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3M Sales Weighed Down by Surprise Decline in Consumer Division

Jan. 24, 2017
The Minneapolis-headquartered business posted its first year-over-year decline since 2009, with “uncharacteristic softness” in its consumer division offset better performance elsewhere.

3M Co.’s fourth-quarter sales fell in its consumer division as the maker of Post-it notes contended with weak demand for office products and stationery.

The business posted its first year-over-year decline since 2009, Deane Dray, an analyst at RBC Capital Markets, said in a note Tuesday. The “uncharacteristic softness” offset better performance elsewhere, he said.

The results capped a challenging year for 3M, which faced a steady drag from a strong U.S. dollar and a sharp downturn in the consumer-electronics market. With about two-thirds of revenue coming from overseas, the maker of adhesives, touch screens and dental tools has attempted to reduce U.S. expenses and strengthen business in Europe and Latin America.

3M’s sales in the quarter were little changed at $7.33 billion, the St. Paul, Minnesota-based company said in a statement. That compared with the $7.35 billion average of estimates compiled by Bloomberg. Sales fell 0.7% in the consumer operation.

The shares dropped 1.7% to $175.43 at 9:42 a.m. in New York, the second-biggest decline in the Dow Jones Industrial Average. 3M climbed 28% in the 12 months through Monday, compared with a 19% gain in the Standard & Poor’s 500 Index.

Earnings rose to $1.88 a share, narrowly beating the $1.87 average of analysts’ estimates. The effects of foreign-currency exchange reduced sales by almost % , while divestitures trimmed the results by 0.4%, 3M said.

The industrial division posted the biggest sales gain, up 3%, boosted by the automotive-parts business. The original-components business, which makes films, emission-control materials and adhesives for use in vehicle manufacturing, “continues to outpace global auto builds,” the company said in slides accompanying its earnings announcement Tuesday. Sales climbed 0.6% in the safety and graphics unit.

CEO Inge Thulin has been reshaping 3M’s portfolio through moves including the sale last month of an identity-verification business to Gemalto NV for $850 million. That followed agreements to shed the safety prescription eyewear unit and buy coding technology company Semfinder. 3M “made incremental investments to accelerate growth” during the year, Thulin said in the statement.

The company has been battling a slowdown in the consumer-electronics market, leading to a 1% sales decline for the unit in the quarter. 3M said last month that the operation’s revenue could fall in 2017.

Profit this year will be $8.45 to $8.80 a share, 3M said, reaffirming a forecast given last month. Organic local-currency sales will grow 1% to 3%.

By Richard Clough

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