Waning demand for flat-screen TVs and other consumer electronics clipped 3M Co.’s quarterly profits and prompted the Maplewood conglomerate to slash its guidance for the year.
3M, which makes popular items such as Scotch tape and Post-it Notes, also manufactures the optical films, adhesives and components that go into laptops, cellphones and televisions.
But the challenged economy in the United States, Asia and Europe has dampened sales of electronics, in addition to consumers’ growing preference for touch-screen devices over TVs, the company said Thursday.
“While there are some indications of an upturn later in the year, our optimism is tempered by the current reality,” CEO Inge Thulin said on a conference call with analysts. “We expected a challenging start to the year, but, in fact, market conditions were tougher than we expected.”
Thulin noted the company overcame a “low-growth economic environment and the strong U.S. dollar” to achieve record sales results. He also said the company is working to gain a stronger foothold in the touch-screen device market as consumer tastes shift toward those products.
3M’s electronics and energy business was the only one of five business groups to post a sales decline Thursday. It dropped 3.3 percent, with most of the decline occurring in Japan, other Asian countries, Europe and the United States.
“This is 3M’s first miss-and-lower in some time, but can be understood in light of the lackluster demand environment,” Steve Winoker, a New York-based analyst with Sanford C. Bernstein & Co., wrote in a research note.
During the quarter, 3M also was hurt by weak sales in Japan and Western Europe and the deflation of the Japanese yen. The high U.S. dollar didn’t help, either. For the quarter, foreign currency exchange rates reduced 3M’s quarterly sales by 1.8 percent.
Still, when it came to overall results, analysts said 3M isn’t doing badly.
Scott Davis, equity research analyst at Barclays Capital, noted that 3M was performing “a lot better than what we are seeing at other companies.”
For the January through March period, 3M said sales grew 2 percent to $7.6 billion while earnings were flat at $1.147 billion. On a per-share basis, earnings were $1.61, below the $1.65 analysts expected on average.
3M’s stock, which recently powered to an all-time high of $108.72 a share, closed Thursday at $104.88, down $2.99 a share or 2.8 percent.
3M’s Latin American and Canadian operations had the strongest product sales of any geographic region for the quarter. Results proved particularly positive for industrial adhesives, consumer health care, food safety products and health software systems.
3M’s U.S. sales rose amid increased demand for industrial tapes, liquid filtration and aerospace products, as well as health care and consumer home products.
Still, Thulin told analysts Thursday that it was “prudent” to lower the earnings forecast for full-year 2013 because of the “slower demand in several markets and the impact from the rising U.S. dollar.”
3M now expects earnings of $6.60 to $6.85 per share, compared with the prior guidance of $6.70 to $6.95 per share. Sales are expected to grow in the 2 percent to 5 percent range.
Bloomberg News contributed to this report.