3M India

Margin under pressure, except for consumer segment

Aug 14, 2019 05:08 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 8% to Rs 804.50 crore. OPM fell 280 basis points to 18.4% which saw OP fall 6% to Rs 148.00 crore.

Other income fell 36% to Rs 6.30 crore and interest cost jumped 327% to Rs 85 lakh. After providing for depreciation (up 35% to Rs 14.91 crore), PBT fell 12% to Rs 138.55 crore.

As taxation fell 11% to Rs 48.42 crore, PAT fell 12% to Rs 90.13 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.

Safety & Industrial

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 microstructured surface finishing and grinding abrasives for the industrial market. Other industrial products include

fluoroelastomers for seals, tubes and gaskets in engines.

Major transportation products include insulation components, including Thinsulate™ Acoustic Insulation and components for catalytic converters; functional and decorative graphics; abrasion-resistant films; adhesives; sealants; masking tapes; fasteners and tapes for attaching nameplates, trim, moldings, interior panels and carpeting; coated, nonwoven and microstructured finishing and grinding abrasives; structural adhesives; and other specialty materials. In addition, 3M provides paint finishing and detailing products, including a complete system of cleaners, dressings, polishes, waxes and other products.

For the quarter, consolidated sales from the Safety & Industrial segment grew 8% to Rs 307.44 crore and accounted for 38% of sales. PBIT from the same fell 7% to Rs 58.11 crore and accounted for 44% 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. Our 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 Transportation & Electronics business grew 8% to Rs 284.28 crore and accounted for 35% of sales. PBIT from the same fell 10% to Rs 35.88 crore and accounted for 27% 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 Healthcare business grew 7% to Rs 129.63 crore and accounted for 16% of sales. PBIT from the same fell 23% to Rs 22.77 crore and accounted for 17% 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 8% to Rs 78.46 crore and accounted for 10% of sales. PBIT from the same grew 17% to Rs 22.77 crore and accounted for 17% 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 21251.

3M India: Consolidated results

 

1906 (3) 1806 (3) Var. (%) 1903 (12) 1803 (12) Var. (%)
Sales 804.50 746.00 8 3016.82 2709.83 11
OPM (%) 18.4 21.2 17.8 18.4
OP 148.00 158.22 -6 535.59 498.61 7
Other inc. 6.30 9.91 -36 36.83 44.79 -18
PBIDT 154.30 168.13 -8 572.42 543.40 5
Interest 0.85 0.20 327 1.12 2.03 -45
PBDT 153.45 167.93 -9 571.30 541.37 6
Dep. 14.91 11.02 35 43.76 43.51 1
PBT before EO 138.55 156.91 -12 527.54 497.86 6
EO 0.00 0.00 -- 0.00 0.00 --
PBT after EO 138.55 156.91 -12 527.54 497.86 6
Total Tax 48.42 54.56 -11 184.39 174.56 6
PAT 90.13 102.35 -12 343.15 323.30 6
EPS (Rs) * # # 7.4 6.9
* 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 1906 (3) 1806 (3) Var. (%) % to Total 1903 (12) % to Total
Sales
Safety & Industrial 307.44 283.99 8 38 1176.84 39
Transportation & Electronics 284.28 263.38 8 35 1030.55 34
Healthcare 129.63 120.84 7 16 475.27 16
Consumer 78.46 72.63 8 10 303.49 10
Others 4.69 5.16 -9 1 30.67 1
TOTAL 804.50 746.00 8 100 3016.82 100
Add: Revenue from discontinued operations 0.00 7.83 7.83
Add: Unallocable sales 0.00 0.00
Net Sales 804.50 753.83 3024.65
PBIT
Safety & Industrial 58.11 62.59 -7 44 243.13 49
Transportation & Electronics 35.88 39.77 -10 27 106.98 22
Healthcare 22.77 29.41 -23 17 79.43 16
Consumer 16.04 13.68 17 12 54.88 11
Others 0.28 1.76 -84 0 7.41 2
TOTAL 133.09 147.21 -10 100 491.83 100
Less interest 0.85 0.20 1.12
Add unallocable income over exp. 6.30 9.91 36.83
EO
Pofit before tax from continuing operations 138.55 156.91 527.54
Figures in Rs crore
Source: Capitaline Databases

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