3M Reports Sales Down In First Quarter 2019 Financials
3M has issued its first quarter 2019 financial results, reporting that sales were down five percent to $7.9 billion while it registered declines in certain business groups and markets. The company, located in St. Paul, Minnesota, operates in the promotional products industry as supplier 3M Promotional Markets (PPAI 113638).
“The first quarter was a disappointing start to the year for 3M,” says Mike Roman, CEO of 3M. “We continued to face slowing conditions in key end markets which impacted both organic growth and margins, and our operational execution also fell short of the expectations we have for ourselves. As a result, we have stepped up additional actions—including restructuring—to drive productivity, reduce costs and increase cash flow as we manage through challenges in some of our end markets.”
The company’s financial report notes that organic local-currency sales declined 1.1 percent while divestitures, net of acquisitions, decreased sales by a half percentage point. Foreign currency translation decreased sales by 3.4 percent year-on-year.
Health care was a bright spot in the company’s first quarter results, up 0.3 percent, while the consumer (down 1.9 percent), safety and graphics (down 4.2 percent), industrial (down 6.6 percent) and electronics and energy (down 11. 8 percent) business groups showed weaker performances. The consumer category did show a sales increase of 0.9 percent in organic local-currency sales. On a geographic basis, total sales grew 0.1 percent in the U.S., with declines of 6.5 percent in Latin America/Canada, 7.4 percent in Asia Pacific, and 9.4 percent in EMEA. Organic local-currency sales increased 0.8 percent in Latin America/Canada and 0.7 percent in EMEA, with decreases of 0.4 percent in the U.S. and 3.6 percent in Asia Pacific.
3M’s first-quarter 2019 GAAP earnings were $1.51 per share, an increase of 54.1 percent versus the first quarter of 2018. During the first quarter of 2019, the company recorded significant litigation-related pre-tax charges of $548 million, or $0.72 per share. The company established a reserve of $235 million to resolve environmental matters and litigation, in which 3M is a defendant, related to its historical manufacture and disposal of waste containing perfluoroalkyl substances (PFAS). 3M manufactured or used PFAS at five manufacturing plants globally, including in Alabama, Illinois and Minnesota, as well as in Belgium and Germany. The company also increased its respirator reserve by $313 million to address the cost of resolving all current and expected future coal mine dust lawsuits in Kentucky and West Virginia. These actions resulted in a total significant litigation-related pre-tax charge of $548 million.
The company’s first quarter operating income was $1.1 billion with operating margins of 14.4 percent. Excluding the litigation-related charges, operating income was $1.7 billion with operating margins of 21.4 percent.
“While we take actions to manage through the near-term, we also continue to invest in growth to position 3M for the future,” Roman continued. “We recently implemented a significant portfolio realignment from five to four business groups, which will enable us to better serve our customers and global markets. Moving forward, I am confident that we are making the necessary changes and focused on the right priorities to accelerate 3M into a stronger future.”
Reflecting the slower than expected 2019, 3M restructuring and other actions are expected to result in a reduction of 2,000 positions worldwide with an estimated annual pre-tax savings range of $225 million to $250 million, with $100 million in the remainder of 2019. The company anticipates a pre-tax charge in 2019 of approximately $150 million, or $0.20 per share. These actions will span all business groups, functions and geographies, with emphasis on corporate structure and underperforming areas of the portfolio.