Ladies and gentlemen, thank you for standing by. Welcome to the 3M Third Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] It is recommended that you use a landline phone if you're going to register for a question. As a reminder, this conference is being recorded, Tuesday, October 26th, 2021. I would now like to turn the call over to Bruce Jermeland, Senior Vice President of Investor Relations at 3M.

Thank you and good morning, everyone and welcome to our 3rd Quarter earnings conference call. With me today, are Mike Roman, 3M's Chairman and Chief Executive Officer, and Monish patolawala, our Chief Financial and Transformation Officer. Mike and Monish will make some formal comments and then we'll take your questions. Please note that today's earnings release and slide presentation acCompanying this call are posted on our Investor Relations website at 3m.com under the heading Quarterly Earnings. Please turn to Slide 2, as we have done throughout the year, I'd like to remind you to mark your calendars for our next earnings conference call, which will take place on Tuesday, January 25th, 2022. Please take a moment to read the forward-looking statement on Slide 3. During today's conference call, we'll make certain predictive statements that reflect our current views about 3M's future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Item 1A of our most recent Form 10-K, lists some of the most important risk factors that could cause actual results to differ from our predictions. Please note throughout today's presentation, we'll be making references to certain non-GAAP financial measures. Reconciliations of the non-GAAP measures can be found in the attachments to today's press release. Please turn to Slide 4, and I'll now hand it off to Mike. Mike?

Thank you, Bruce. Good morning, everyone. And thank you for joining us. In a dynamic environment, our performance throughout 2021 has shown the skill of our people around the world the resiliency of our business model, and the relevance of our technologies. In the third quarter end-year-to-date, we have delivered broad-based organic growth across all business groups and geographic areas, along with good margins and strong cash flow. Q3 organic growth was over 6% as we drove innovation across our market-leading businesses with margins of 20% and earnings of $2.45 per share. Geographically, growth in the quarter was led by the Americas, up 7% with the US up 6% growth in APAC was 6% with China up 3%, and Japan up 6%. While EMEA grew 4%. With respect to the macro-environment, overall end-market demand remains strong, though the semiconductor shortage continues to impact many markets, most visibly in electronics and automotive. As we navigate near-term uncertainty, we continue to invest in growth, productivity, and sustainability, which I will discuss shortly. We are also actively managing disruptions in the global supply chain with a relentless focus on customer service. Looking at our performance through nine months, we have executed well and delivered 11% organic growth, with all business groups about 10%, along with margins of 22% and earnings of $7.81 per share. Today, we are updating full-year expectations for organic growth to a range of 8% to 9% and EPS to a range of $9.70 to $9.90, reflecting our results to-date and ongoing supply chain challenges. I would like to make a few comments on how 3M is actively managing those challenges. As you know, many companies are facing supply chain disruptions. The result of a convergence of issues, including the Delta variant, strong demand, energy and labor shortages, and extreme…

Thank you, Mike. And I wish you all a very good morning. Please turn to Slide 6. As I look back on the quarter, the 3M team demonstrated the resilience of our business model and the relevance of our technologies as we executed well in a very challenging environment, effectively navigating the supply-chain disruptions while serving and innovating for our customers. Though manufacturing, raw materials, and logistics challenges persisted throughout the quarter. We continue to invest in the business while driving operating rigor and managing costs. Turning to the third quarter, financial results, sales were $8.9 billion up 7.1% year-on-year, or an increase of 6.3% on an organic basis. Operating income was $1.8 billion down 6% with operating margins of 20% coming in at the top end of the range, which we had previously communicated in mid-September. Third quarter earnings per share were $2.45, which was similar to last year. On this slide, you can see the components that impacted both operating margins and earnings per share as compared to Q3 last year. Our strong year-on-year organic volume growth was more than offset by the headwinds resulting from the global supply chain challenges, investments in growth and sustainability, and litigation-related costs. Combined, these impacts lowered operating margins by 1.4 percentage points, and earnings per share by $0.02 year-on-year. The restructuring program we announced in Q4 of last year remains on track. As part of this program we incurred a Pretax restructuring charge of $50 million in the third quarter. This charge was offset by the benefits we achieved this quarter. Moving to price and raw materials. As expected, increases in selling price gain traction as we went through the quarter with year-on-year selling prices up 140 basis points in Q3 versus 10 basis points in Q2. However, we continue to…

[Operator Instruction]

First question comes from the line of Nigel Coe with Wolfe Research. Please proceed with your question.

