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3M held steady in the IW US 500 ranking at No 44 Its revenue inched up 10 At the same time 3M was able to grow net income by more than 2 thanks in large part to a reduction in its percentage of sales devoted to cost of good sold

3M Still Has ‘Work to Do’ as Auto, Electronics Hurdles Persist

The results underscore CEO Mike Roman’s uphill climb to stabilize the company, which has faced multiple cuts to its guidance since he took the helm last year.

3M Co.’s sales and profit fell as the diversified manufacturer couldn’t shake weakness in the automotive and electronics markets.

The issues weighed on the shares even as the company topped Wall Street’s expectations for second-quarter earnings and reaffirmed its forecast for the year. Sales dipped 9% in the safety-products unit and declined 2.9% in the transportation and electronics division, 3M said in a statement Thursday.

“3M still has some work to do to regain its footing in 2019,” David Berge, senior vice president for Moody’s, said via email. 3M’s “debt increase since the beginning of the year, and thin free cash flow generated year-to-date, place greater stress on the company to achieve operating goals.”

The results underscore Chief Executive Officer Mike Roman’s uphill climb to stabilize the company, which has faced multiple cuts to its guidance since he took the helm last year. The maker of Post-it notes and touchscreen displays has cited challenges ranging from high raw-materials prices to unfavorable foreign-exchange rates to headwinds in China.

The shares reversed early gains and fell 1.3% to $177.01 at 12:46 p.m. in New York. 3M had fallen 5.8% this year through Wednesday, the second-worst performance in the Dow Jones Industrial Average.

Earnings Beat

Adjusted profit in the quarter fell to $2.20 a share, a 28% drop from a year earlier but better than the $2.05 average of analyst estimates compiled by Bloomberg. Net sales declined to $8.17 billion, compared with an expectation of $8.04 billion.

While challenges persist in several critical markets, the company said, the health-care business was a rare bright spot, boosting sales 5.8%. The unit also got a boost in the quarter as 3M agreed to buy surgical-wound care specialist Acelity Inc. for about $4.4 billion, its biggest acquisition ever.

“Our execution was strong in the face of continued slow growth conditions in key end markets, as we effectively managed costs and improved cash flow,” Roman said in the statement.

3M’s adjusted profit will be $9.25 to $9.75 a share this year, unchanged from its prior outlook. Including a 28-cent charge related to deconsolidating its Venezuelan subsidiary, 3M reduced its forecast.

The company’s performance in the quarter was far from perfect, but it marked an improvement over the terrible start to the year, when 3M pared its forecast and announced 2,000 job cuts in the face of profit declines in all major business lines. On the day of the announcement, 3M’s stock suffered its worst one-day loss in 31 years.

By Richard Clough

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