not working. And this idea of refreshing the portfolio and enhancing our margin, that I would argue our evidence shows, it's clearly working.
In the cases of our ability to enhance growth, I'd say there's a mixed record there. Some places, it's more successful. Some, it's less. And places where we were seeing less success, that's what led us about 18 months ago to change some of our R&D prioritization to focus even more on these 12 priority growth platforms.
Because when I look over a long history of where we've created the most success and the ability to create outsized growth from R&D, it's often been around new platforms that we've established and that's where we've been seeing a shift in our R&D resources away from what I'll call one-off product development initiatives to more platform initiatives and seeing the shift in our R&D dollars more around these 12 priority growth platforms.
And that as the percentage of our total R&D spending, these 12 priority growth platforms are seeing multiple time -- they're consuming a bigger and bigger percentage of our total R&D investment. That's why you hear us talk about these 12 as being important to our future growth as a company.
是。所以，我会退后一步然后跳进你的问题，彼得。因此，3M的商业模式实际上是围绕创新，创建解决方案，我们使用技术为客户创建解决方案 - 并解决通常无法解决的问题。因此，正是在3M的商业模式的核心是在研究方面进行这些投资以推动科学发展。
然后 - 所以我们认为它有能力增强我们的有机增长。我们的研发支出中有一部分也可以提高我们的利润。事实上，我们提出了我们创造的新版本和改进版本，这使我们能够维持利润率，在某些情况下，如果我们不进行投资并提升产品组合的健康状况，则可以提高利润率，我们经常会发现自己又回到了更加价格敏感，更具商品价格的状态。
因此，我们的投资模式的一部分是保持自己的创新产品和更多的价格 - 更加价格敏感的模型。它还增强了我们与客户的关系。
而作为我们研发总支出的百分比，这12个优先增长平台看到了多个时间 - 它们占我们研发总投资的越来越大的比例。这就是为什么你听到我们谈论这12个对我们未来公司发展的重要性。
Right, right. Okay. And do you think 3M today or through the cycle going forward, the various economic cycles, do you think the company can grow at a multiple of industrial production? One and a half times industrial production is often the number that I think of as 3M's ability to outgrow.
是的是的。 好的。 您是否认为3M今天或通过未来的周期，各种经济周期，您认为公司能够在工业生产的多重增长中发展吗？ 工业生产的一倍半通常是我认为3M能力不断增长的数字。
Yes. And when we guided our five year -- our last five-year guidance last November, we started with an assumption of economic growth somewhere in the two to three percentage, and the fact that we feel we can grow 100 to 200 basis points faster or a multiple of IPI of roughly 1.5 times.
We think what we're investing in and around innovation, the changes that we've been making to our portfolio through prioritization, our enhanced go-to-market model with how we've recently organized the company, our Business Transformation efforts, we see all of those as contributing to our ability to, over time, outgrow the market, and there's nothing we're seeing today that takes us off that view that we see our potential to outgrow the market.
是。 当我们引导我们的五年 - 我们去年11月的最后一个五年指导时，我们开始假设经济增长在2到3个百分点，并且我们认为我们可以更快地增长100到200个基点或 IPI的倍数约为1.5倍。
Okay. Okay. Now, turning maybe a little bit from the organic to the inorganic. M&A and capital allocation become a larger piece of -- or a larger priority for 3M over the past few years. And the strategy really appears to have changed a little bit from a large number of small deals or a fairly large number of the small deals to a smaller number of larger deals.
And I have a couple questions around this. One is how are you seeing returns on invested capital as your approach has changed? Our deals today at a certain vintage -- are your returns better than they were on deals that you did five or 10 years ago at a comparable time?
好的。 好的。 现在，从有机物到无机物可能有点转变。 在过去几年中，并购和资本配置成为3M的一大部分 - 或者更重要的一部分。 而且这个策略似乎已经从大量小额交易或相当多的小额交易变为少量大宗交易。
我对此有几个问题。 一个是当您的方法发生变化时，您如何看待投资资本的回报？ 我们今天的交易是在一定年份 - 您的回报是否比您在五年或十年前在同等时间做的交易更好？
Yes, Peter, I like to -- I often like to look at things at a longer perspective. So, thanks for asking the question on -- versus five or 10 years ago. So as you had mentioned doing fewer larger deals, where we have been is this has not been an abrupt change. This has been a gradual movement over the course of many years, that the average deal size of what we were doing 10 years ago under $1 billion, what we've been doing five years ago, four years ago, they average over $1 billion and more recently, doing the two deals that we've announced this year averaging almost $4 billion.
