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3M Moves Most Capital Spending Outside U.S. for First Time

3M Boosts Forecast as Renewable Energy Helps Top Estimates
3M Co. boosted its full-year earnings forecast after first-quarter profit rose 16 percent. Photographer: Andrew Burton/Bloomberg

April 26 (Bloomberg) -- 3M Co.’s 2011 capital spending will be mostly outside the U.S. for the first time in its 109-year history, as the company chases sales in emerging markets.

Spending on plants, property and equipment in countries growing more rapidly than developed markets is part of 3M’s plan to garner full-year sales of more than $30 billion, a record. Sales to China, India and other emerging markets now represent 34 percent of revenue, and the company projects they may make up as much as 45 percent in 2015.

3M is building and expanding plants overseas to keep up with demand for products such as optically clear adhesives used in smartphones and computer tablets. About 70 percent of company sales come from outside the U.S. and about 65 percent of manufacturing takes place in the U.S.

This year “is the first time the company is now having more than 50 percent of its capital deployed internationally,” Chief Financial Officer David Meline said on a conference call. “As we see the recovery in demand, we are adding capacity and where we’re adding it is internationally, close to where the growth is.”

About 48 percent of the St. Paul, Minnesota-based company’s $1.09 billion in capital spending last year was outside the U.S., according to data compiled by Bloomberg.

3M today boosted its full-year earnings forecast after first-quarter profit surpassed analysts’ estimates, fueled by demand for films used in solar panels and tablet computers.

Profit this year will be $6.27 to $6.47, excluding pension-related expenses, compared with a February forecast of $6.17 to $6.42 a share, 3M said.

Films Sales

Sales increased about 20 percent at the industrial and transportation division, whose products include films for solar panels and windows, and at the electronics and communications unit, which makes films for smartphones. 3M said the earthquake and tsunami in Japan will curb 2011 profit by 10 cents to 13 cents a share, and favorable currency translation will help offset that.

“The year has started off better than we would have expected,” Stephen Tusa, a JPMorgan Chase & Co. analyst in New York, wrote today in a note. Tusa has a “neutral” rating on the shares.

3M climbed $1.82, or 1.9 percent, to $95.94 at 4:15 p.m. in New York Stock Exchange composite trading. That was the highest closing price since at least 1980, adjusted for stock splits. The shares have gained 11 percent this year.

First-quarter net income rose to $1.08 billion, or $1.49 a share, from $930 million, or $1.29, a year earlier. Analysts projected profit of $1.44, excluding some items, the average of 15 estimates in a Bloomberg survey.

Economic Bellwether

Revenue climbed 15 percent to $7.31 billion, compared with an average estimate of $6.95 billion, with sales gains at all six divisions. 3M is an economic bellwether because of its product range which spans health-care, consumer, automotive and energy markets.

3M’s full-year forecast tops analysts’ average estimate of $6.22 a share and last year’s adjusted profit of $5.75 a share.

3M has five manufacturing sites and about 2,700 workers in Japan, where its largest businesses are industrial and consumer-related.

3M today said favorable currency translation will increase sales this year by 2 percent to 3 percent, up from a previous forecast of 1 percent to 2 percent.

To contact the reporter on this story: Will Daley in New York at wdaley2@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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