3M Co. (MMM), the maker of products ranging from Scotch tape to dental braces, said quarterly sales growth in Asia, excluding Japan, rose the most in almost two years, a sign demand is picking up in the region.
3M’s sales from existing business rose 10 percent in Asia Pacific, driven by China’s 16 percent gain, Chief Financial Officer David Meline said today on a conference call. Including Japan, sales in the region rose 5.8 percent, Meline said, compared with a decline of 0.1 percent in the third quarter.
“For the base business we see a recovery coming and we feel optimistic about that,” Inge Thulin, 3M’s Chief Executive Officer, said on the conference call about China. “We’re still cautious.”
Asia, which unexpectedly became a drag for U.S. companies as growth slowed last year, may help boost sales in 2013 and make up for a recession-hurt Western Europe. 3M, similar to many large U.S. companies, has invested heavily in China and other Asian economies to make up for growth that’s lagged behind developed countries.
China’s economic growth slowed to 7.8 percent last year from 9.3 percent in 2011. This year, it’s forecast to accelerate to 8.1 percent growth, according to the average of economists’ estimates compiled by Bloomberg. Asia, excluding Japan, is forecast to grow 6.72 percent this year. Growth slowed to an estimated 6.25 percent last year from 7.56 percent in 2011.
Asia Pacific accounted for 31 percent of the company’s sales in 2011, the latest annual sales figure with a regional breakdown, trailing only the U.S, which had 34 percent. Europe, the Middle East and Africa accounted for 24 percent of sales.
Still, Thulin warned that growth in China won’t be at the levels of the recent past. China’s economy expanded 14.2 percent in 2007.
“It’s not the old China, if you like,” Thulin said. “It’s a different base line that we need to grow from.”
While 3M’s industrial business is expected to do well in China this year, there’s some doubt on the recovery of electronics, Thulin said.
U.S. sales from existing businesses rose 5.2 percent in the fourth quarter, more than double the 2.3 percent gain in the third quarter, helped by strong holiday demand for consumer and office products.
As part of a strategic review of businesses with sales of $2.5 billion that the company announced in November, 3M will combine its security-systems division with its traffic-safety business, eliminating 300 jobs, Thulin said. The move will result in an $8 million charge in the first quarter, he said.
Thulin said government spending on security has decreased over the last few years and combining the businesses will increase efficiency.
3M posted fourth-quarter net income of $991 million, or $1.41 a share, up from $954 million, or $1.35, a year earlier. That matched the $1.41 average estimate of analysts surveyed by Bloomberg. Sales climbed 4.2 percent to $7.39 billion, beating the average estimate of $7.17 billion.
The company reaffirmed its full-year forecast for 2013 of earnings in a range of $6.70 to $6.95 a share.
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