3M CEO: inflation keeps increasing

·Anchor, Editor-at-Large
·2-min read

3M Chairman and CEO Mike Roman is not yet ready to call an inflationary peak. 

From his vantage point, inflation is still, well, inflating. 

"We have been talking about inflation since the first quarter. We called out what we thought the impact was, we put a range around it. As we came into the third quarter we updated the range — about in the middle to the higher-end of our range. So we continue to see inflation increasing as we have come through the year. As we look out, it's difficult to estimate where it's going to go," said Roman on Yahoo Finance Live

3M (MMM) has estimated that inflation in commodities such as polypropylene would dent earnings by 65 cents to 80 cents this year. 

Roman said 3M is looking under every rock to find efficiencies to combat inflationary pressures and protect margins. 

CHICAGO, ILLINOIS - JANUARY 28: Scotch tape manufactured by 3M is offered for sale at a big box retailer on January 28, 2020 in Chicago, Illinois. 3M announced it would be cutting 1,500 jobs as well as making other changes at the company after reporting fourth-quarter earnings that plunged 27%.  (Photo by Scott Olson/Getty Images)
Scotch tape manufactured by 3M is offered for sale at a big box retailer. (Photo by Scott Olson/Getty Images)

"We are working to manage our efficiencies in our factories. We are working to get dual sourcing across our raw materials supply. And then we are working to take price increases to offset that. So we are looking ahead, working to get traction on each of those strategies in anticipation that inflation can continue," Roman explained. 

Despite the efforts, 3M did see profit margin pressure in the third quarter even as sales continued to recover from the depths of the pandemic. 

The Scotch Tape maker posted operating profit declines in all of its segments except for health care, where profits gained 7% from a year ago on a 4.1% sales increase. Diluted EPS of $2.45 a share beat analyst projections for $2.20 a share. 

3M narrowed its outlook amid the macroeconomic uncertainty. 

Full-year sales are pegged to grow between 9% and 10%, compared to a prior outlook of 7% to 10%. Earnings are expected in the range of $9.70 to $9.90 a share, revised from a previous outlook for $9.70 to $10.10 a share. 

3M shares rose slightly on Tuesday's session

While Roman sees inflationary pressures lingering, he isn't in the hyperinflation camp with the likes of Twitter and Square CEO Jack Dorsey.

"We are seeing increased costs in logistics. Everybody is talking about the port congestion. So we are seeing inflation in those categories and labor inflation. We are paying higher labor rates. So those are each categories that look like they are going to persist in the near-term at least," added Roman.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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