A strong U.S. dollar is creating currency exchange headwinds for 3M, leading the multinational corporation on Tuesday to lower its forecast for the year.
3M sees profit more than double, but a strong dollar dampens its outlook
The Maplewood-based company cited a drop in respirator sales and currency exchange headwinds for lower quarterly sales and full-year forecast.
October 25, 2022 at 3:26PM
3M saw a dip in sales during the third quarter, which ended Sept. 30, on lower demand for disposable respirators and costs associated with divestitures.
"We continue to position 3M for the future through investments for growth, productivity and sustainability, along with active portfolio management," Mike Roman, chief executive of 3M, said in a statement.
Despite the sales decline, the Maplewood-based company more than doubled its profit from a year ago to $3.86 billion, or $2.69 a share. The adjusted earnings per share beat analyst expectations and excludes special items, like litigation and divestitures costs.
"This quarter we divested our food safety business and began executing the work-streams to successfully spin our health care business, resulting in two world-class, public companies," Roman said.
In July, 3M announced the spinoff of its $8.6 billion health care business, which will leave 3M as a smaller company. In 2021, health care accounted for more than 25% of its $35.4 billion in sales.
Its remaining business segments will be safety and industrial, transportation and electronics and consumer.
The company lowered its full-year outlook to a range between $10.10 to $10.35 a share, down from the previous forecast of between $10.30 to $10.80, reflecting "ongoing macroeconomic and geopolitical uncertainty," Roman said. "The global economic outlook is softening."
3M sales declined 3.6% in the third quarter to $8.6 billion due in part to unfavorable foreign currency exchange conditions.
"Despite the respirator drag, [safety and industrial] core growth of 1.7% was stronger with solid trends across the portfolio," Nigel Coe, an analyst with Wolfe Research, wrote in a research note on 3M's results.
The company continues to grapple with long-running litigation over defective military earplugs and the looming firefighter foam lawsuits. Stock analysts have estimated 3M's total earplug liabilities could ultimately cost the company tens of billions of dollars.
In July, Aearo Technologies — the 3M subsidiary at the heart of the earplug lawsuits — filed for bankruptcy protection. Bankruptcy freezes litigation against Aearo, but a judge in August rejected the company's bid to extend the litigation freeze to the parent company.
Roman said Tuesday that 3M appealed that decision and the U.S. Court of Appeals for the Seventh Circuit has agreed to hear the case.
"The Aearo Technologies Chapter 11 proceeding is active and progressing," said Roman. "Aearo is participating in a confidential mediation process focused on reaching a comprehensive settlement."
The company's stock closed flat for the day.
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