3M Cuts More Jobs as U.S. Demand Falls -- 3rd Update

Date : 01/28/2020 @ 6:03PM
Source : Dow Jones News
Stock : 3M Company (MMM)
Quote : 137.91  4.77 (3.58%) @ 12:49AM
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3M Cuts More Jobs as U.S. Demand Falls -- 3rd Update

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By Austen Hufford 

3M Co. posted lower revenue in key U.S. markets and set plans for fresh layoffs, the latest manufacturer to exhibit signs of strain at a time of weakness for the industrial economy.

3M sells its diverse array of products in a wide swath of the economy, including to consumers, offices, manufacturers and hospitals.

While the U.S. economy remains strong overall, the manufacturing sector has contracted for five consecutive months through December. 3M's results on Tuesday showed this divergence. Units that largely serve the industry economy posted revenue declines, while sales in units serving consumers and the health-care industry were flat.

"The industrial-production-related businesses are a little lower growth, " 3M Chief Executive Mike Roman said in an interview.

Shares in 3M were down 5.4% at $165.98 at midday.

Slow rates of domestic car production, lower shale-drilling activity and slack demand from China have all weighed on U.S. manufacturers. Boeing Co.'s decision to first slow and then suspend production of its 737 MAX has also been working its way through the company's supply chain. New orders for capital goods, a proxy for business investment, declined in December from the previous month, the Commerce Department said Tuesday.

The maker of products as diverse as Post-it Notes and industrial sandpaper reported a fourth-quarter revenue decline of 2.6% when excluding currency movements and acquisitions, including a 2.9% drop in the U.S. 3M said it was eliminating 1,500 jobs as part of a continuing restructuring to streamline its global operations. The company employs 96,000 people and said last April that it was cutting 2,000 jobs in underperforming business lines, such as energy and electronics.

The cuts will save the company as much as $120 million a year, 3M said. It booked a $134 million restructuring charge in the fourth quarter related to the cuts.

3M also said Tuesday that it received a grand-jury subpoena in late December related to chemical discharges from a facility in Decatur, Ala. 3M said chemicals might have been released from that plant into the Tennessee River, and that it was cooperating with the investigation by the U.S. attorney's office for the northern district of Alabama.

The U.S. attorney's office didn't respond to a request for comment.

St. Paul, Minn.-based 3M said sales in China and Hong Kong rose 0.8% for the latest quarter, even as the economy slows there. As one of the largest makers of medical face masks, the company has increased production to meet a surge in demand because of the global outbreak of a coronavirus in China.

"We are ramping up production in all of our facilities around the world, including in China, to full capacity. Twenty-four-seven production to meet the demand," Mr. Roman said.

At the same time, 3M said extended shutdowns at factories and other businesses in China could weigh on demand for other 3M products. The outbreak gained momentum this month, so the impact to the company's fourth quarter, which ended in December, was limited.

Sales in 3M's safety and industrial business fell 2.8% to $2.8 billion for the quarter, and sales in its transportation and electronics business fell 5.9% -- excluding currencies and acquisitions. Revenue also declined in 3M's aerospace unit, which makes industrial glues and other products for plane makers. Revenue in the company's health-care business declined 0.2%, and increased 0.2% in its consumer unit.

The company said sales in the latest quarter rose to $8.11 billion overall from $7.95 billion a year earlier, in part because of the October completion of its $4.3 billion acquisition of wound-care company Acelity Inc.

Analysts had expected revenue of $8.11 billion in the quarter, according to FactSet. 3M reported a profit of $969 million, compared with $1.35 billion a year earlier. Adjusted earnings were $1.95 a share. Analysts polled by FactSet were expecting adjusted earnings of $2.11 a share.

For 2020, the company said it expects earnings between $9.30 and $9.75 a share. Analysts were expecting the company to earn $9.59 a share in 2020.

Amber Burton contributed to this article.

Write to Austen Hufford at austen.hufford@wsj.com

 

(END) Dow Jones Newswires

January 28, 2020 12:48 ET (17:48 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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