3M's China Growth at Triple Pace


Industrial goods manufacturer 3M Company (MMM) recently projected that sales in China will triple in the next five years compared to the rest of the world, driven by a huge demand for health and consumer products such as face masks and water filters. China generated about 10% of the company’s total global revenues of $30.9 billion in 2013. Given the size and potential of the Chinese market, it makes sense to focus exclusively on this economic powerhouse.

3M envisions Chinese sales to grow at an annual pace of about 15% over the next five years, compared with a global growth rate in the range of 4% and 6%. The company aims to capitalize on higher consumption for necessary as well as luxury items as the Chinese government hopes to double the per capita income by 2020 from 2010 levels.

This is likely to generate higher demand for 3M face masks, which can filter out harmful suspended particulate matter less than 2.5 micrometers in diameter as China faces alarming pollution threats. The face masks were sold out in December and are likely to see increasing demand just as China pledges to control pollution in all earnestness.

3M has 11 manufacturing plants in China that produce adhesives, tapes and filters to the Post-it sticky notes. With rising per capita income and improving quality of life, the company also expects a higher demand for such consumables.

3M, together with its subsidiaries, operates as a diversified technology company with manufacturing operations spread over 70 countries. The company aims to deliver innovative security solutions to businesses and governments worldwide, thus ensuring the security of people and documents.

The company also remains focused on inventing new products and maintaining its competitive advantage worldwide. The rise in demand for 3M product services is likely to augment its overall revenues.

3M currently has a Zacks Rank #2 (Buy). Other stocks that look promising and are worth considering include Noble Group Ltd. (NOBGY), Federal Signal Corp. (FSS) and Sumitomo Corporation (SSUMY), each carrying a Zacks Rank #1 (Strong Buy).

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