3M posts grim first quarter, will cut 2,000 jobs worldwide

3M will cut 2% of its global workforce, about 2,000 jobs, after the giant manufacturer posted a difficult first quarter Thursday and slashed its profit forecast for the rest of the year.

The company's stock responded by plunging 13% Thursday, its largest one-day drop since a broad market crash in 1987.

Sales and profits particularly suffered in 3M's big industrial segment — where automotive-related markets got hammered — as well as in its electronics business, which was hurt by soft consumer electronics sales.

Geographically, 3M's sales were hit hardest in China and Japan, key markets for the company's automotive and electronics businesses.

"The first quarter was a disappointing start to the year for 3M," Mike Roman, the company's CEO, said in a statement. "We continue to face slowing conditions in key end markets, which impacted both organic growth and margins, and our operational execution also fell short of the expectations we have for ourselves."

"This quarter was bad across all fronts," Jim Corridore, an analyst at CFRA Research, wrote in a research note Thursday. "However, we think 3M has good core products, and long-term profitability is solid."

Maplewood-based 3M Thursday reported first-quarter adjusted earnings of $1.7 billion or $2.23 per share, down 11% from a year ago and well below the $2.49 per share expected by stock analysts.

"Generally, 3M management does a really good job of executing and responding to changes in the demand environment, but it seems like they were slow in responding to demand decline," said Matt Arnold, an analyst at Edward Jones.

Joe Ritchie, an analyst at Goldman Sachs, said in a research note Thursday that his first-quarter expectations for 3M had already been lowered by management comments at recent investor conferences. Still, "this was much worse than expected," he wrote.

3M's stock closed Thursday at $190.72, down $28.36.

3M, which makes everything from Post-it notes to wound dressings, is one of Minnesota's largest nongovernment employers with about 16,000 workers here, mostly in the Twin Cities area. At the end of 2018, the company employed 93,000 globally and around 37,400 in the U.S. alone.

3M didn't release specifics about the job cuts, other than to say the company's restructuring will "span all business groups, functions and geographies, with emphasis on corporate structure and underperforming areas of the portfolio."

With its bleak first-quarter performance, 3M cut its 2019 earnings outlook from a range of $10.45 to $10.90 per share to $9.25 to $9.75 per share.

"We are not overly concerned, but obviously it's disappointing to see such a sizable downward revision in the earnings forecast," said Arnold of Edward Jones.

3M said its planned restructuring will cut costs and improve productivity, leading to annual savings of $100 million for the rest of 2019 and $225 million to $250 million annually thereafter. The rebuild also will result in a pretax, one-time charge of $150 million.

In addition to the restructuring, 3M earlier this month realigned its divisions, moving from five to four. Essentially, the safety and graphics division will be parceled out to two other 3M units: industrial and electronics & energy, both of which will be renamed.

3M's weakness during the quarter was broad-based.

3M's industrial business, its largest segment, experienced a 2.8% drop in sales (adjusted for currency swings), while 3M's electronics and energy business saw a parallel decline of 3%. Currency-adjusted sales rose a bit — under 1% — in the company's consumer and health care businesses, while safety and graphics sales were down a tad.

Operating profits declined in all five of 3M's divisions, though by less than 1% in its consumer segment.

Also during the first quarter, 3M took two significant one-time charges totaling $548 million — or 72 cents per share — to cover litigation expenses, including in Minnesota. One is a $235 million charge related to 3M's past production of chemical substances known as PFAS, which were used in many household products.

The $235 million reserve looks "low" given the $850 million PFAS settlement that 3M has already reached in Minnesota, DeBlase wrote.

Drinking water and groundwater pollution caused by PFAS have been associated with cancer and other health risks. 3M is also a defendant in PFAS cases in Alabama and Illinois, along with the nations of Belgium and Germany.

Mike Hughlett • 612-673-7003