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Negative Foreign Currency Translation Eats Away At 3M Sales, Earnings

Negative Foreign Currency Translation Eats Away At 3M Sales, Earnings

The company reported sales decreased in two of its five sales divisions, with electronics and energy slipping the most.

3M reported on Tuesday a slight year-over-year drop in its revenue and profit for the second quarter, largely due to negative foreign currency translations and a struggling electronics and energy division, which has seens its sales drop consistently over the last year and a half.
 
The Maplewood-based company, known for Post-It Notes, Scotch tape and the other industrial supplies it manufactures, narrowed its earnings outlook for the year to $8.15 to $8.30 earnings per share compared to its prior estimate of $8.10 to $8.45 per share.
 
The company's stock took a 1.6 percent tumble in early morning trading to $176.42.
 
For the three-month period ending June 30, three of 3M’s five business sectors posted year-over-year sales gains, although the growth was marginalized by overseas pressure on the U.S. dollar.
 
A financial breakdown of each 3M business division is as follows:
 
Industrial
  • Sales down 0.1 percent from a year ago to $2.6 billion
  • Foreign currency translations cut sales by 1.3 percent
  • Growth in auto parts, automotive aftermarket and abrasives
  • Declines in the rest of its portfolio
 
Safety and Graphics
  • Sales up 4.7 percent to $1.5 billion
  • Foreign currency translations cut sales by 2.2 percent
  • Largest growth in roofing granules and commercial solutions
 
Health Care
  • Sales up 3 percent to $1.4 billion
  • Foreign currency translations cut sales by 1.9 percent
  • Every business reported growth within this division
 
Electronics and Energy
  • Sales down 10 percent to $1.2 billion
  • Foreign currency translations cut sales by 0.9 percent
  • Significant declines in electronics-related sales, including the films and adhesives used to construct smartphones and televisions
 
Consumer
  • Sales up 1.7 percent to $1.1 billion
  • Foreign currency translations cut sales by 1 percent
  • Growth in home improvement and consumer health care
 
All in all, sales took a 0.3 percent year-over-year dip to $7.66 billion for the quarter. Wall Street analysts expected $7.71 billion.
 
3M’s profits, however, edged past analyst expectations. The company reported earnings of $1.29 billion, amounting to $2.08 per share, which was a penny above Wall Street’s estimate.
 
“Building on a solid first quarter performance, our team controlled the controllable and posted another quarter of strong earnings and expanded margins,” 3M CEO Inge Thulin said in a statement. “Our execution of the 3M playbook is enabling us to deliver premium returns today while also building for the future.”