MINNEAPOLIS (AP) — 3M said Thursday its first-quarter profit barely rose as it faced weaker demand. It cut its profit guidance for the full year.
3M's Scotch tape and construction and safety materials make it a good window into the broader economy. It has operations all over the world, so a stronger dollar hurt its revenue because many of its goods are sold in other currencies.
In addition, profits declined sharply in 3M's electronics unit because of soft demand.
"While there are some indications of an upturn later in the year, our optimism is tempered by the current reality, said Inge G. Thulin, 3M's chairman, president, and CEO, on a conference call. "We expected a challenging start to the year, but, in fact, market conditions were tougher than we expected."
Net income for Maplewood, Minn.-based 3M Co.'s was just slightly higher from a year ago at $1.13 billion, or $1.61 per share. A year ago its net income worked out to $1.59 per share. Revenue rose 2 percent to $7.63 billion. Revenue and profits were both short of analyst expectations of $1.65 per share and revenue of $7.81 billion.
The cut to its full-year profit guidance was driven by the stronger U.S. dollar and uncertainty in Japan and Western Europe. For the full year, it now expects to earn $6.60 to $6.85 per share. It had previously predicted $6.70 to $6.95.
Analysts had been expecting a profit of $6.83 per share, according to FactSet. Half of the profit reduction is because of the impact of foreign currencies, and half is because of tougher business conditions, the company said.
It didn't make a specific revenue prediction, but said currency issues will reduce revenue by 1.5 percent, whereas previously it had expected no impact from currency.
Operating profits in its industrial division — the company's biggest by revenue — fell almost 3 percent to $576 million. Profits rose slightly in its safety and graphics and health care divisions, and dropped 16 percent in its electronics and energy division as revenue declined. Operating profits were flat in its consumer division, where products include Scotch tape and Post-it notes.
Automatic government spending cuts that took effect last month are expected to cut $10 million to $20 million from revenue for the year, the company said. 3M gets about $1 billion in revenue from the government.
Its Ceradyne ceramics unit, acquired late last year, makes the bullet-stopping inserts for body armor used by U.S. troops. That business is in decline as the U.S. shrinks its presence in Afghanistan, but it's being partially replaced by a contract to supply armor for the Afghan government, the company said. Earlier this month 3M said it would lay off 93 workers in Kentucky because of the slowdown.
3M shares dropped $2.99, or 2.8 percent, to close at $104.88 Thursday. 3M is one of the 30 stocks in the Dow Jones industrial average, and the shares had been near their 52-week high of $108.72.