Dive Brief:
- 3M plans to shift its capital spending within its operating budget to fund upgrades for research and development facilities, part of an effort to rapidly scale products from lab to manufacturing, CEO Bill Brown said in an Oct. 22 Q3 earnings call.
- The chemical titan will move about 100 people within its R&D team to focus on new product development, including employees who are no longer working on PFAS-related projects as the company exits the segment, Brown said.
- 3M will also hire 50 engineers in Q4 to prioritize focus areas such as specialty materials and films for the automotive, aerospace, electronics and semiconductor markets.
Dive Insight:
Q3 sales were up 1% year over year to approximately $6 billion. Growth was led by new Command brand products for the back-to-school and holiday seasons, according to an Oct. 22 securities filing.
But that 1% is not where 3M wants to be, Brown told analysts. Boosting R&D will help push forward the CEO’s priorities to sustain growth and improve operational performance, two focus areas he announced in his first earnings call in July as the chemical maker’s new top executive.
About a decade ago, 3M at one point created over 1,000 new products, Brown said in the Q2 call. Now, it takes a year or so for the chemical maker to develop and commercialize launch a new product, Brown said in the Q3 call. The CEO is aiming to turn that around.
“We’ve got to get that R&D engine moving again,” Brown told analysts. “That is going to be essential to improving on our growth rate and starting to hit and then outgrow the market. That will start to bear fruit into next year, maybe the end of next year and into ‘26.”
New production introductions are up 10% YOY, according to 3M’s Q3 presentation. The company expects that 10% will accelerate going into 2025. A large part of 3M’s new product investment will be in its safety and industrial, and transportation electronics businesses.
Since July, the company has made progress in its R&D effectiveness and efficiency, Brown said. However, it will take some time to get more productivity out of 3M’s R&D investments. The company is also focusing on cost reduction and its PFAS exit by 2026.
3M’s revenue in the aerospace and automotive markets decreased 7.5% YOY at $469 million in Q3, according to a securities filing. The auto OEM business reflected the global car and light truck build decline, EVP and CFO Anurag Maheshwari said in the call.
Meanwhile, its electronics business saw a 1% increase YOY at $767 million, which includes the semiconductor market. Brown pointed to the company’s films that go into various electronic devices such as large screen displays in cars.
