3M India

Disappointing Q4

May 29, 2019 06:05 IST capital market

3M India is the flagship Listed Company of 3M Company, USA in India.

3M Company, USA holds 74.99% equity stake in the Company and is a diversified technology and science company with a global presence in Industrial; Health Care, Consumer, Safety and Graphics, and Energy sectors. It is among the leading manufacturers of products for many of the markets it serves.

Most of its products involve expertise in product development, manufacturing and marketing. The company has manufacturing facilities in India at Ahmedabad, Bengaluru, Pune and has a R&D Center in Bengaluru. As at March 2016, the company had employee strength of 1,388 personnel.

Its products are used in wide range of industries

The companys products are used in wide range of businesses. These are Abrasives, Automotive, Casting & Splinting, Dental, Filtration, Food Service & Hospitality, Hand Hygiene, Marine Maintenance and Repair, Medical Device & Optical Components, Orthodontic, Painting Equipment & Supplies, Patient Monitoring, Safety Products, Securement & Immobilization-Dressing Securement, Skin & Wound Care, Sterilization Monitoring, Surgical Solutions, Tapes & Adhesives, Vascular Access and Wire & Cable.

On consumer side it serves segments such as Home, Personal Health Care, DIY, Decorating and Organizing, Student, Office and Crafts.

Broadly it serves Automotive, Commercial Solutions, Communications, Design & Construction, Electronics, Energy, Health Care, Manufacturing, Mining, Oil & Gas, Safety and Transportation.

The company managed its operations in five (5) operating business segments: Industrial; Health Care; Consumer; Safety and Graphics; and Energy. Its five business segments bring together common or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of business resources. These segments have worldwide responsibility for virtually all 3M product lines.

3M products are sold through numerous distribution channels, including directly to users and through numerous wholesalers, retailers, converters, distributors and dealers in a wide variety of trades in many countries around the world.

Quarter Consolidated results

In March 2019 quarter consolidated sales grew 3% to Rs 742.85 crore. OPM fell 790 basis points to 13.8% which saw OP fall 34% to Rs 102.74 crore.

Other income fell 70% to Rs 2.47 crore and interest cost fell 54% to Rs 63 lakh. After providing for depreciation (Rs 10.78 crore against Rs 10.84 crore), PBT fell 38% to Rs 93.79 crore.

As taxation fell 39% to Rs 33.48 crore, PAT fell 38% to Rs 60.32 crore.

FY 2019 consolidated results

In FY 2019 sales grew 11% to Rs 3016.82 crore. OPM fell 60 basis points to 17.8% which saw OP rise 7% to Rs 535.59 crore.

Other income fell 18% to Rs 36.83 crore and interest cost fell 45% to Rs 1.12 crore. After providing for depreciation (up 1% to Rs 43.76 crore), PBT grew 6% to Rs 527.54 crore.

As taxation grew 6% to Rs 184.39 crore, PAT grew 6% to Rs 343.15 crore.

Industrial segment

The Industrial segment serves a broad range of markets, such as automotive original equipment manufacturer (OEM) and automotive aftermarket (auto body shops and retail), electronics, appliance, paper and printing, packaging, food and beverage, and construction. Industrial products include tapes, a wide variety of coated, non-woven and bonded abrasives, adhesives, advanced ceramics, sealants, specialty materials, closure systems for personal hygiene products, acoustic systems products, and components and products that are used in the manufacture, repair and maintenance of automotive, marine, aircraft and specialty vehicles.

Major industrial products include vinyl, polyester, foil and specialty industrial tapes and adhesives; Scotch Masking Tape, Scotch Filament Tape and Scotch Packaging Tape; packaging equipment; 3M™ VHB™ Bonding Tapes; conductive, low surface energy, sealants, hot melt, spray and structural adhesives; reclosable fasteners; label materials for durable goods; and coated, nonwoven and micro structured surface finishing and grinding abrasives for the industrial market. Other industrial products include fluoroelastomers for seals, tubes and gaskets in engines

For the quarter, consolidated sales from the Industrial segment fell 5% to Rs 277.05 crore and accounted for 37% of sales. PBIT from the same fell 46% to Rs 38.75 crore and accounted for 42% of total.

In FY 2019, sales from the Industrial segment grew 6% to Rs 1175.41 crore and accounted for 39% of sales. PBIT from the same grew 1% to Rs 203.80 crore and accounted for 41% of total.