Thanks. Good morning and thanks for the details on the quarter. So Monish, you mentioned the 19%, 20% margin for 3Q. You came in at the high end of that range. Obviously, you'd like to be conservative, but I'm just curious, what's in better or maybe not quite as bad as you expected or see it back in mid-September.

That's great question, Nigel. I think when I gave you the range of 19% to 20%, as we have said in my prepared remarks, we were facing a lot of inflation. At the same time, there is a lot of uncertainty as regards volumes, as regards supply chain flow. And then third, I'd also mentioned that as we were facing all those items, we were also doing our own self-help versus just letting these things go through whether it was guild sourcing, whether it was controlling some of our expenses, etc. And then you put all that together, we came in at the 20%. If you look at where we ended up, I would say inflation came in pretty much where we thought it was going to be. We executed on price, we moved from 10 basis points of price increase in Q2 to a 140 basis points in Q3. So that was pretty much in line, and we were able to execute more volumes of our vendors. with flow of supply. We were able to get good flow supply. There's strong demand, as Mike said, and we were able to execute the demand, as well as we controlled our expenses across the corporation to make sure that we were prioritizing on serving our customers and trying to mitigate impact of inflation as much as we could. So put all that in, we came in at the 20% versus the range of 19 to 20 that I mentioned earlier.

That's great. Thank you.On the margin bridge, based on -- based on your 4Q for your full-year guidance, looks like 4Q margins looked at an 18 handle. Maybe my math offset, but I'd be curious if you can maybe talk to that and maybe the two major margin budget items, the volume productivity, supply chain, and pipe costs 100.8 base points negative on volume productivity and 130 on price cost this quarter. How does that look in a broad sense for 4Q year-over-year?

So I would start by sayin, Nigel, a couple of things. So your math is not real, if you follow the implied guide that we gave you. It's directionally very close. I think a couple of things on just the items you talked about, which is priced raw. We expect to continue to have continued momentum in price in the fourth quarter. You saw us again go up from 10 to 140 basis points and we should see that go up as price continues to take hold across the various geographies and product lines, things that we've talked about before. I would say we don't see the raw material or the inflation environment slowing down in any way. I think you're going to see that volatility. It's going to depend on what the holiday season does. It depends on what logistics costs are going to be. Our goal is to get to neutral. The question is going to be, how does raw materials at some point play itself out, and do we see a turn in some of the commodities like, polypropylene, ethylene, etc, where we have seen a lot of inflation? I would say that's number 1 on your question. I think there was another point on bridge on revenue. I would just say if you're looking 3 to 4Q, just remember there are a couple of things that impact 3M. There's one less billing day from 3Q to 4Q and secondly, you have a normal seasonality that you have in 3M as many of the factories with our industrial customers slowed down during the holidays and that's the impact. So I think you've answered your question, but if there's anything else I'm happy to answer, Nate.

No, that's perfect Monish.

Thank you. Our next question comes from the line of Jeff Sprague with Vertical Research Partners. Please proceed with your question.

Thank you. Good morning, everyone.

Hey, Jeff. Good morning.

Just want to pick a touch on auto a little bit. Kind of extraordinary divergence and the numbers there as you laid out, I just wondered, does that create some kind of significant headwind for you now, as you look forward, obviously we should have volumes going up, but may have suppliers, I think that burn off inventory and mix shifts back. I was wondering if you could give us a little more perspective on what's going on there.

Maybe there's a couple of parts to that I'll talk about. The first -- if you look at what we've done year-to-date, it's really been reflective of our innovation, something we've been talking about for some time, we outgrow the build rates and even in dynamic like this year where the build rates are swinging down as there were some challenges in OEM production plans for Q3 and the outlook for Q4 being similar. We're continuing to drive our innovations when spec -in's and design-in opportunities. And then Monish mentioned the mix of vehicles in this demand environment is more premium, which we have a higher level of penetration in those vehicles. We also have very good growth in our Auto electrification. priority growth platform and broadly, and getting good traction, 40% year-to-date. So those are all driving that performance as we come through a year-to-date and we expect to be able to continue to perform build rates as we go forward. The channel -- everybody is challenged with matching up to the changes in production plans, and these are changing quickly and the dynamic has been challenging for the supply chains, and I would say everyone in the value chain to keep up with. That said we see inventory trying to track pretty well with that. We don't see really -- in our results, we're not seeing a year-to-date of impact from excess inventory, so it's really about matching up with where the mix is going, where the build rates are going, and again, we see good momentum in our portfolio against those build rates.

