3M’s New CEO Looks For Ways to Develop Higher Growth
3M is a global science company that seems to never stop inventing. Using 46 technology platforms, their integrated team of scientists and researchers works with customers to create breakthroughs. Their inventions have improved daily life for hundreds of millions of people all over the world. With $30 billion in sales, their 90,000 employees connect with customers all around the world. Scientists, researchers and marketers work across countries and across subjects to solve challenges big and small.
3M’s new chief executive, Mike Roman, is looking into buying companies and selling under-performing units while also investing in developing the next highly successful product in an effort to allow faster growth at the industrials group that create products that range anywhere from adhesive tape to air filters. The company is looking into acquisitions that can influence the fundamental strengths in the attractive parts of its portfolio.
In 2017, 3M had $31.7 billion in sales, and with the economic upturn, business is growing. Despite the growth, the company’s investors are not satisfied with the rate of growth and the shares of the company fell 7% in April when the company cut is organic sales growth forecast from 4-5% to 3-4% for 2018.
Tuesday morning, shares were up 1.5% but still below the year high of $259.77 at $198.34.
One of 3M’s “faults” is that due to their big size, it is difficult to keep a higher growth rate. To combat this, the company needs a significant new product or products to sell to multiple groups across its portfolio. A product that could be promising for 3M is Novec, a non-flammable, non-conductive liquid fluorochemical that could be used as a cooler for servers at data centers.
3M’s CEO has increased its research and development spending from 5.5% to 6% and has updated its safety business with its acquisition of Capital Safety ($2.5 billion) in 2015 and Scott Safety ($2 billion) in October of 2017. 3M has dropped its under-performing businesses.
While the steel and aluminum tariffs that were recently imposed have not caused harm to 3M directly, higher raw material costs may cause the company’s customers to move their factories.
“We haven’t seen our customers shifting production yet. But depending on where trade negotiations go, they could shift production. But we would follow them.” – Mike Roman, Chief Executive Officer of 3M
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