So, that's been a progression that we've been working on and anticipating over probably the last decade of how we want to be shifting to fewer larger deals. So, what's changed in our own capability? There's a period of time early in that 10-year period where we looked at -- as we're doing many of these smaller deals, where we were not getting the kind of trends that we were projecting, and some of that had to do with our own internal capability about how we were integrating these, and that led to us changing our strategy and approach in integration, where we created a central stronger integration management office that controls many of the integration steps that we go through as we bring this deal in.
So, if you would ask me to compare a deal that we were doing eight years ago to a deal today, eight years ago, I would have said there is risk in the cost synergies that we have laid out that my own experience back then was saying, I need to hedge down some of these cost synergies that we're projecting because this experience shows that we're not going to successfully complete all of them.
The experience in deals that we've done in the last four or five years causes me to take a look at those and say we will absolutely deliver the cost synergy, that the process has been -- has grown that I have a high reliance on what we will do there and with a high degree of success.
As far as the returns that we've been seen, if I look over the last four or five deals, we typically want a deal to be generating at least its cost -- our cost of capital by the fifth year, and that's been very typical of what we've done over the last four or five years of where we've been investing in Capital Safety, Scott Safety, our Membrana acquisition and most recently, our Acelity acquisition that we expect to consummate in the second half of this year. So, all of those have been very similar in that and delivering to expectations of what we're expecting. So on that front, I'd say there's been very, very little change.
是的，彼得，我喜欢 - 我经常喜欢从更长远的角度看待事物。所以，感谢你提出问题 - 相对于五年或十年前。因此，正如你所提到的那样做更少的大型交易，我们一直在这里，这不是一个突然的变化。多年来，这是一个渐进的过程，即10年前我们所做的平均交易规模低于10亿美元，这是我们五年前，四年前所做的，平均超过10亿美元，最近，做了我们今年宣布的平均近40亿美元的两笔交易。
所以，这是我们一直在努力的进展，并预测可能是过去十年我们希望如何转向更少的大型交易。那么，我们自己的能力发生了什么变化？在我们看到的10年期间的早期有一段时间 - 我们正在做很多这些较小的交易，我们没有得到我们预测的那种趋势，其中一些必须做凭借我们自己的内部能力，我们如何整合这些，这导致我们改变了我们的集成战略和方法，在那里我们创建了一个中央更强大的集成管理办公室，控制我们带来这笔交易时经历的许多集成步骤在。
至于我们已经看到的回报，如果我查看过去四五次交易，我们通常希望达成协议至少产生成本 - 我们的资本成本到第五年，这是非常的我们在过去四五年里一直在投资资本安全，斯科特安全，收购Membrana以及最近收购的Acelity，这是我们在今年下半年完成的典型事业。 。因此，所有这些都非常相似，并满足了我们期望的期望。所以在这方面，我会说变化非常非常小。
That's it, great. And the decision earlier -- well, it was last month; to reduce the buyback and scale back on CapEx for this year, the announcement really came in conjunction with the Acelity deal. How much of that decision was driven by Acelity, well, by your acquisition of Acelity? And how much of -- maybe on the CapEx side was driven by the growth challenges that you're seeing in the environment?
就是这样，很棒。 之前的决定 - 好吧，这是上个月
So, in April and early May, we announced a couple of changes in capital allocation for the full year. I'll take the second part of it first on from a CapEx spending. We had originally been guiding CapEx for the year between $1.7 billion at $1.9 billion. We then moved that down to $1.6 billion to $1.7 billion. That is really a function of the slower growth environment.
That's really the only thing behind that roll down in CapEx, but there were some things, as we looked at our CapEx spending with the lower growth expectation, we just felt it would be wise to be deferring some of these capacity expansion, capital investments until we are in a stronger growth position.
In terms of share buyback, at the time that we announced Acelity, we had been in an expectation that we would deploy between $2 billion and $4 billion of capital this year to share buybacks.
We then moved that down to $1 billion to $1.5 billion. That's really 100% a function of our decision to be acquiring Acelity and because -- and let me explain that a little more. Our approach around share buyback and the amount of capital that we're deploying to it is twofold.
