It said it is cutting 2,500 manufacturing jobs worldwide as the company grapples with turbulence in foreign markets and weakening consumer demand.
The maker of Scotch tape, Post-it Notes and thousands of other consumer and industrial products said Tuesday it expects lower sales and profits in 2023 after demand weakened significantly in late 2022, dragging down quarterly performance.
The St. Paul, Minn., company forecast sales this year to fall from last year’s level due to weak demand for consumer products and electronics, particularly smartphones, tablets and televisions, for which 3M supplies components. Fourth-quarter sales of 3M’s consumer business fell nearly 6% from the same period a year earlier.
“Consumers slashed discretionary spending and retailers adjusted their inventory levels,” 3M Chief Executive Mike Roman said during a conference call. “We expect the demand trends we saw in December to carry over into the first half of 2023.”
Shares of 3M were down 5.2% at $116.25 on Tuesday afternoon, while major US stock indices were little changed.
The company said demand for its disposable face masks is declining as healthcare providers spend less on Covid-19 measures and demand for masks returns to pre-pandemic levels. 3M said it expects mask sales to decline by $450 million to $550 million this year from 2022.
3M executives said the spread of Covid infections in China is hurting sales there and sporadic plant closures are disrupting industrial production. China is also cutting output of consumer electronics due to weakening consumer demand, they said, and 3M’s exit from its Russian business last year will also help reduce sales this year.
The 2,500 layoffs represent about 2.6% of the company’s workforce, which according to a regulatory document was about 95,000 at the end of 2021. Roman declined to specify where the job cuts will occur or whether the company could make further reductions as you go. reviews its supply chains and prepares to spin off its healthcare unit.
“We are looking at everything we do as we overcome the challenges we face in end markets and focus on driving improvements,” he said.
The company said it would take a first-quarter pretax restructuring charge of $75 million to $100 million.
Mr. Roman said the job cuts were not related to the litigation the company was facing. 3M is defending itself against accusations that so-called forever chemicals it has produced for decades have contaminated soil and drinking water. It is also involved in litigation over foam earplugs that its subsidiary Aearo Technologies LLC sold to the military. Some 230,000 veterans have filed complaints in federal court alleging that earplugs did not protect them from service-connected hearing loss.
3M has said that earplugs were effective when military personnel received sufficient training on how to use them. In litigation over firefighting foam incorporating forms of forever chemicals, 3M is expected to argue that the products were manufactured to US military specifications, giving the company legal protection as a government contractor.
In both cases, Roman said the company is focused on finding a way forward.
3M said the strong value of the US dollar continues to erode sales from other countries when foreign currencies are converted to dollars.
The company forecast that sales for the quarter ending March 31 will be down 10-15% from the same period last year. For the full year, the company projects sales to fall between 6% and 2%, and it expects adjusted earnings of $8.50 to $9 per share. The company earned $10.10 per share in 2022, not including special charges, and analysts polled by FactSet expected the company to earn $10.22 in 2023.
For the fourth quarter, the company posted a profit of $541 million, or 98 cents per share, compared with $1.340 million, or $2.31 per share, a year earlier.
Excluding one-time items, including costs associated with exiting the chemical company’s operations forever, adjusted earnings came in at $2.28 per share. Analysts were looking for adjusted earnings of $2.36 per share, according to FactSet.
Sales fell 6% to $8.08 billion in the quarter, slightly beating the expectations of analysts polled by FactSet.
Mr Roman said there were promising signs for some of 3M’s businesses, including biopharmaceutical processing, home improvement and automotive electrification, the latter of which he said will grow 30% by 2022 to become a business. of approximately $500 million.
“There’s more to this than consumer electronics, but certainly the dynamics of consumer electronics are the story of the day,” he said.
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