3M says it’s hit midyear goals for increasing U.S. respirator output as a new production line recently opened at one of the company’s Wisconsin factories.
The N95 respirators are vital for protecting health care workers from COVID-19, and with sharply rising demand, they’re boosting 3M’s sales in an otherwise dismal year for manufacturers.
The Maplewood-based company has respirator contracts with the federal government that this year alone could generate over $1 billion in sales. And it’s sold nearly 100 million N95 masks directly into the health care system since coronavirus came calling.
“We are making more respirators than ever before,” said 3M spokeswoman Jennifer Ehrlich. The company, she added, “is delivering on its commitments to public health.”
3M drew President Donald Trump’s ire this spring for allegedly not working fast enough to meet U.S. mask needs. The company rejected such assertions, and the tiff ended with a mask production agreement between 3M and the government.
3M is the leading U.S. producer of N95 masks, which are considered the gold standard for health care and industrial workplaces. They block out 95% of airborne particles.
As COVID-19 started rolling in March, 3M significantly hiked its U.S. production to 35 million N95 respirators per month. The company committed to further boost U.S. output to 50 million per month by July.
3M said this week it’s now producing N95 respirators at a pace of over 50 million per month in the U.S. That number is expected to reach 95 million this fall.
3M said it’s also on target to meet its goal of increasing global production of N95 respirators from 1 billion annually to 2 billion by 2020’s end.
3M has respirator production plants in China, Singapore, Europe and Latin America, as well as in Aberdeen, S.D., and Valley, Neb. Masks are generally made in each market for that market.
But with demand surging from COVID-19, 3M has also been shipping millions of respirators made in China to the U.S.
To bolster U.S. production, 3M in June completed a new N95 mask production line at a Wisconsin factory that primarily manufactures equipment to make respirators. Eventually, that line will be moved to 3M’s Aberdeen plant, which is being expanded.
The federal government has played a major role in financing 3M’s expanded N95 production.
To boost mask supplies, Trump invoked the Defense Production Act. It allows the president to expand output of critical goods through loans, grants and other financial incentives to private companies.
The Defense Department has awarded $202 million in grants to 3M for increasing U.S. respirator manufacturing capacity. 3M has also invested $80 million since January to do the same.
Under the Defense Production Act, the Federal Emergency Management Agency (FEMA) became 3M’s priority customer for N95 masks. To meet FEMA’s needs, 3M has imported 166.5 million respirators, mostly from its plants in China.
Those 3M respirators are covered by four FEMA contracts with a total value of $78.8 million. But they are part of a master supply agreement with a ceiling of $1 billion in sales.
The master contract allows FEMA to place orders as needed at fixed prices through Sept. 8. A 3M spokesman said FEMA indicated last week it would buy up to 166.5 million more respirators over the next three months under the Defense Production Act.
FEMA distributes masks to states, tribes, territories and federal agencies that need them.
3M has another contract — worth $172.9 million — to supply N95 respirators to the U.S. Department of Health and Human Services, which manages the nation’s stockpile for critical medical supplies.
Also, 3M has two respirator contracts with the Department of Veterans Affairs that together total $60 million, according a federal contract database.
The N95 sales bump for 3M helps — a little, at least — to counteract coronavirus-induced damage. With an ailing global economy, 3M’s revenue in April fell by 11% over the same time a year earlier and dropped again in May by 20%.
Some stock analysts expect that increased respirator sales could add 3% to 3M’s overall revenue in 2020, particularly in the year’s second half.
“That is certainly significant, and a big reason why we’re forecasting (3M’s 2020 earnings per share) to be down only about 8% from 2019 vs. consensus estimates of down 50% for the S&P Industrials sector,” wrote Colin Scarola, an analyst at CFRA Research.
Matt Arnold, an analyst at Edward Jones, said that 3M’s respirator business “in the grand scheme is a modest needle mover. But in an environment where 3M is seeing mostly declines, every little bit helps. It is a shock absorber that 3M’s competitors don’t have.”