First of all, we're at any given time looking at our view of the intrinsic value of the company and how we see our share price trading. And then further below intrinsic value that we see our share price trading, we will increase our share purchases, the more it gets closer to our view of intrinsic value, we will scale that back.
And as you look at our trading pattern over that capital allocation to share buyback over the last four or five years, you can see that ebb and flow based on that relative, but it's also impacted by other draws on capital where an M&A deal can have the ability for us to scale back share repurchases.
So, right now, we're in a position where we have more capital being deployed to M&A in the second half of the year, which is causing us to take a slower, more cautious path on share buyback.
Absent that other call on capital for M&A, as we digest this, then we see ourselves resuming the normal approach with share buyback, which is based on the relative valuation.
然后，我们将其降至10亿美元至15亿美元。这真的100％是我们决定收购Acelity的一个功能，因为 - 让我解释一下。我们围绕股票回购和我们部署到它的资本数量的方法是双重的。
Great. And one of the -- one of my last point of question on capital allocation is we've heard some rumblings about the dividend. How committed are you to the dividend at the current level, where you see -- to grow the dividend. Maybe you can address that a little bit.
非常好。 其中一个 - 关于资本配置的最后一点问题是我们听到了一些关于股息的问题。 你如何致力于目前的股息，你看到 - 增加股息。 也许你可以解决这个问题。
Yes. In November, I laid out our priorities around capital allocation that over the course of the next five years, generating $70-plus billion of deployable capital. And then our first priority is investing in the organic business, investing in CapEx, investing in research and development. That remains our highest priority.
We had a second tier of priority, and that's around dividend, that we expect our dividend to grow in line with earnings over time. And we've had a track record of over 100 years of paying a dividend and I think its 61 years of increasing that dividend each year. And so that's second-tier priority.
After those priorities, we still see approximately 40% of our deployable capital remaining for what we call more discretionary capital, and that's what we'll put into share buyback or M&A.
And part of what we communicated in November is between those two, we have a bit of a bias if we can find the right opportunities for more to M&A than share buyback. And so as I think about our overall capital allocation plans, I put them in that order of priority for us.
And so if they were to become a more constrained cash environment for us, it would probably have more impact on that bottom category of M&A and share buyback than it would have an impact on the top two categories of organic investment or our dividend.
Great, great. Shifting gears maybe to a less fun topic for you, but PFAS. You know they're coming. I'm sure there's frankly not a huge amount you can tell us about the PFAS litigation, but I do have a few things that, I think, maybe you should just help distinguish for people.
There are a couple of different pieces here in terms of litigation. There's -- there are suits around your manufacturing of the product and then suits around use of the product itself. And maybe you could address how you're addressing both of those two pieces because they are fairly distinct.
很棒很棒。 换档可能是一个不太有趣的主题，但PFAS。 你知道他们要来了。 我敢肯定坦白地说，你可以告诉我们关于PFAS诉讼的巨额金额，但我确实有一些事情，我想，也许你应该帮助区分人。
在诉讼方面，这里有几个不同的部分。 有 - 适合您的产品制造，然后适合产品本身的使用。 也许你可以解决你如何解决这两个问题，因为它们是相当不同的。
Yes, yes. Yes, they are, Peter. And let me just start out by saying something just about the philosophy about this that 3M does take seriously our responsibility to our customers, to our employees, their families and to the communities in which we operate. So, that's part of our overall guiding principle as we're looking at where we are with PFAS right now. And so I just want to make people aware, this is a responsibility we take seriously.
In -- from the 1950s until the early 2000s, we manufactured long-chain PFAS, a compound that tends to not break down very quickly in the environment. We manufactured that in five manufacturing sites in the world, and we've had settlements with different government agencies around reducing the amount of this particular compound in groundwater to make -- to ensure that the drinking water is not containing that particular compound, and that first started with the settlement with the state of Minnesota early in 2018, $850 million settlement there.
And then over the last year, continuing litigation and settlement discussions with the four remaining manufacturing sites where, over this time, we manufactured. That resulted in us in the first quarter taking -- of 2019, taking a $235 million charge that we believe is our best estimate of our liability around litigation and environmental matters for all of our manufacturing sites.
What it does not encompass is litigation involving cases where, after we've manufactured this product and there's places around the world where we've manufactured -- where we've sold product containing PFAS and then that has been -- found its way into the environment. And our -- look, what we have shown as a reserve -- taken as a reserve, does not show a liability there.
