3M limited company
The company said it would cut 2,500 jobs globally as it faces turmoil in overseas markets and weak consumer demand.
The maker of Scotch tape, post-it notes and thousands of other industrial and consumer products said Tuesday it expected lower sales and profits in 2023 after demand weakened sharply in late 2022, dragging down quarterly results.
The St. Paul, Minnesota-based company forecast sales will decline this year from last year’s levels due to weak demand for consumer goods and electronics, especially smartphones, tablets and televisions, for which 3M supplies components. Fourth-quarter sales at 3M’s consumer products business fell nearly 6% year-over-year.
“Consumers slashed discretionary spending and retailers adjusted inventory levels,” 3M Chief Executive Officer Mike Roman said on a conference call. “We expect the demand trends we saw in December to continue into the first half of 2023.”
3M shares fell 5.2 percent to $116.25 Tuesday afternoon, while major U.S. stock indexes were little changed.
The company said demand for its disposable masks is falling as healthcare providers spend less on Covid-19 measures and demand for masks returns to pre-pandemic levels. 3M said it expects mask sales this year to fall by $450 million to $550 million starting in 2022.
3M executives say the spread of Covid infections in China is hurting sales there and sporadic factory closures are disrupting industrial production. China is also reducing production of consumer electronics due to weak consumer demand, while 3M’s exit from Russia last year will also lead to lower sales this year, they said.
The 2,500 layoffs represent about 2.6% of the company’s workforce, which a regulatory filing said would take the figure to about 95,000 by the end of 2021. Roman declined to specify where the layoffs will take place, or whether the company will make further layoffs as it reviews its supply chain and prepares to spin off its health care unit.
“We’re looking at everything we do to address the challenges we face in our end markets, and we’re focused on driving improvements,” he said.
The company said it will take a pretax restructuring charge of $75 million to $100 million in the first quarter.
Roman said the layoffs had nothing to do with the lawsuit the company was facing. 3M is defending itself against allegations that it has contaminated soil and drinking water with so-called permanent chemicals it has produced for decades. It is also involved in a lawsuit over foam earplugs that its subsidiary Aearo Technologies LLC sold to the military. Some 230,000 veterans have filed a complaint in federal court alleging that earplugs failed to protect them from service-related hearing loss.
3M says the earplugs are only effective when military personnel have received adequate training in their use. In a lawsuit against firefighting foam containing permanent chemical forms, 3M is expected to argue that the products are manufactured to U.S. military specifications, giving the company legal protection as a government contractor.
In both cases, Mr Roman said the company was focused on finding a way forward.
3M said the strength of the U.S. dollar continued to erode sales from other countries when foreign currencies were converted into U.S. dollars.
The company forecast sales for the quarter ended March 31 would be down 10% to 15% from a year earlier. For the full year, the company expects sales to decline 6% to 2% and expects adjusted earnings per share of $8.50 to $9. Excluding special charges, the company earns $10.10 a share in 2022, and analysts polled by FactSet expect $10.22 a share in 2023.
In the fourth quarter, the company reported a profit of $541 million, or 98 cents a share, compared with $1.34 billion, or $2.31 a share, a year earlier.
Excluding one-time items, including costs related to exiting the company’s business of making permanent chemicals, adjusted earnings came to $2.28 per share. Analysts expected adjusted earnings of $2.36 a share, according to FactSet.
Sales fell 6% to $8.08 billion in the quarter, slightly above expectations of analysts polled by FactSet.
Some of 3M’s businesses are showing promising signs, Roman said, including biopharmaceutical processing, home improvement and vehicle electrification, the last of which he said could grow 30% in 2022 to become a roughly $500 million business.
“It’s not just about consumer electronics, but the consumer electronics dynamic is certainly the story of the day,” he said.
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