Stock Analysis on Net
Stock Analysis on Net

3M Co. (NYSE:MMM)

This company has been moved to the archive! The financial data has not been updated since October 25, 2022.

Common-Size Income Statement

3M Co., common-size consolidated income statement

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12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net sales 100.00 100.00 100.00 100.00 100.00
Cost of sales -53.16 -51.59 -53.32 -50.91 -50.54
Gross profit 46.84% 48.41% 46.68% 49.09% 49.46%
Selling, general and administrative expenses -20.36 -21.53 -21.87 -23.20 -20.76
Research, development and related expenses -5.64 -5.84 -5.95 -5.56 -5.84
Gain on sale of businesses 0.00 1.21 0.35 1.67 1.85
Operating income 20.84% 22.25% 19.21% 22.00% 24.70%
Interest expense -1.38 -1.64 -1.39 -1.07 -1.02
Interest income 0.07 0.09 0.25 0.21 0.16
Pension and postretirement net periodic benefit benefit 0.84 0.16 0.21 0.22 0.00
Loss on deconsolidation of Venezuelan subsidiary 0.00 0.00 -0.50 0.00 0.00
Other income (expense), net -0.47% -1.40% -1.44% -0.63% -0.86%
Income before income taxes 20.38% 20.85% 17.77% 21.36% 23.84%
Provision for income taxes -3.63 -4.10 -3.52 -5.00 -8.46
Income of consolidated group 16.74% 16.76% 14.26% 16.37% 15.38%
Income (loss) from unconsolidated subsidiaries, net of taxes 0.03 -0.02 0.00 0.00 0.00
Net income including noncontrolling interest 16.77% 16.74% 14.26% 16.37% 15.38%
Net income attributable to noncontrolling interest -0.02 -0.01 -0.04 -0.04 -0.03
Net income attributable to 3M 16.75% 16.73% 14.22% 16.33% 15.35%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

The analysis of the common-size income statement from 2017 to 2021 reveals a period of margin volatility followed by a stabilization in net profitability. While operating margins experienced a notable dip toward the middle of the period, net income margins remained relatively resilient, supported by significant changes in the tax provision as a percentage of sales.

Gross Profitability and Cost Management
Gross profit margins exhibited a downward trend from 49.46% in 2017 to a low of 46.68% in 2019. This compression was driven by an increase in the cost of sales, which rose from 50.54% to 53.32% over the same period. A partial recovery was observed in 2020, though margins returned to 46.84% by 2021, indicating a persistent increase in the cost of goods sold relative to revenue compared to 2017 levels.
Operating Expense Trends
Selling, general, and administrative (SG&A) expenses showed volatility, peaking at 23.20% of net sales in 2018 before trending downward to 20.36% by 2021. This suggests an improvement in operational efficiency or a successful cost-reduction initiative over the latter three years. Research and development expenses remained highly stable, fluctuating minimally between 5.56% and 5.95%, demonstrating a consistent commitment to innovation relative to sales volume.
Operating Income Performance
Operating income as a percentage of net sales declined from 24.70% in 2017 to 19.21% in 2019. This decline aligns with the contraction in gross margins and the temporary spike in SG&A. However, a recovery occurred in 2020 and 2021, with operating income stabilizing around 20.84% to 22.25%, reflecting better alignment of operating expenses with revenue.
Non-Operating Items and Financial Costs
Interest expenses as a percentage of sales increased from 1.02% in 2017 to a peak of 1.64% in 2020, before settling at 1.38% in 2021. Other income and expenses remained relatively immaterial, although a specific loss on the deconsolidation of a Venezuelan subsidiary impacted the 2019 results by 0.50% of net sales.
Net Income and Tax Impact
Net income attributable to the company remained remarkably stable despite operating margin fluctuations, ranging between 14.22% and 16.75%. A significant driver of this stability was the reduction in the provision for income taxes, which dropped sharply from 8.46% of net sales in 2017 to 3.63% in 2021. This reduction in the effective tax burden effectively offset the erosion of operating margins, allowing net profit margins in 2021 (16.75%) to exceed those of 2017 (15.35%).

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