3M cuts profit forecast after sales miss on slowing Asia demand

[October 24, 2019]  By Ankit Ajmera

(Reuters) - U.S. industrial conglomerate 3M Co <MMM.N> fell well short of Wall Street estimates for quarterly revenue and cut its full-year profit forecast on Thursday, adding to signs of U.S. corporations suffering from trade tensions with China.

Shares of the Scotch tape and Post-it notes maker fell as much as 3% premarket. The Dow component has lost about 11% so far this year, underperforming a near 14.8% rise for the index.

China, a high-growth market for 3M, expanded at its weakest pace in almost three decades in the third-quarter as the bruising trade war hit factory production.
 

So far this week, industrial bellwether Caterpillar Inc <CAT.N> reported weak demand in Asia, including a 29% plunge in construction equipment sales, while toymaker Hasbro Inc <HAS.O> highlighted a hit from the tit-for-tat tariffs.

3M also said sales in Asia-Pacific, its biggest market outside the United States, fell 5% in the third quarter ended Sept. 30, while Europe, Middle East and Africa declined 4.1%. Sales in the United States rose just 0.8%.

"While the macroeconomic environment remains challenging... we continued to effectively manage costs and reduce inventory levels," Chief Executive Officer Mike Roman said in a statement.

The company earlier this year announced plans to reduce production and cut 2,000 workers.
 

The 3M logo is pictured on products at an Orchard Supply Hardware store in Pasadena, California U.S., January 24, 2017. REUTERS/Mario Anzuoni

"We believe investors anticipated a weak quarter and guide down. Operationally, this appears worse," Gordon Haskett analyst John Inch wrote in a note.

3M said it now expects full-year sales to decline in a range of 1% and 1.5%, excluding the effect of currency changes, compared with sales growth of 1% at the mid-point forecast earlier.

The company also lowered its full-year adjusted earnings expectations to be between $8.99 and $9.09 per share, down from its prior outlook of $9.25 to $9.75 per share.

Net income attributable to the company rose to $1.58 billion, or $2.75 per share, in the quarter, from $1.54 billion, or $2.64 per share, a year earlier, helped by a gain from a divestiture.

Net sales fell 2% to $7.99 billion, missing the average analyst estimate of $8.16 billion, according to IBES data from Refinitiv.

(Reporting by Ankit Ajmera in Bengaluru; Editing by Shinjini Ganguli and Sriraj Kalluvila)

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