And just on your, maybe your Capex and what you are seeing your customers do. When I heard Monish talk about seasonal slowdown with everybody of run and full out here and trying to get caught up. Do you actually think it's possible we don't have a normal seasonal slowdown as people try that kind of execute on some of these backlogs and kind of separate move, a little bit unrelated, but your own Capex, what sort of projects did you have planned that are sliding to the right?

Yeah. It is -- good question Jeff. Listen, as we're trying to be helpful by giving you what we're seeing right now. Is there a possibility that customers continuing to keep running through 24/7, and that there's more production that comes out from them. Absolutely possible and as Mike mentioned in so have I, will do whatever it takes to make sure that we keep serving our customers. Overall, I would still say this is a short-term phenomenon. Long-term, we're seeing good end-market trends. And that's why you're seeing us continue to invest. So your point on the next piece which is Capex and where we were I would say the areas where we're looking to keep investing, we're in all the 3 buckets, growth, productivity, and sustainability, and the cycle times to get Capex raw material for these businesses is just taking longer than we had originally thought. And that's why we had to slow it down to 1.5 to 1.6, but I would just end by -- your question by saying, Jeff, we are not done with the quarter. This team knows how to fight, we are going to keep doing whatever it takes to keep serving for our customers as long as the demand is there and at the same time, the teams furiously working to make sure that we mitigate some of the raw material pressure that we have, as well as keep investing for growth, productivity, and sustainability because we just see the long term to be very bright where we can grow above the macro, we can get margin expansion and keep having strong cash.

Great, thanks for the color.

Our next question comes from the line of Julian Mitchell with Barclays. Please proceed with your question.

Hi, Good morning. Maybe just the first question around China, Hong Kong demand. And obviously 3M has a very large presence in the region. Good perspectives on different industries. The growth rate slowed, I think to 3% in Q3, that was down from low double-digit last Quarter and low thirties in Q1. So just wondered, do we think that that China, Hong Kong may be down in the fourth quarter and maybe just describe how you see what's going on there as being maybe different or idiosyncratic or do you think about pace of slowdown is a good template for what we should expect elsewhere in the world as the demand recovery matures.

Yes, Julian, if you look -- step back and look at year-to-date, China 's up mid-teens for us. So that, I think reflective of strong growth through Q3. And as you pointed out, we saw a 3% in the quarter. I would say it's having an impact from the same things we've been talking about, supply chain, logistics, port closures. Those are impacting our business. And just as a reminder, our business in China, so we manufacture most of what we sell in China in factories in China. And we sell to customers -- about 50% of them exposed to exports about 50% to the domestic market. And the exports are probably one of the areas that's hard to sit. So it's down about 10%. Looking forward, that's the expectation as we go forward with Q4. So that'll be one of the impacts, has been one of the impacts being hurt most by the supply chain challenges for us,our focus in China has really been very much in line with what we've been talking about as we came through the pandemic, we see market segments that are high-growth and we've been prioritizing investments there and we see those growth trends continuing. So we are that's where we're focused -- we're focused where we have the kind of the winning solutions. And we do see opportunities across each of our businesses year-to-date, we've been led with strong growth in Our Home Care business are actually in Q3 and the Healthcare business we expect that to continue as we go into Q4.

Julian, just to add to Mike's point on all the items you mentioned on the macro trends. Just on a year-over-year basis to for the quarter at 3%. You also got to look at the comp of last year. We had a very strong growth in China, if you remember, the third quarter of last year, you had seen China starting to come out of the pandemic first. So their order patterns were higher in the end of like June and then into the third quarter.And that's the other reason you see a 3%

That's helpful.Thank you.Maybe just my follow-up around safety and industrial margins,understand what's going on with some of the markets in terms of supply chain constraints and the impact that's having on margins. But maybe focusing on the impact of the legal costs. And also as the respirator business moves slower sequentially. Any color you could provide on the impact that those two things are having on margins. Perhaps sizing that legal headwind. And do we expect that to bleed into next year as well? Thank you.

Yes, sure Julian.There are 2 ones, on the legal one, the combat arms litigation that we are incurring costs on show up in the CBG margins. As Mike mentioned, we are continuing to defend ourselves in that litigation. There's an acceleration in the fourth quarter. We will have EPS 5 more of these for which we're going to prepare. I would say, depending on how the litigation goes. Do you see it bleed into '22? Yes, because the MDS will all not be done by fourth quarter of 2021 On disposable respirators as we've talked about, depending on seeing how the pandemic has played itself out. We felt Q1 was peak. We had mentioned that even in our last earnings call, we have seen revenue consistently, sequentially come down. You have seen we came down nearly 6% in the [Indiscernible] in the third quarter. We see that further down between 75 to a 125 on a year-over-year basis or 25 to 75 sequentially. And depending on where the pandemic goes, that will have an impact into 2022. But again, we've seeing pockets where you are seeing COVID cases go up, where you are seeing demand go up and then in other cases, you're starting to see demand come down. So it's pretty dynamic on the disposable respirator side, but as we've talked before, we've got capacity of 2.5 billion respirators that we can ramp up very quickly. The team's done a really nice job of managing this environment in certain cases, we have shutdown manufacturing lines in certain cases, we are managing our inventory levels as we go through this, but we'll be ready for the next factor event. And hopefully never happens. But that's not being the history of the world, but we'll be ready for that.

