3M Plans $400M in Cost-Cutting Measures in 2Q
3M appears to have weathered its first quarter better than many other companies still reeling from impacts of the Covid-19 pandemic. But the Minnesota manufacturer on Tuesday hinted at some major cost-cutting measures in the coming months.
Though 3M’s first quarter revenue and net income actually grew compared to the same period last year, the company says it plans to take “aggressive cost reductions” to save between $350 million and $400 million in the second quarter. 3M hasn’t yet outlined any specific actions, but said it would aim to minimize the impact on employees.
The company also plans to reduce 2020 capital expenditures to $1.3 billion, down from about $1.7 billion.
“Looking ahead, 3M is taking action that will help us navigate near-term uncertainty, generate strong cash flow, and lead out of the slowdown by delivering for employees, customers and shareholders,” chairman and CEO Mike Roman said in a news release.
In the first quarter, 3M’s net sales grew 2 percent to $8.1 billion, while net income soared 45 percent to $1.29 billion. Unsurprisingly, the company said it’s seeing strong demand for general cleaning products, along with products related to food safety and personal safety. But some of 3M’s other mainstays aren’t faring quite as strongly, including its stationery and office supplies, oral care products, and automotive parts.
Starting in May, 3M will begin reporting monthly sales figures in the interest of “transparency.”
Meanwhile, 3M officials said the company is withdrawing its full-year 2020 guidance, which was initially issued in January, before the pandemic took hold in the U.S.
“3M currently is not able to estimate the full duration, magnitude and pace of recovery across its diverse end markets with reasonable accuracy,” officials said in the release. “Therefore, 3M believes it is prudent to withdraw its previously communicated full-year 2020 outlook.”
In an RBC report quoted by NBC News, analyst Deane Dray said 3M was expected to “to modestly outperform peers by roughly low-single-digits” in the quarter.