The 3M logo on a building in Irvine, Calif., on April 13, 2016.Mike Blake/Reuters
U.S. industrial conglomerate 3M Co MMM-N beat Wall Street expectations for first-quarter profit on Tuesday on cost-cutting, sending its shares up nearly 5 per cent even as it warned of a potential hit to 2025 earnings from trade tensions.
Bill Brown, who succeeded Mike Roman as CEO in May, laid out a restructuring plan focused on reining in spending and redirecting funds from mitigating legal liabilities. It also included discontinuing less-profitable consumer product lines.
In February, 3M said it was targeting an operating margin of about 25 per cent by 2025. For the first quarter, it reported an adjusted operating income margin of 23.5 per cent, up 2.2 percentage points compared to last year.
The St. Paul, Minnesota-based company now expects a potential tariff-related hit of 20 cents to 40 cents per share on its full-year adjusted profit forecast of $7.60 to $7.90, keeping in view heightening global trade tensions.
U.S. President Donald Trump’s tariffs have fuelled concerns about an economic slowdown and a decline in consumer sentiment, which could impact sales for 3M’s consumer products, including its iconic Scotch tape and Post-it notes. China accounted for roughly 10 per cent of the company’s global revenue, as of March.
Kleenex tissue maker Kimberly-Clark slashed its annual profit forecast on Tuesday, projecting an about $300-million in costs this year due to the broad tariffs.
Excluding items, 3M posted a first-quarter profit of $1.88 per share, higher than the average analyst estimate of $1.77, according to data compiled by LSEG.
The industrial giant benefited from 2.5 per cent growth in its safety and industrial segment, while sales of auto aftermarket products and abrasives declined.
Sales in its consumer segment in the first quarter came in flat compared to last year on the back of soft consumer spending on office and home products such as adhesive hooks and packaging.
Total net sales for the quarter were $5.78-billion, slightly above Wall Street expectations of $5.75-billion.