Great. Thank you.

Our next question comes from the line of Scott Davis with Millios Research. Please proceed with your question.

Good morning, everybody.

Hi, Scott.

The price increase in the quarter was a pretty dramatic quarter-to-quarter sequential change, but we've clearly seen pretty big step-ups in CPI and PPI. What -- when you think about 4Q and kind of think about the ramp into 2022, do you continue with this aggressive of a ramp. Is there any mitigating factors that holds you back from getting price? I mean, I don't think I remember you guys being as far below CPI before. But these are strange times too. So I'm not sure it really matters. Just some color on that ramp would be helpful. Thank you.

Sure, Scott. As I mentioned in my prepared remarks, you will see us continue to gain price in the fourth quarter. I know they've been quite a few questions around why it has taken us this long to get price. As we mentioned before, we follow up pretty methodical approach of taking consistent, taking price across geographies. We work with our customers. In certain cases, we are working with contracts and the constraints in those contracts. And we put a pretty thoughtful approach to how we go after price increases. How it goes into 2022, Scott, I think will also depend on where we see inflation going to be in '22 and beyond. Right now, I think we're comfortable with the price increases that we've taken, but we're going to keep doing it as long as we need to. As I mentioned the goal of the team is to get to neutral, but it's going to highly depend upon what happens with inflation. So I don't know if I answered your question, but that's how we're thinking about pricing from that angle. And we try to be as -- again, as I've said before, thoughtful and methodical in how we go [Indiscernible] we have a pretty rigorous approach on how we approach our customers and we try to work it as a partnership with both. And you've got different businesses, so you've got specting businesses where you are specting for a certain period of time. You got healthcare where you got half my business where it's easier to take price. In other cases that are contracts. And then you've got the industrial margins, which is distributor lead. And then you've got the consumer business where we working with all the big retailer. So each one of them have a different dynamic. And we factor all that in and you've seen that we have made progress in Q3 and we'll keep making progress in Q4 and beyond.

As a follow-up in -- the China comments were helpful, but can you talk about some of the other major emerging markets and what you've seen as far as improvements or decrements over the quarter and outlook? Thank you.

Sure. Thanks to God. And just as a reminder, if you remember back to 2019, we aligned our businesses, now around four go-to-market models are globally. And so those businesses are executing global strategies locally everywhere around the world. And they -- each of them have a view of each of the regions, but I'll give you a view at a higher level. So we talked about America's being up 7% in the quarter and low double-digits year-to-date. The highest growth as we came through the quarters in Latin America and Canada and up double-digits across all business groups. So again, similar to what we talked about. And the way we are seeing year-to-date demand across 3M globally, broad-based across business groups in the Americas. And I'd say it's still in a strong position, up 6% in the Quarter and double-digits for the year. EMEA, if you look at how we're doing there, we're growing high single-digits for the year, 9%, 4% in the quarter. We haven't seen a strong rebound in growth as other areas, but we are seeing a recovery now in healthcare and transportation and electronics starting to help drive that growth that we are seeing. And in Asia-Pacific, grown mid-teens year-to-date, double-digit growth across the business groups. All business groups again, and as I mentioned, and we talked about China, mentioned Japan and in prepared remarks, that's been one of the improving areas is Japan now starting to see improving growth as we come through the year. So not down -- not near the pre-COVID levels, yet. But again, starting to see some improvements, and in that case also being led by healthcare. So we're seeing some -- I would say the recovery of the electric procedures around the world being one of the dynamics that's helping to start drive improving growth.

Thank you. Good luck, guys.

Thanks, Scott.

Thank you. Our next question comes from the line of Deane Dray with RBC Capital Markets, please proceed with your question.

Thank you. Good morning everyone.

Hi Deane

We've heard lots of specifics on material cost inflation. I'd like to hear some color on labor costs, labor shortages. I know Mike highlighted in the opening remarks about new initiatives for recruiting, I'd imagine higher comp and benefits are among those. And is this more of U.S. centered headwind or just how labor costs and shortages look globally? And start there, please.

