3M Co. today lowered its financial outlook for the remainder of 2011 and said it was looking at restructuring moves as a result of weak consumer electronics sales, compounded by slowing Western European economies.
The Maplewood-based company (NYSE: MMM) — viewed as a bellwether for the economy — delivered the somber outlook in reporting third-quarter earnings this morning. The market took 3M stock down nearly 7 percent in early trading.
3M reported third-quarter sales of $7.5 billion, up 9.6 percent from a year ago, but earnings were $1.52 per share, a 1 percent decline year-on-year.
The company now expects to earn $5.85 to $5.95 per share for the full year, down from previous guidance of $6.10 to $6.25. Last year, 3M reported $5.63 earnings per share.
Sales in the Display and Graphics division, which includes films used in the manufacture of LCD TVs, fell 12 percent to $935 million, and earnings dropped 37 percent to $179 million from a year ago.
CEO George Buckley told investors and analysts in a call this morning that the company is not forecasting a double-dip recession but, rather, looking at a “double dimple.”
Buckley said he expects “somewhat slower growth next year for the United States,” predicting economic growth will remain below 2 percent.
He also cited continuing concerns about Europe and warned that the company “may yet see some other cascading impacts from flooding in Thailand,” which is a major parts supplier for the Japanese auto industry.
Citing customers who have reduced inventories “in anticipation of slowing demand,” the company also pointed to slowing spending among Western European consumers and governments as factors affecting the quarter’s performance.
“We are responding to lower demand with aggressive cost management and operational discipline in developed economies,” Buckley said in prepared remarks.
The company will continue to move manufacturing capacity “from the wrong places to the right places,” Buckley said, by spending overseas and “in markets that are growing very fast, some of which may be in the U.S.”
In addition, in response to European uncertainty, the company told investors it had combined operations among several Western European countries and split off Eastern Europe, the Middle East and Africa.
3M also warned that it may do further cost cutting next year, although the planning process for 2012 is still under way.
“The business environment remains challenging, as the economic softening that we experienced late in the second quarter continued into the third,” Buckley said in a prepared release. “While growth rates were good across much of our portfolio, LCD TV remained weak and momentum slowed in other parts of electronics following several quarters of very good growth.”
Also, he said, “ongoing policy uncertainty and austerity are affecting growth in Western Europe, which reduced sales in the quarter. As is typical, we are seeing the impact of these changes earlier than most, as our customers decrease production in order to lower their inventories. Conversely, we should benefit more quickly when those markets recover.”
Buckley also noted: “Looking ahead, early evidence suggests slower growth will persist through year end … At the same time, we are bullish on many developing economies and plan to maintain key investments in R&D, sales and manufacturing to capitalize on underlying strength in those regions.”