3M Sales Fall With Drag From Weak Electronics, Strong Dollarby
Currency headwinds have weighed on international revenue
First-quarter earnings top estimates as company cuts costs
3M Co. is contending with falling sales as persistent strength in the U.S. dollar and weakness in the consumer electronics market hurt the maker of Post-it notes and Scotch tape.
First-quarter revenue declined 2.2 percent from a year earlier to $7.4 billion, including a 14 percent drop in the electronics and energy unit, 3M said Tuesday in a statement. The effects of foreign currency reduced sales by 3 percent.
3M has struggled to generate growth as currency headwinds and a sluggish global economy have weighed on an international business that accounts for about two-thirds of the company’s sales. Chief Executive Officer Inge Thulin overhauled operations last year, including plans for 1,500 job cuts, to reduce U.S. expenses and strengthen 3M’s operation in Europe and Latin America.
“We continued to march forward with business transformation,” he said on a conference call with analysts.
The company announced a restructuring effort for its electronics business that will result in a $20 million charge in the second quarter. The move will include 250 job reductions, 3M said.
“Electronics and Energy continues to be impacted by softness in the consumer electronics market, which we expect to persist through the first half of the year,” Thulin said.
3M fell 1.4 percent to $165.98 at 12:02 p.m. in New York. The shares rose 12 percent this year through Monday, outpacing the 2.1 percent gain in the Standard & Poor’s 500 Index.
Earnings in the first quarter rose to $2.05 a share, the St. Paul, Minnesota-based company said. The results included a benefit of 10 cents a share, stemming from new tax guidance for employee stock-based payments. Analysts had projected $1.92 a share, based on the average of estimates compiled by Bloomberg.
The operating income margin rose 1.3 percentage points to 24.1 percent, 3M said.
Sales rose 4 percent in the health-care division and 2.9 percent in the safety and graphics business.
The company said last month that it may spend more than $10 billion on acquisitions by 2020 to help spur growth. That would add to recent deals, including the purchase last year of Polypore International Inc.’s separations-media business for $1 billion and of a safety-equipment maker for about $2.5 billion.
Profit in 2016 will be $8.10 to $8.45 a share, 3M said, reaffirming an earlier forecast. Organic local-currency sales will climb 1 percent to 3 percent.