So I would say, Dean e, it's a global item but it's more pronounced right now for us in the U.S. So we are seeing higher cost, whether it is cost driven by some of the i tems Mike mentioned as well as with the demand that we have, we are spending more money on overtime. And also we are seeing cost of inflation, which is labor cost that comes through us, through outsource manufacturing hard goods that we buy, we're also seeing inflation on that. But with that said, I do want to recognize all the employees of 3M who are tirelessly working to make sure that we are delivering for our customers in this tough demand environment, as well as a very tough supply environment. But we're confident, Dean e, will get through this.

Do you have a year-over-year labor cost? Any kind of specifics you can help us with?

I don't have it very specific. I can ask Bruce to follow up and give you an answer. But just if you go back to the bridge on the walk for Q3, you can see there's a 140 basis points of pressure due to organic volume and productivity. Some of that is driven by labor constraints. In other words, the higher cost, but at the same time, making sure that we have all the production that we can make. And some of it is driven by the fact that we have had to have more changeovers because raw material has not been flowing properly.

Got it. And just as a follow-up on the Copaxone litigation, I was hoping you could comment on the strength of your insurance coverage. Both - we're just whether it's P fast specifically will see headline settlements. What we don't always have line of sight on is the insurance coverage. Are there any coverage limits and just help us frame for us the strength that the insurance coverage, if you could.

Yeah, so we do have insurance coverage. We are working with our various insurance providers through multiple dialogues that we keep having with them. But as you know, some of these things take time. So when we do get those settlements in, we'll definitely keep your costs too.

Okay. Thank you.

Thanks.

Thank you. Our next question comes from line of Andrew Obin with Bank of America, please proceed with your question.

Good morning.

Hey, Andrew

Hey, Andrew.

Hey, there's a question for bigger picture question for Mike and maybe Monish. I think 3M has a fairly unique integrated model, and the way your supply chain flows internationally, I think inside the Company is also fairly unique. Do these current supply chain constraints and shipping constraints: A, give you an opportunity to re-evaluate how your internal supply chain are constructed? and -- yeah, I'll just leave it at that.

Yeah, Andrew, it's one of our fundamental strengths and back to what Monish was talking about, how we're focused on delivering for customers. We're leveraging the strengths of our 3M model. The idea that we talked about in the prepared remarks, local for local, building our capabilities across our value model to the customers close to them regionally around the world. And that has been a strength as we've come through COVID and I would say this year as we deal with the interruption in supply chain, this regional strategy has allowed us to be more agile in just what Monish was talking about, the changing nature of our production plans in our production wheels in our -- what we're doing in our factory. So we have a lot of flexibility built in. I would say we are always evaluating how to better serve customers, how do we look at our lean value streams and how do we take new strategies into that getting -- based on, I would say, the improving visibility we have, we see opportunities to be more efficient and improve our cycle times and so on. So I -- we're always looking at changes. I do think the model that we have has served us well and it's been great place to respond to the challenges. And I think that's the foundation as we go ahead. It's how do we make that better? How do we drive better performance, improving operational efficiency? So building on those strengths is where I'd leave you with.

Thank you, Mike. And just a follow-up question. I apologize if I missed it, but on electric procedures, what's your best guess with sort of falling COVID cases in the U.S.? What's the most likely trajectory for likely procedures over the next, let's say 6 months?

So Andrew, that's one, of course, we keep watching very closely. We -- for the quarter, we ended up at -- I think the industry ended up at a lower end of the 90% to 95% that was originally forecasted. Part of it was, I think September was a tougher month as many countries saw a spike in COVID cases. Our belief, and I think it's the industry's believe, that we should stabilize in the fourth quarter and we hopefully get back to the 90% to 95% range as we get into the fourth quarter. And then the bigger discussion around the industries, what does 2022 and beyond look like? The reason is a lot of these elective procedures that have been slowed down are elective, but they are still time-sensitive at the end of the day. So there's -- so that's what we'll have to see and see both capacities added in all the countries we have to see how cases go -- play out from a COVID perspective. But I also think hospitals are far better equipped right now, or more prepared to deal with this. So our hope is that, elective procedures come back up to 2019 levels in 2022. When it happens, I think will depend on different parts of cases in the world, but that's how we see it.

Do you see the possibility of a cumulative catch-up in '22?

Well, that's -- I think that's the debate, right? Who knows? But I think that's going to depend basically on hospital preparedness as well as patient readiness to come into the hospital to get their surgeries done. From our end, we would rather have the volume than not have the volume. So, I would say it will be a good problem to have, but I think we'll have to see what happens.

