3M profit falls 37 percent as sales decline

WASHINGTON -- 3M Co.'s fourth-quarter profit dropped 37 percent as the global economic slowdown lowered sales in most of its wide-ranging businesses, prompting the company to cut its outlook for 2009.

However, even as weak demand by U.S. and foreign customers for LCD screen coatings, adhesives, and more, impacted the manufacturer's profit in the latest quarter, it still managed to beat analysts estimates by 4 cents as a result of a lower tax rate.

Wall Street also seemed to note the 20-cent guidance reduction was still within range of what analysts are expecting. "We believe guidance exceeded some of the more bearish scenarios," said Deutsche Bank analyst David Begleiter, in a note to clients.

The company, whose operations span office supplies, transportation and health care, said net income fell to $536 million, or 77 cents per share, for the three months ended Dec. 31. It earned $851 million, or $1.17 per share, in the same period a year earlier.

Sales for 3M, known for its Scotch tape and Post-it brands, fell 11.2 percent to $5.51 billion, led by its largest division, industrial and transportation.

Revenue for that segment, which makes specialty products for autos, aircraft, boats and other vehicles, fell 11.3 percent to $1.7 billion due to many shutdowns of customer plants across the manufacturing sector.

The company's safety, security and protection unit, which makes products like air duct wrap and steel coatings, was the only segment to report higher sales in the quarter.

By contrast, its display and graphics business, which makes the LCD screen coating, posted the worst sales decline among 3M's six core businesses, down 28 percent.

Before special items, the company -- a component of the Dow Jones industrial average -- earned 97 cents per share, beating Wall Street expectations by 4 cents, according to a poll of analysts by Thomson Reuters.

Shares of the Maplewood, Minn.-based company rose $1.13, or 2 percent, to $56.55 Thursday. During the last three months of 2008, they fell nearly 16 percent.

But 3M Chief Executive George Buckley said the company expects a "worse" global economy in the first quarter compared with the fourth, due to weak sales volumes and continued softening of the economy.

"On this basis, we need to recognize that the first quarter is probably going to be the hardest one of this recession for 3M," Buckley told analysts during a conference call after the earnings were announced.

For the year, 3M expects revenue to fall anywhere between 5 percent and 9 percent -- a steeper decline than its previous estimate of a 3- to 7-percent.

It also scaled back its 2009 earnings forecast to a range of $4.30 to $4.70 per share, from $4.50 to $4.95 per share, previously.

The company plans to cut capital spending by about 30 percent this year and conserve cash "aggressively." During the fourth quarter, 3M announced plans for 2,400 job cuts worldwide to save $235 million this year, and deferrals of merit pay increases and phasing out its vacation policy for another $100 million in annual savings over the next two years.

3M earned $3.5 billion, or $4.89 per share, for all of 2008, down 16 percent from 2007. But revenues grew 3.3 percent to $25.3 billion.