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Star Tribune 100

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Minnesota’s biggest companies are healing

  • Article by: JOHN J. OSLUND and PATRICK KENNEDY
  • Star Tribune
  • April 23, 2011 - 10:38 PM

Minnesota's biggest companies are heading down the path toward recovery after the Great Recession.

Sales, profits, market values and employment collectively rose at Minnesota's 100 largest public companies in 2010 as the global economy gained traction.

By year end, sales at the Star Tribune 100 companies rose a net 5.7 percent, compared with a drop of 0.3 percent in 2009. Profits jumped nearly 14 percent last year after falling 1.2 percent in 2009. And employment rose 0.7 percent, or about 9,135 jobs in 2010. That compares with a loss of 25,000 jobs in 2009.

"These are pretty overall strong results for Minnesota companies,'' said David Vang, chairman of the Finance Department at the University of St. Thomas Opus School of Business.

The market values of the state's 100 largest companies climbed 8 percent to $467 billion for the period from April 9, 2010, to April 6, 2011. That puts them within about $27 billion, or 10 percent, of recovering the market value that had been shed since the crisis hit in 2008. (Market value, also called market capitalization, is a company's stock price multiplied by the number of its shares outstanding.)

Consider these signs of recovery:

•Year-over-year sales rose at 78 companies in 2010; in 2009 only 39 companies saw increases.

•80 companies posted profits, up from 75 in 2009.

•Sixty-six added workers in 2010, including UnitedHealth Group, 3M, Target, General Mills and U.S. Bancorp. In 2009, only 36 companies added jobs.

•Thirty-two companies cut jobs in 2010, but just two of them account for the bulk of the cuts. Supervalu, which has struggled with its acquisition of Albertsons and the recession, cut 20,000 jobs in 2010 after cutting 20,000 the year before. Best Buy, which added 10,000 jobs in 2009, ended up cutting payrolls by 5,000 last year as it coped with slowing consumer electronics sales.

The jobs reported by ST100 companies reflect their payrolls worldwide, not only in Minnesota.

Unemployment statewide reached 6.6 percent in March, down from 8.2 percent in March 2009. Minnesota's jobless rate remains significantly below the national rate of 8.8 percent.

All Minnesota employers added a net 10,500 jobs between December 2009 and December 2010, said Tom Stinson, Minnesota state economist. That's a 0.4 percent increase. The Star Tribune 100 companies increased payrolls at a 0.7 percent rate -- the same rate at which jobs grew nationally last year.

"Times are getting better, but it's still taking time,'' Stinson said.

Mergers remake the list

A frothy mergers and acquisitions market resulted in significant turnover on the 2010 list, especially in the middle and bottom. Four Minnesota-based medical companies and two big technology firms were acquired. The departures made room for a dozen newcomers.

"I see a lot of familiar names on the top part of the list,'' Stinson said. "And a lot of unfamiliar names on the bottom. Which ones will break out and move to the top?''

Still the annual assessment of Minnesota's largest companies reveals a diverse corporate landscape that remains strong in financial services, retail, manufacturing and health care. Minnesota is home to 21 Fortune 500 companies, the highest concentration of headquarters firms per capita in the nation.

Those big firms, and their high-paying headquarters jobs, have long been significant contributors to the local economy and the state's cultural climate.

In 2010 manufacturing, health care, financial services and utility firms grew payrolls. Manufacturing led the hiring with 12,742 jobs followed by health care (9,586) and financial services (2,176). Job cuts came in information technology (-40) and retail/services (-15,654). Manufacturers recovered the jobs they shed in 2009 (-11,137) while retailers, which cut 14,929 jobs in 2009, have continued to cut.

Vang attributes the rebound in manufacturing employment to a weak dollar, which has made U.S. goods more price competitive globally, and to the rapid and deep job cuts most manufacturers made in late 2008 and early 2009 as the recession took hold.

"I think they had gotten to the point where they could not cut anymore,'' Vang said.

Looking forward, economists agree the economy is accelerating.

"Consumers will continue to acquire the wherewithal to increase spending,'' said Dan Laufenberg, an economist with Stonebridge Capital Advisors in St. Paul. While the housing sector remains depressed, Laufenberg points to steady, if slow, job growth combined with lower levels of household debt and the fact that consumers are not taking on more mortgage debt.

"I am fairly optimistic, even though we may get off to a slow start in the first quarter [of 2011],'' Laufenberg said. "I don't see consumers pulling back in a significant way.''

Laufenberg expects the economy to grow at a 3 percent rate for the year and the national unemployment rate to decline to about 8.1 percent by year end, with a sharper drop in 2012.

Stinson is more conservative, expecting a 2.5 percent year-over-year U.S. growth rate. "We thought we'd get a kick up from the payroll tax cut,'' Stinson said. "Now it looks like the kick will be backloaded [in 2011]."