Thanks a lot, guys. Good luck.

Thanks to you.

Thank you. Our next question comes from the line of Nicole DeBlase with Deutsche Bank. Please proceed with your question.

Yes. Thanks. Good morning, guys.

Hi Nicole.

I just wanted to dig into what you guys are seeing from a supply chain perspective a bit more. So if you could talk about any changes in the key bottlenecks versus last quarter's update. And is there a sense at all that there's green shoots here meeting that is there any possibility that the supply chain issues or headwinds have peaks?

While Nicole, I go back to it, it really is a convergence of multiple factors. And so you've got to pull those apart a little bit. The strong demand we think will continue to see strong demand. So that's going to put pressure on the supply chains going forward. We've seen challenges and labor shortages, the pandemic has impacted production, semiconductor shortages are impacting end markets for us in particular. And then we were also impacted as we went through the year with some extreme weather events which interrupted our raw material supply. Those are getting better. So some of the raw material supply issues that we were facing are getting better as we go and we do expect supply chains to improve. It's difficult to estimate or predict the duration of each of these factors and how they play with each other and watching the congestion in logistics is one of the things that we are carefully looking for improvements in as well. Can we move back to more normal logistics patterns for us as we go forward, that will be a good sign that broadly supply chain disruptions are improving. But you have to keep an eye on each of these aspects to see step-by-step. And we do -- we are optimistic, we are hopeful as we get into 2022, that we're going to continue to see improvements.

Nicole, we also have a control tower that has been set up, so we're constantly watching whether it is the port congestion, whether it is shutdown of airports, whether it is customers, suppliers telling us that raw material, maybe few hours. So that's why we have new changings in our factories faster to keep other products moving so that we just make sure that we keep customer demand as well as customer demand itself is pretty variable right now. And that's another big thing that control towers doing his watching customer demand and then adjusting supply as needed.

Got it. Thanks, Monish, thanks, Mike. That was helpful. And then I guess for 4Q, as you kind of think about the expectations by segment, we've kind of discussed elective procedures within healthcare. You guys talked a little bit about safety and industrial, what's going on with math. But I think both consumer and T&E are facing tougher comps in the fourth quarter. Is the expectation that those businesses can still grow organically or is there a risk they could be down year-on-year?

So I would start with just Transportation Electronics, that business has impacted the most by two.One is the auto industry, and second is the electronics industry and the semiconductor shortages hits that business squarely. I would say on the auto build the latest IHS forecast that we look at is, on a year-over-year 20% down as where auto builds are expected to be. There's also, they're facing comps from last year in the electronics side. So whether it's consumer electronics, TVs, tablets, all of them, are supposed to be down on a year-over-year basis. I think we'll have to see where semiconductor shortages land up for that business, but they're Ashish and team are fighting hard and if the volumes they're going to do whatever it takes to make sure that the customers are served. On consumer, you're right, that's also facing a very strong comp from last year, but you can see what they -- what Jeff and team have done in the first 11 months. We have seen strong growth. Our platforms where it was command or Filtrete are posted notes, etc., all have seen good growth in the third quarter. We saw a good early start in our stationary business and the holiday season. The question is whether that continues is the thing that we'll have to keep watching.

Got it. Thanks. I'll pass it on.

Thanks.

Thank you. Thank you. And our next question comes from the line of Steve Tusa with JP Morgan. Please proceed with your question.

Hi. Good morning.

Hi Steve.

Hey, guys. So what is like the underlying, like leverage this quarter? [inaudible 01:00:15] Back out price costs and then I think like the year-over-year on restructuring costs and savings and then temporary costs kind of mask things a little bit. But if I just -- if I kind of like back into what I'm getting something negative on the revenue growth. But then obviously there's the supply and that other inflation that you have to deal with. What is the underlying -- is the underlying leverage positive this quarter on that 5%? Or was it negative because of this, just have that out a little bit because a lot of moving parts here.

You're breaking up a little bit, Steve, but I think I got your question as what's the underlying leverage, and I would tell you it's a little hard for me to X everything out from a restructuring perspective. X out organic volume price raw and then give you a leverage. I would just tell you when you look at the bridge that we have given you, we did see volume growth, but that was offset by the productivity from global supply chain, as well as our growth in productivity and increased litigation costs. And you can see that hurt us 1.4% on that productivity basis. That's the way I look at it Steve, it's very hard and I think it would be unfair for me to just X everything out and then tell you leverage is good because I don't think that's the way we look at it. Because for me it's -- ultimately it's the all-in, what I give you versus Xing stuff out.