Health Care segment

Health Care business segment serves markets that include large multi-specialty hospitals and small clinics, dental and orthodontic practitioners, processed food manufacturers and pharmaceutical companies. Its offerings include medical and surgical supplies, medical devices, skin & wound care and infection prevention products & solutions, drug delivery systems, dental and orthodontic products and food safety products.

For the quarter, sales from the Health Care business fell 4% to Rs 94.06 crore and accounted for 13% of sales. PBIT from the same fell 42% to Rs 11.27 crore and accounted for 12% of total.

In FY 2019, sales from the Health Care business grew 7% to Rs 427.05 crore and accounted for 14% of sales. PBIT from the same grew 8% to Rs 84.30 crore and accounted for 17% of total.

Safety and Graphics segment

The Safety & Graphics business serves a broad range of markets that serve to increase the safety, security & productivity of people & improves facility design, aesthetics, hygiene, etc. Major product offerings include personal protection products; traffic safety & security products, border security solutions; public safety & identity management solutions; commercial graphics sheeting & systems; architectural surface & lighting solutions; cleaning & protection products for commercial establishments, etc.

Personal protection products include maintenance-free & reusable respirators, personal protective equipment, head & face protection, body protection, hearing protection & protective eyewear. In traffic safety & security, 3M provides reflective sheeting used on highway signs, vehicle license plates, construction work-zone devices, pavement marking systems, electronic surveillance products, films that protect against counterfeiting & reflective materials that are widely used on apparel, footwear & accessories, enhancing visibility in low-light situations. Traffic safety & security also provides remote people-monitoring technologies used for offender-monitoring applications.

The portfolio also includes RFID tracking technologies & Automatic Number Plate Recognition (ANPR). Major commercial graphics products include films, inks, digital signage systems & related products used to produce graphics for vehicles, signs & interior surfaces. Other products include spill-control sorbents; nonwoven abrasive materials for floor maintenance & commercial cleaning; floor matting, housekeeping chemicals, etc.

For the quarter, sales from the Safety & Graphics business grew 1% to Rs 196.45 crore and accounted for 26% of sales. PBIT from the same fell 51% to Rs 20.34 crore and accounted for 22% of total.

In FY 2019, sales from the Safety & Graphics business grew 8% to Rs 712.56 crore and accounted for 24% of sales. PBIT from the same grew 4% to Rs 88.08 crore and accounted for 18% of total.

Consumer segment

The Consumer segment serves markets that include consumer retail, modern trade, office retail and other emerging retail channels. The products in this segment include office supply products, stationery products, home care products and protective material products. Major consumer products include Scotch brand products, such as Scotch Magic™ Tape and Scotch Glue Stick; Post-it Products, such as Post-it Flags, Post-it Note Pads and Dispensers; home care products, including Scotch-Brite Scour Pads, Scotch-Brite Scrub Sponges, Scotch-Brite™ Microfiber Cloth products.

For the quarter, sales from the Consumer segment grew 7% to Rs 68.47 crore and accounted for 9% of sales. PBIT from the same fell 4% to Rs 9.36 crore and accounted for 10% of total.

In FY 2019, sales from the Consumer segment grew 11% to Rs 303.49 crore and accounted for 10% of sales. PBIT from the same grew 15% to Rs 55.10 crore and accounted for 11% of total.

Electronics & Energy

Infrastructure Protection Products Division of 3M offers a comprehensive array of products that ensure effective protection against corrosion for a variety of installations and structures. While 3M™ Scotchkote™ Fusion Bonded Epoxy Powders and Scotchkote™ Liquid Epoxy Coatings offer protection for steel pipelines, associated fittings and structures used in the oil, gas, water, industrial and construction markets, the range of 3M™ Scotchcast™ Powder Resins are ideal for OEM electrical insulation applications. 3M Dynatel Locators combine simple interfaces, large backlit high-resolution graphics, excellent balance and ergonomics with precision locating capabilities to quickly and accurately identify underground assets.

In Renewable Energy 3M is helping to transform the fields of Generation & Conservation of Energy. 3M supports solar & wind energy initiatives through product solutions such as films, tapes, coatings, encapsulants and adhesives that help reduce the cost of energy generation. For energy conservation and management needs of customers we provide affordable window film technology that ensures effective health and environment protection.

