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3M Warns Inflation Is Here To Stay

(Tyler Durden | Zero Hedge) – As we warned last week, profit warnings are coming thick and fast from American companies as they come to grips with Delta-fearmongered-demand weakness and COVID-scare-driven supply-chain chaos that is anything but transitory.

The latest warning comes from massive multi-national conglomerate 3M.

Speaking at a Morgan Stanley conference this morning, 3M CFO Monish Patowala warned that the outlook is much more like the worst-case scenarios than any overly-optimistic view that markets appear to be imbibing… (headlines via Bloomberg)

  • *3M SEES AUTO ’21 PRODUCTION -6% ON CHIP SHORTAGE VS -3% EARLIER
  • *3M EPS IMPACT DUE TO INFLATION, SUPPLY CHAIN DISRUPTIONS: CFO
  • *3M CFO SAYS AUTO CHIP SHORTAGE DISRUPTIONS TO CONTINUE IN 2022
  • *3M CFO SEES 2021 EPS IMPACT ON `HIGH END’ OF 65-80 CENT RANGE
  • *3M CFO: COST OF RAW MATERIALS IS BIGGEST SUPPLY CHAIN CHALLENGE

Excerpted transcript:

All of us are experiencing the semiconductor shortages. I would say to automotive and electronics, but you starting to see it impacting a lot of Industries, the outbreak of the Delta variant continues to impact the world as well as hurricane idea as also put more stress now on already stress supply chains, causing a lot of inflation, as well as material availability across issues across the globe… you’re seeing a lot of OEM the shutting down manufacturing because the lack of semiconductor chips.

Auto which was expected to see down -3% for the second half of the year or bills is now going to be down 6%, for the second half electronics is getting impacted, so consumer electronics, TVs are all getting impacted by the chip shortage, but also TV is we are seeing that factories of being shot down because of the cost of the delta variant in many parts of the world, so that’s going to put more pressure, on basically what was already going to be a negative year-over-year company’s going to make it worse. When I move over to healthcare, you’re seeing uneven recovery in healthcare so in certain places, you’re saying procedures remaining as they were and certain cases, you are seeing procedure starting to come down. We see right now that that North American elected procedures would be approximately 90% of pre-pandemic levels. Going into the third quarter, we have thought we would be closer to the 92% to the 95%, but we are going to be at the lower end and even lower depending on where it goes.

Moving over to raw materials. Again, I think the inflation is unprecedented. We are seeing inflation in the same areas I talked about earlier jobs, raw material, labor and logistics, raw materials again you go down to polypropylene, talk about resins, that inflation remains.

I would say inflation, when you think about raw material and logistics, both are very high. For us, inflation again comes from multiple different. So luckily, we don’t have one commodity that has all the inflation, but right now we are seeing broad-based inflation. So, we’ve seen inflation in the resins work, we’ve seen it with poly propylene, ethylene, wood, pulp. You’re seeing inflation in all those areas. We are also seeing labor inflation. You’re seeing labor inflation, whether it’s outsource manufacturing goods, plus in some cases even in our own factories. We’re seeing some labor inflation.

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