Right. I guess, is there a reason why you wouldn't be able to convert more normally in '22? I guess, assuming these things stabilize, is this business still a 35% core incremental margin business?

I would say so, Steve, I think it's a gain. You have to go back to all thing s being equal.

Yes, it's a 30 to 40% leverage business and I don't see that change. But I think it will come down to what does supply chain trends look like in 2022. You've seen not just us, but many of our peers as well as other people have said supply chain constraints go into 2022. But I think long term, as Mike has mentioned, and I have said, we are very confident we can grow about the macro. We can get margin expansion and we can continue to have strong cash. So all those, it's -- I think it's just a short uncertain time that we'll have to just see how supply chain self -- plays itself.

Yeah. Yeah, very appreciated. Okay. Thanks. Thanks [inaudible 01:02:44]

Thank you. And our next question comes from the line of John Walsh with Credit Suisse. Please proceed with your question.

Hi, good morning.

Hey John.

Hi, John.

Maybe just first question around the restructuring,you used the term on track,,but I just wanted to confirm the numbers here. I mean, the prior program was 275 million in Costs, 225 million of savings, and then now you've -- you've taken it obviously up higher here. How do we think of -- what is that -- is that you mean by on track, that's like an 82% conversion on the savings and on the new actions, how do we think about the payback on those?

So I'll reiterate and I'm -- our program was going to cost somewhere between 250 to 300 and benefits of somewhere between 200 and 250. What we have looked -- what I said in this, in my prepared remarks was year-to-date we have spent 240 million against the 250 to 300 and we are updating that from 250 to 300 to 300 to 325 and be largely expect the program to be initiated by the end of 1Q '22. On the benefit side, we are -- we had set 200 to 250 with all the actions that we have taken. We see ourselves at the higher end of that range in between the 225 and the 250, but half of it that's already shown up or will show up for this year in '21 by the time we're done with the fourth quarter. And the balance would show up in '22.

Hey, John I just want to clarify one thing. Monish said year-to-date we've had $240 million of charges --

Charges, sorry,

That's actually a 140 last year in Q4 and 100 million year-to-date this year?

Yeah. Sorry. Program to-date.

Yeah.

And as you know, John, we don't remove restructuring charges from our results and that's all included in the numbers we report. So we don't adjust for that.

Yes, no. Thank you for the [Indiscernible] extra details there. And then maybe just as a follow-up here, lot of questions around supply chain I think we're all following the semi shortages, etc.. But 3M, you also mentioned like probably propylene and some other supply chains that a little bit more ancillary to kind of semi and some of the things we might be tracking day-to-day. I'm assuming there was some impact there from either hurricanes first majeur, etc. Can you maybe just help us understand what you're seeing in that part of your supply chain?

Yeah. So --

How long the duration of that might be.

So we're seeing polypropylene ethylene resins, all of the ones are the companies I mentioned seeing inflation. Many of these accrued better videos. They're not perfectly tied to the price of crude, but you can see where crude is going. So there's derivatives. T hey all have got impacted all the way in February, but the hurricane that happened. And then I would say the global supply chains have further put pressure on it for the material flow across the globe. And that makes it harder for you to buy material only in certain locations. And just -- I would, if my memory is right, on polypropylene and ethylene, we saw actually a jump in August. We've seen it come down a little bit in September. But that's again, it's demand-supply equation there, but it's all goes back to Hurricane Ida that happened in February. And then the demand from the pandemic also increased the need for the product and all that put together, Mike used the word convergence, has driven some of the pressures on the chemical side of the house.

Great. I appreciate you taking the questions.

Thanks, John.

Thanks John.

Thank you. Our next question comes from the line of Andrew Kaplowitz with Citigroup. Please proceed with your question.

Hey, good morning, guys.

Morning.

Maybe an update on how you're thinking about cash deployment at this point. I think we all understand your priorities and they start with organic investments. But at what point do you ramp up purchases for instance, if your stock continues to languish at [Indiscernible], at what point do you think you've gone far enough into a salary integration that 3M might be better equipped to make a larger deal again?

