This year, 3M Co. is paying the price for being a multinational behemoth.
In other years, overseas sales surged, and big profits there helped shore up results back home.
But as it released second-quarter results that narrowly beat analysts' profit expectations, 3M warned of currency woes and tepid international sales and lowered its full-year outlook.
Investors punished the stock, which fell $5.81, or nearly 4 percent, to close at $149.13 — a level not seen since October.
"Volatility is exactly why we are seeing a lower-growth world," 3M Chief Financial Officer Nicholas Gangestad told analysts during a conference call Thursday morning.
Edward Jones stock analyst Matt Arnold said Wall Street reacted strongly to the news that 3M was finding itself in the same boat as many other multinational giants such as Caterpillar, Dow Chemical and Donaldson.
"Outside of the U.S., growth is anemic. When you go across the remainder of the world, growth is all below 1 percent," Arnold said. In addition, "China was weak. It's a region that has slowed quite a bit and a region that has been called out by numerous industrial firms as [lagging] prior estimates."
For the second quarter, 3M saw total revenue fall 5.5 percent to $7.7 billion. Sales were down across all business units of the Maplewood-based conglomerate best known for Scotch tape, sandpaper and Post-it notes. The company said foreign currency translation depressed revenue by 7.3 percent.
Despite such pressures, profits rose 1.1 percent to $1.3 billion, or $2.02 per share, which beat expectations by 2 cents.
Arnold noted that 3M is making up for sagging revenue by consolidating departments, cutting costs and taking full advantage of reduced oil and other raw material prices.
Divisions suffering the largest revenue declines were industrial and electronics/energy. Officials noted some customers were impacted by the slowdown in the oil and gas sector and that orders for certain industrial abrasives, adhesives and tapes lagged. At the same time, industrial sales aimed at auto, aerospace and filtration increased during the quarter.
3M lowered its full-year profit guidance to a range of $7.80 to $8 a share. It previously told investors to expect between $7.80 to $8.10 a share.
"In the face of a mixed economic environment, the 3M team delivered positive [local] organic growth in all geographic areas while expanding worldwide margins by over a full point," CEO Inge Thulin said in the call to analysts.
He noted 3M's June announcement that 3M intends to pay $2.5 billion for Bloomington-based Capital Safety, a maker of harnesses and fall protection gear.
The deal "will bolster our personal safety platform and build on our fundamental strengths in technology, manufacturing, global capabilities and brand," Thulin said.
Wall Street analysts had plenty of questions for Thulin and Gangestad about Capital Safety and just what it would add to 3M's portfolio.
Some questioned if 3M will pay too much. Others wondered why 3M had sniffed at Capital Safety before and turned it down.
Thulin said 3M last looked at Capital Safety years ago at a time when it was not clear what the company needed to boost its safety equipment business. Thulin said he is convinced that this is a business segment in which 3M had to get much bigger.
"In my view, we were not big enough. We were very, very small [in fall protective products]. And if you do not have a reasonable good market share position, you will over time lose out," Thulin said. Gaining Capital Safety "was a very important strategic move for us. It's a high-class asset."
Dee DePass • 612-673-7725
