(Reuters) - 3M Co (MMM.N) is eager to make a deeper foray into natural resources and aerospace markets to expand beyond consumer products like Scotch Tape, sand paper and touch-screen displays, new chief executive Inge Thulin said Tuesday.
The U.S. manufacturer is planning an immediate push into markets that service customers dealing with the gas, oil, mining and water industries by forming a new division called “natural resource management and extraction.”
“We have been in those markets for some time,” Thulin told analysts during a conference call after posting quarterly earnings on Tuesday. “But at least in my mind, and the organization’s mind here in total, we have not given full attention in terms of additional investment in order to accelerate our growth.”
Other companies have been looking to boost business in the natural resources sector. Caterpillar Inc (CAT.N), for instance, has in recent years increased profit by diving into the area via acquisitions in the mining sector.
“If you look at the play for natural resources, it’s a huge market globally,” said Kevin Walkush, business analyst for Jensen Investment Management. He cited an “energy renaissance” taking place in the United States, with natural gas and oil exploration increasing, as one example of why 3M would more aggressively chase this business.
Jensen owns 3 million shares of 3M.
Thulin has been at 3M’s helm for two months and presided over his first quarterly earnings report on Tuesday. Profit came in ahead of Wall Street expectations and 3M raised its full-year outlook, sending shares up 1.6 percent to close at $88.49.
Thulin’s heightened focus on natural resources comes as he looks to manage a set of challenges inherited from predecessor George Buckley.
While Buckley is credited with reshaping 3M by refining the focus, boosting growth targets and increasing research and development budgets, the company’s volatile display and graphics division is struggling. And sales fell in Asia Pacific.
3M will also seek further inroads in the aerospace sector. Thulin believes the company’s product range, including composite films, abrasives and personal protection devices, can help it jump-start sales to aerospace companies.
“That’s a good opportunity for us to enable lighter, safer, quieter aircraft, constructed faster. We believe with additional technologies that we can accelerate that even more - meaning more focus and investment will go into that business,” he said.
3M has six main operating divisions, such as office supplies or healthcare, and a myriad of subdivisions, such as food safety or optical systems.
A spokeswoman for 3M said it will focus on better grouping its natural resources products, such as cement products, pipeline protectants and liquid filtration, to more effectively sell to customers in the natural resources sector. The move should allow the company to provide more managerial focus on underdeveloped businesses without shifting investment out of another sector.
3M had done this with its automotive business by bundling products such as window coatings and paint supplies under the same umbrella, Morningstar equities analyst Adam Fleck said. The company now points to automotive as a key growth business.
“If you kind of think about the industrial space as a whole they have a lot of opportunity,” Fleck said. This move “helps them to focus from a managerial perspective,” he said.
Reporting By John D. Stoll in Detroit; editing by Matthew Lewis