Again, just I -- and my apologies, Andy, I am just going to reiterate our capital allocation priorities just so that everyone's on the same page. Our first priority is always go organic. We just see it's the best use of our capital, best return, as you can see, the not afraid to deploy capital. We've done that in 2020, We're continuing do that in '21, which is investing in growth, productivity, and sustainability. We were going to spend $1.8 to $2 billion this year, but with some office supply chain constraints, it's down to 1.5 to 1.6, but we still believe in the long-term growth, and so we're going to keep investing in that. As Mike had announced early in the year, we also announced a billion dollars to improve -- for our sustainability efforts. That's going to be spend over the next 20 years, but it's front-end loaded, so that's the second piece on organic investment. Dividend is our second priority, important for our shareholders. So that's a priority that we clearly are focused on. Our third priority is M&A, and you're right that we are integrating Acelity and the team's doing a very nice job by integrating Acelity into our business. At the same time, we have tons of ideas and we have a pipeline that we'll execute when we see that we get a target that we believe can add value to our shareholders at the same time, it's things that we believe that, we can add value to the target too, by using some of the strengths that we have, which is our brand, our global capability, our employee base our material science capability, etc. So that's our third and we always have an active pipeline. And then the last one, a share buyback. You've seen, we've now done 1.3 billion for the year. We did 527, that's the last priority for us from a deployment of capital perspective. But depending on the stock price and how much cash we generate, we clearly will look at that too. Overall, I would just save and I look at net debt to EBITDA leverage, which is at approximately 1.3. At that point, it gives me a lot of financial strength and optionality. It gives 3M a lot of financial strength and optionality. So depending on what opportunities we see, we won't hesitate to deploy capital because, as Mike mentioned, even some of the platforms that we've talked about, all of them are GDP plus growth platform. So that's an area we would love to keep investing in.

Many sets [Indiscernible] Could you give us a little more color on what's going on in your Healthcare business in terms of margin. I think margin performance is relatively doing year-over-year,at least versus your other segments. So how much is the Saudi integration helping? Is it a mix of your businesses such as oral care outperforming that's helping margin. And how are you thinking about margin trajectory in that business moving forward?

Yeah. So for healthcare, I also look at EBITDA, if that helps, Andy. I think year-to-date, we are approximately 31% on an EBITDA basis. The team most and team have done a really nice job of continuing to drive margin. We increased margin 70 basis points in the third quarter. I would say it's a performance all around the Oral Care business and the snapback has definitely helped. It helps us on a volume, it helps us on leverage with the volume and the factories. The MSD business, if you exclude the disposable respirator decline, grew very nicely in the second quarter and MSD's [inaudible 01:11:00] Acelity was in there too. Acelity was impacted in the third quarter by low elective procedures, but the integration is going well, we're continuing to find synergies between the cross-selling that we can do with our wound care business and facility or existing wound care business and facility. So we are very happy with our progress. But in the spirit of continuous improvement, there's always more we can do to drive growth and margin and most in team are very focused on continuing to do that.

Appreciate in Monish.

Thank you. Our next question comes from the line of Joe Ritchie with Goldman Sachs. Please proceed with your question.

Thank you. Thanks for fitting me in to everybody

[Indiscernible]

Maybe just on the price cost discussion, I haven't covered you guys for a while.It's rare to see that price cost equation negative,the question I have is, do you think we're at the peak of pain that a 140 basis points impact on price costs? And then my follow-on to that, Monish, you talked about some of your business being going through contracts. I'm just curious, what portion of your business is tougher to re-price in this environment?

So to answer your first question, we have made progress on price. You saw us going from 10 basis points to 140. And if you recall, Joe, we had said that, you will see this ramp through the year, because we take a very methodical approach to driving price across the multiple geographies and the channels, we have. We should continue to see progress in the fourth quarter as these price actions that we've taken in the third quarter continue to take hold. I think the big issue that we have seen as inflation is coming faster than anybody thought. And so the team has continuously done what it can to drive price increases to the question that was even asked earlier, our goal is to get to neutral of price and all. But I think it'll all depend on how inflation goes. But the team knows how to drive price, the team drives a lot of innovation that also helps from a price increase perspective. So all that put together teams working it pretty hard.

And the question on the contract,in being able to reprice some of your contract,you have some kind of benchmark for us on what portion is a little bit tougher to reprice in the environment?

Yes. Listen, all price increases we work with our customers. We have contracts with many of our customers, in some cases we get 90 to a 120 days notice. In some cases, these are longer contracts that we worked through. And then we have spec in businesses that we work directly with the OEM. So put all that together, that's how we look at this. So it's hard for me to give you one number because, pick a day and I think you'll have a different dollar of contract on the contract quote and quote.

Got it. Okay. Thank you very much.

Thanks too

Thanks too

[Operator Instructions]

To wrap up, our team is performing well in a challenging environment, delivering broad-based growth, good margins, and strong cash flow. We will stay focused on managing supply chain constraints, investing in attractive market trends to drive our growth and creating greater value for our customers and shareholders. Thank you for joining us.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Thank you.