At this point, we don't think it's something that we can assess as both probable and estimable. And as these litigations proceed, we believe we'll be getting into a position where we can better assess how probable a liability there is, and if it is probable, what we think is the likely liability -- a better estimate of the liability.
But right now, we just don't see ourselves in that position and we think it could take several quarters before we are in a position where we think we'll have better clarity on whether there is a probable and estimable liability.
从20世纪50年代到21世纪初，我们制造了长链PFAS，这种化合物在环境中不会很快分解。我们在世界上的五个生产基地制造了这个产品，我们与不同的政府机构进行了定居，围绕减少地下水中这种特殊化合物的含量 - 确保饮用水不含有特定的化合物，首先是在2018年初与明尼苏达州达成和解，那里有8.5亿美元的和解。
它没有包含的诉讼涉及一些案例，在我们制造了这种产品之后，我们已经制造了世界各地 - 我们已经销售了包含PFAS的产品，然后又已经进入了环境。我们 - 看看，我们作为储备所显示的 - 作为储备，并没有在那里表现出责任。
在这一点上，我们认为这不是我们可以评估的可能和可估计的东西。随着这些诉讼的进行，我们相信我们将进入一个可以更好地评估责任可能性的位置，如果可能的话，我们认为可能的责任 - 更好地估计责任。
And is part of the complexity on that side trying to determine where the liability sits, whether it's with 3M or the other manufacturers or your customers? Is it that--
并且在这方面的复杂性的一部分试图确定责任在哪里，无论是与3M或其他制造商或您的客户？ 是那个吗 -
That is part of the complexity in this. That is because unlike our own manufacturing where we were the only defendant, almost all of these other cases involved multiple defendants.
Right. Right. And I suppose there's used and disposal and multiple issues on that side of things. Well, maybe just with the two or three minutes we have remaining, Mike has been pretty clear that he has four priorities for 3M to build around: innovation, transformation, people and culture and portfolio management.
I think unless I've missed some of my questions, the only one of these we haven't addressed is people and culture. And maybe it's a good one to end on because it's forward-looking over a long period of time. But what, in your opinion, is changing on the culture front at 3M? And/or what you think needs to change? And how will the culture of the company will be different than five or 10 years' time?
对。 对。 而且我认为在这方面有使用和处理以及多个问题。 好吧，也许只剩下我们剩下的两三分钟，迈克已经非常明确地表明他有四个优先事项要求3M建立：创新，转型，人员和文化以及投资组合管理。
我想除非我错过了一些问题，否则我们没有解决的唯一一个问题就是人和文化。 也许这是一个很好的结束，因为它在很长一段时间内具有前瞻性。 但是，您认为在3M的文化方面正在改变什么？ 和/或你认为需要改变什么？ 那么公司的文化将如何与五年或十年不同？
So, as Mike Roman laid out these four priorities, three of them are very closely aligned with what already had been priorities in the company around innovation, transforming or Business Transformation in our business processes, managing our portfolio.
As Mike took over as CEO, I believe part of what he looked at is to see all of these things aren't going to happen if we don't create an environment in which we have people growing, developing and a culture that supports all of this happening.
So, part of what Mike's doing as CEO and paying attention to this fourth priority from people and culture is looking at what is it we need about our people developing and what is it we need about our culture to ultimately be able to make all of our other strategies successful. So as an example, part of our culture is one where we're highly, collaborative culture, right, and that creates many good attributes in how we operate as a company, that we have thoughtful discussion and engagement from multiple dimensions to make sure 3M comes up with the very best solution.
As we look at where we're going as a company, we also want to make sure the very things we're good at in our culture and the way we develop people don't end up becoming a weakness as well. So, one of the downsides of a collaborative culture can be how quick are we to respond, how agile are we? So, part of our process in the last several months has been defining parts of our culture that we want to continue to keep and develop and what are parts of our culture we want to take and move to a competitive strength for us.
So, as an example, creating a culture that's very focused on our end customers, and how do we create our culture that supports an environment in 3M that's always focused on our end culture? How do we create a culture that supports people being agile and being quick to respond the business conditions when we need to?
Those are examples of what we're working on in our culture to take what we think is a strong culture and move it even to a more competitive or zone in the next five or 10 years.
Great, great. Well, with that, I think we're out of time.
Great. Peter, thanks for the questions.
Thank you very much for having us -- for coming here.
非常感谢你拥有我们 - 来到这里。
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