For the quarter, sales from the Electronics & Energy grew 37% to Rs 94.11 crore and accounted for 13% of sales. PBIT from the same grew 471% to Rs 9.28 crore and accounted for 10% of total.

In FY 2019, sales from the Electronics & Energy grew 32% to Rs 367.51 crore and accounted for 12% of sales. PBIT from the same grew 40% to Rs 53.27 crore and accounted for 11% of total.

Prepared to avail of opportunities from Governments Make in India and Smart Cities initiatives

3M is known globally to be a leading manufacturer. The Make in India initiative is helping 3M deploy its manufacturing strength within the country. The evolving Electronics, Defence and Automobile manufacturing will help 3M lay a very strong foundation for local manufacturing in the country.

3Ms philosophy for smart cities is to help develop the market for smart cities through collaboration with other relevant stakeholders with similar interests. The company is working closely with the government to help India develop smart cities.

The company has strategies in place for growth

Seeing the pickup in consumption while the industrial production remains stagnant, 3M has increased focus on consumption driven businesses. It has focused on geographic penetration plans mainly for consumption driven businesses.

3M is also tapping on the increased sustainability focus of companies as well as the government through introduction of products and green initiatives. 3M has increased focus on sciences that save lives, save resources, save energy and improve productivity efficiently.

3Ms globally competitive cost positions and well crafted business strategies have enabled it to retain its leading market positions. The company strongly believes in the 3M™ brand equity and its ability to provide its customers with innovative solutions. Global campaigns and brand building continues to benefit its business in India.

Valuation

The scrip trades at Rs 22875.

3M India: Consolidated results

 

1903 (3) 1803 (3) Var. (%) 1903 (12) 1803 (12) Var. (%)
Sales 742.85 720.43 3 3016.82 2709.83 11
OPM (%) 13.8 21.7 17.8 18.4
OP 102.74 156.45 -34 535.59 498.61 7
Other inc. 2.47 8.19 -70 36.83 44.79 -18
PBIDT 105.21 164.64 -36 572.42 543.40 5
Interest 0.63 1.37 -54 1.12 2.03 -45
PBDT 104.57 163.27 -36 571.30 541.37 6
Dep. 10.78 10.82 0 43.76 43.51 1
PBT 93.79 152.44 -38 527.54 497.86 6
EO 0.00 0.00 -- 0.00 0.00 --
PBT after EO 93.79 152.44 -38 527.54 497.86 6
Total Tax 33.48 55.19 -39 184.39 174.56 6
PAT 60.32 97.25 -38 343.15 323.30 6
EPS (Rs) * # # 304.6 287.0
* On current equity of Rs 11.27 crore. Face Value: Rs 10
EO: Extraordinary items
Figures in Rs crore
Source: Capitaline Databases

3M India: Consolidated segment results

 

Segments 1903 (3) 18003 (3) Var. (%) % to Total 1903 (12) 1803 (12) Var. (%) % to Total
Sales
Industrial 277.05 291.49 -5 37 1175.41 1105.66 6 39
Health Care 94.06 97.81 -4 13 427.05 400.63 7 14
Safety and Graphics 196.45 193.77 1 26 712.56 660.91 8 24
Consumer 68.47 64.23 7 9 303.49 272.87 11 10
Electronics & Energy 94.11 68.72 37 13 367.51 277.84 32 12
Others 12.70 4.41 188 2 30.81 16.28 89 1
TOTAL 742.85 720.43 3 100 3016.82 2734.19 10 100
Add: Revenue from discontinued operations 0.00 6.85 7.83 48.75
Add: Unallocable sales
Net Sales 742.85 727.28 3024.65 2782.93
PBIT
Industrial 38.75 72.22 -46 42 203.80 201.64 1 41
Health Care 11.27 19.43 -42 12 84.30 77.79 8 17
Safety and Graphics 20.34 41.91 -51 22 88.08 85.07 4 18
Consumer 9.36 9.74 -4 10 55.10 47.97 15 11
Electronics & Energy 9.28 1.63 471 10 53.27 38.19 40 11
Others 2.96 0.69 326 3 7.27 4.45 64 1
TOTAL 91.96 145.62 -37 100 491.83 455.11 8 100
Less interest 0.63 1.37 1.12 2.03
Add unallocable income over exp. 2.47 8.19 36.83 44.79
EO
Pofit before tax from continuing operations 93.79 152.44 527.54 497.86
Figures in Rs crore
Source: Capitaline Databases

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