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3M hits 1Q mark, cuts jobs
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April 23, 2001: 2:26 p.m. ET
Maker of Scotch tape, industrial items to slash 5,000 jobs; warns on '01 results
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NEW YORK (CNNfn) - Minnesota Mining & Manufacturing Co. Monday reported a slight rise in its first-quarter profit, meeting Wall Street forecasts, and became the latest major company to cut jobs and warn about results.
The company popularly known as 3M, which makes Scotch tape, industrial coatings and other products, earned $467 million, or $1.16 a diluted share, in line with the forecast of analysts surveyed by earnings tracker First Call. A year earlier it earned $456 million, or $1.13 a share, before special items.
The company said its results were hit by higher energy costs and the strong value of the dollar, which reduced overseas sales. In response, it said it will cut 5,000 jobs, about 7 percent of its work force, with about half the cuts coming outside the United States. The cuts are to take place over the next 12 months.
"While no one likes to eliminate jobs, this action is consistent with our resolve to achieve solid growth, make the whole organization faster, and advance 3M to an even higher level," said CEO W. James McNerney Jr., who completed his first quarter as head of the company since coming over from General Electric Co. (GE: Research, Estimates) Jan. 1.
McNerney, the first outsider to run Minneapolis-based 3M in recent memory, said the cuts are "especially important now in light of the current, difficult economic situation, and the reality that these conditions may last longer than expected."
The company now expects earnings per share of $4.75-to-$5.00 for the year. First Call's forecast calls for EPS of $4.98. Even the low end of the guidance represents an improvement from the $4.68 a share, excluding special items, the company earned in 2000.
But even with the warning on future results, the news of job cuts was welcomed by analysts and investors, as shares of 3M (MMM: up $2.09 to $114.59, Research, Estimates), a component of the Dow Jones industrial average, rose in midday trading, bucking the direction of the overall benchmark.
"Anytime you bring in an outsider, you run risk of disturbing the culture," said Jack Kelly, analyst with Goldman Sachs, about McNerney. "But I think it's fair to say he'll make 3M a more performance-minded company. I don't think it's been performance minded enough in the past."
Kelly said company officials made it clear in talks with analysts Monday that the cuts would not be across-the-board, but that he didn't think any particular operation would be sold or closed completely.
"I think clearly the pressures will fall heaviest on the products and geographic regions not producing sufficient profitability," said Kelly. "It's unlikely the technology business will have any heavy hits. It's growing quite nicely. But some of their mature businesses might."
Besides consumer and office division that makes such well-known products as Scotch tape and Post-It Notes, 3M has an industrial products segment making products such as abrasives and specialty adhesives, a transportation, graphics and safety segment that makes reflective materials for traffic and personal safety.
Its health-care segment makes prescription and over-the-counter drugs as well as medical and surgical products, while its electro and communications division is a leading provider of connecting, splicing, insulating and protective products used by telecom companies and the electrical industries. Finally, its specialty materials makes products for the telecom, chemical processing, automotive and other industries.
The consumer and office division was the company's only segment to show an increase in operating income during the quarter, despite basically flat sales. Revenue and profit both declined at its industrial and specialty materials units.
Overall revenue in the latest quarter edged up to $4.2 billion from $4.1 billion a year earlier. U.S. sales volume fell 2 percent, and while prices increased 0.5 percent, U.S. revenue fell 1.5 percent overall.
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Sales volume outside the United States rose 14.5 percent, but was hurt by a 0.5 percent decline in prices and a change in currency exchange values that reduced sales by another 8 percent, resulting in only a 6 percent gain in international revenue. 
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