By Helen Chernikoff
NEW YORK (Reuters) - 3M (MMM.NY)Co
The St. Paul, Minnesota, company is a bellwether of the U.S. economy because of its geographic reach and broad lineup of products including everything from Scotch tape to optical films for liquid crystal displays,
3M said quarterly earnings fell to $536 million, or 77 cents per share, compared with $851 million, or $1.17 per share, a year earlier.
Excluding restructuring expenses and other special items, however, profit was 97 cents per share, beating analysts' expectations of 93 cents, according to Reuters Estimates.
CEO George Buckley told analysts on a conference call that the first quarter of 2009 would be the hardest of this recession for 3M, that sales should recover a little in the second quarter and that the third quarter should produce economic growth and "gathering momentum" into the fourth.
3M forecast 2009 earnings of $4.30 to $4.70 per share, down from a previous range of $4.50 to $4.95, based on an assumption that organic sales volume would fall 5 percent to 9 percent.
Sales fell 11.2 percent to $5.5 billion.
"If you look near-term there's a lot of headwinds facing the company, said Morningstar analyst Adam Fleck, citing foreign exchange risk and weak customer demand. "But if you look past that, the company's pristine balance sheet and their cost-control actions are going to spring-load them for demand when it does return."
In response to lower demand, the company said it would reduce capital expenditures by 30 percent. Restructuring actions should save the company at least $235 million in 2009 while the deferral of merit pay increases will save it over $100 million.
3M also announced a halt to further share repurchases and had already said it had cut 2,300 jobs in the fourth quarter, a number the company bumped up to 2,400 during its conference call.
"Cutting capex is a big cost savings, so is deferring merit-pay increases," Fleck said. "That puts the company into position to be leaner and meaner when it does rebound. The long-term story is still intact."
At Wednesday's close, the shares were down about 33 percent from their 12-month high of $83.22 in April, slightly less steep than the 36 percent decline in the Dow Jones industrial average.
3M shares were up $1.55 or 2.8 percent at $56.97 on the New York Stock Exchange near midday on Thursday, off an earlier high at $57.71. The Dow Jones industrial average, of which 3M is a component, was down 1.6 percent.
(Reporting by Helen Chernikoff; Editing by John Wallace, Lisa Von Ahn and Matthew Lewis)
