NEW YORK, N.Y. – 3M Co., the iconic maker of Post-Its and Scotch Tape, said Thursday it managed a slim increase in second-quarter earnings as cost-cutting offset a revenue shortfall.
It also held onto its forecast for the year, saying it would continue to trim expenses in the face of weakening economic conditions, especially in Western Europe. Shares rose more than 2 per cent Thursday.
The St. Paul, Minn., conglomerate makes thousands of items beyond its well-known office products. Because of the diversity of what it makes, and its global footprint, the company is seen as a bellwether for economic health. 3M’s second quarter highlighted growing strength in the automotive and aerospace industries, while demand for health-care products continues to grow around the globe. Consumer electronic sales slowed as many await new launches of popular products before the holidays. Apple Inc. is expected to launch a new version of the iPhone in October.
Sales in the U.S. held up well, while Asia had pockets of softness. Europe was a weak spot for most of 3M’s divisions.
3M posted net income of $1.17 billion, or $1.66 per share in the spring quarter, compared with $1.16 billion, or $1.60 per share, a year earlier.
Revenue fell 2 per cent to $7.53 billion. In addition to the economic conditions in Europe and weakness in sales of consumer electronics in Asia, a strong U.S. dollar diluted the value of international sales. For instance, an 11 per cent increase in sales in Latin America and Canada was almost entirely erased when sales in local currency were translated to dollars.
Besides its popular household products, 3M makes items ranging from stethoscopes to pavement markings and computer arms. Excluding the currency impact, sales rose in every division except for display and graphics, where sales of films for LCD televisions have slumped as TV sales slow. A bright spot in that segment, though, is film for smart phones and tablets, which continue to gain in popularity despite an overall slowdown in consumer spending. The unit also makes touch screen monitors and overhead projectors.
Sales in industrial and transportation, 3M’s biggest segment, rose 4.2 per cent to $2.63 billion. But when exchange rates were factored in, sales fell 0.6 per cent.
Analysts expected net income of $1.65 per share on revenue of $7.79 billion, according to FactSet. Costs fell nearly 4 per cent to $5.81 billion.
3M maintained its full-year forecast for earnings between $6.35 and $6.50 per share, compared with $5.96 per share in 2011. It expects sales to fall by 3 per cent because of continued strength in the dollar. That implies sales of $28.72 billion. Excluding that impact, 3M predicts sales will rise 2 to 5 per cent.
Analysts, on average, predict earnings of $6.39 per share on revenue of $30.56 billion.
3M also warned Thursday that its ability to fetch higher prices may be tested in the second half of the year. The company has been able to hike prices as it increases business in many markets. But it said slowing economic conditions may lead to slightly lower prices on some products. 3M still expects sales margins to be bolstered by cost cuts.