Manufacturing

For the second consecutive year the state's most valuable firms, as measured by market capitalization, are in manufacturing.

3M got its share of the global recovery last year as sales jumped 15 percent and profits rose nearly 28 percent. After cutting 5 percent of its workforce in 2009, the maker of Post-it notes and Scotch tape added 5,000 jobs last year (up 6.7 percent). 3M added nearly $7.4 billion in market value, to $66.8 billion, becoming Minnesota's most valuable public company.

As global food demand recovered in 2010, sales at fertilizer maker Mosaic jumped 30 percent and profits rose 200 percent. Headcount, however, remained flat.

At General Mills, sales were nearly flat and profits dipped slightly percent. Still, General Mills added 3,000 jobs.

Spam-maker Hormel Foods posted strong sales and earnings and its market value jumped 33.7 percent.

Retail / service

After struggling in 2009, Target delivered solid sales, impressive profits and even hired 4,000 additional workers as consumers returned to stores. But market value, which jumped 66 percent in 2009, dropped 14 percent in 2010.

On the strength of its credit card discount program and planned expansion into Canada, Target said this month that it expects sales to top $100 billion annually in the coming years. In 2010, Target sales totaled $67.4 billion.

At Best Buy sales rose 5 percent (half as much as 2009) but profits fell 3 percent. After adding 10,000 jobs in 2009, the discount electronics retailer cut 5,000 positions last year.

With sales of TVs slowing and discretionary spending by consumers still soft, Best Buy has announced plans to close some stores while expanding online sales. Nervous investors hacked $7 billion in market value off the company.

Supervalu continued to struggle as sales fell nearly 10 percent. The grocer lost $1.5 billion and trimmed payroll by another 20,000 jobs.

Global logistics and transportation provider C.H. Robinson participated in the global recovery as sales jumped 22 percent and market value jumped 25 percent.

Health care

Sales jumped 8 percent at UnitedHealth Group and profits 21 percent as the big health insurer successfully navigated the effects of the recession and health care reform. UnitedHealth's market value jumped a stunning 31.7 percent, or $11.8 billion -- the biggest gainer on our list.

The company is projecting revenue to increase approximately $6 billion (6.5 percent) to about $100 billion in 2011.

At Medtronic, meanwhile, sales grew an anemic 2.5 percent, profits fell 6.6 percent and investors trimmed $7.85 billion of market value off the medical device maker -- the largest market value decline on our list.

Earlier this year, Medtronic announced plans to layoff 2,000 workers companywide. The company is also expected to name a new CEO to replace William Hawkins, 56, who late last year announced plans to retire.

Meanwhile St. Jude, also a medical device maker, fared much better with sales up 10 percent and soaring profits and market value. In October, St. Jude agreed to buy Minnesota-based AGA Medical, which makes patches and plugs to repair holes in the heart, for $1.1 billion. AGA ranked No. 62 on our Star Tribune 100 list last year.

Patterson, a dental and veterinary products maker, had modest sales gains while profits rose 9.8 percent.

Financial services

With the financial crisis in its rearview mirror, U.S. Bancorp posted strong sales and soaring profits in 2010. Market value at the big bank, which largely avoided the financial land mines that claimed many others, was flat after more than doubling in 2009. Last week, U.S. Bancorp reported that first-quarter 2011 earnings jumped 56 percent to $1 billion.

Benefiting from its acquisitions last year and the stock market's strong recovery, financial planning firm Ameriprise saw sales jump 28 percent and profits go up 52 percent.

Profits at TCF Financial jumped 68 percent on revenue that rose only 1.6 percent.

OneBeacon Insurance is a Minnetonka-based specialty and personal lines insurance company that joined our list in 2010. In July 2010 the company sold its personal lines business and in December 2009 it sold its commercial lines business. Poor underwriting results during 2010 contributed to losses. However, much of those losses occurred in lines the company has exited.

Utilities / telecom

Sales growth switched on again in 2010 for Xcel, Otter Tail and Allete. The Great Recession dampened demand for energy in 2009.

Multiband, which wires apartment units for DirecTV and also provides voice, data and video networking services, saw its market value jump 166 percent to $44 million.

Information technology

Selling hardware or software to tightfisted business customers during and after a recession is tough. And a look at revenues for these information technology companies underscores the point.

Sales fell at memory maker Imation, e-commerce firm Digital River and disk-drive assembly maker Hutchinson Technology. Hutchinson added jobs in 2010 but in March announced it would cut 30 to 40 percent of its 2,500 workers this year.

Business software maker Lawson fared better with sales up 4 percent, profits up 17 percent and market value up 63 percent. A suitor's unsolicited offer for Lawson has driven up the stock price this year.

John Oslund • 612-673-7206 • oslund@startribune.com • Patrick Kennedy • 612-673-7926 • pkennedy@startribune.com

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