3M cuts profit forecast after sales miss on slowing Asia demand
(Reuters) – 3M Co (MMM.N) on Thursday became the latest U.S manufacturer to signal American corporations are suffering from the trade war with China, after it reported quarterly revenue well short of Wall Street estimates and cut its full-year profit forecast.
FILE PHOTO: The 3M logo is pictured on products at an Orchard Supply Hardware store in Pasadena, California U.S., January 24, 2017. REUTERS/Mario Anzuoni
Shares of the company, which gets nearly a third of its annual sales from Asia, fell as much as 5.4%. The stock is the third biggest percentage loser on the Dow Jones Industrial Average .DJI this year to Wednesday, with an 11% drop.
China was the worst performing market, the company said, with sales plunging 9% excluding the impact of currency changes.
The world’s second largest economy expanded at its weakest pace in almost three decades in the third-quarter as the bruising trade war hit factory production, with auto sales slumping for the 15th straight month in September.
This squeezed demand for 3M’s automotive products such as sound absorption materials and thermal insulation pads used in batteries.
So far this week, industrial bellwether Caterpillar Inc (CAT.N) reported weak demand in Asia, including a 29% plunge in construction equipment sales, while toymaker Hasbro Inc (HAS.O) highlighted a hit from the tit-for-tat tariffs.
Overall, 3M’s sales in Asia-Pacific, its biggest market outside the United States, fell 5%. In the United States adjusted sales dropped 1.1% and also came in below the expectations of some analysts.
“We’re seeing a broader impact on industrial production, broader manufacturing,” in the United States due to the slowing economic growth, said Chief Executive Officer Mike Roman.
3M, known for Scotch tape and Post-it notes, earlier this year announced plans to reduce production and cut 2,000 workers as its sales slowed.
“We believe investors anticipated a weak quarter and guide down. Operationally, this appears worse,” Gordon Haskett analyst John Inch wrote in a note.
3M lowered its full-year adjusted earnings expectations to be between $8.99 and $9.09 per share, down from its prior outlook of $9.25 to $9.75.
Net income attributable to the company rose to $1.58 billion, or $2.75 per share, in the quarter, from $1.54 billion, or $2.64 per share, a year earlier, helped by a divestment gain.
Net sales fell 2% to $7.99 billion, missing the average analyst estimate of $8.16 billion, according to IBES data from Refinitiv.
Reporting by Ankit Ajmera in Bengaluru; Editing by Shinjini Ganguli and Sriraj Kalluvila