3M reported record second quarter sales of $7.7 billion, up 14.1% year-on-year. Sales increased in all geographic regions, with Europe up 24.1%, Latin America/Canada up 20.2%, Asia Pacific up 11% and the U.S. up 8.7%.
Earnings rose 3.9% to $1.60 per share and operating margins were 21.6%. The company generated $1.2 billion in free cash flow during the quarter, equal to 100% of net income.
The company estimates that combined direct and indirect business disruption resulting from the March earthquake in Japan reduced second-quarter sales growth by 2.4 percentage points, operating margins by 50 basis points and earnings by $0.07 per share. Without these estimated impacts, second-quarter sales growth was 16.5%, operating margins were 22.1% and earnings per share growth was 8.4%.
For the full year 2011, 3M estimates that the Japan earthquake impacts will reduce sales growth by approximately one percentage point, operating margins by 30 basis points and earnings by $0.11 to $0.12 per share.
"We posted record second-quarter sales and earnings per share and generated significant free cash flow in the quarter, and we did so in the face of some sizable headwinds," said George W. Buckley, 3M chairman, CEO. "Most significant was the impact of the Japan earthquake, which was in line with our projections. In addition, a larger-than-anticipated contraction in LCD TV end-market demand affected our sales, reflecting a tighter consumer electronics market as OEMs work to reduce channel inventories and lower their unit costs. Without these two impacts, organic sales growth would have been 8%, so underlying strength remains."
Buckley said that the company expects further growth in new products this year.