3M cuts 2013 outlook on falling electronics demand
(Reuters) - Diversified U.S. manufacturer 3M Co cut its 2013 profit forecast on Thursday, citing weakening demand for flat-panel televisions as well as the stronger U.S. dollar.
The lowered outlook came after first-quarter profit and revenue both missed Wall Street expectations.
3M, which makes a range of products from Post-It notes to Scotch tape, blamed falling sales in its consumer electronics segment, which makes films used to make flat-panel TV displays.
Prices for those TVs, as well as the amount of televisions sold, have fallen recently as consumers move toward touch-screen devices. Global demand for TVs is expected to plateau this year as many consumers in developed countries already own a flat-screen TV.
TV manufacturers Sony Corp and Samsung Electronics Co Ltd are among 3M's largest customers. Both are paring their TV units.
3M executives had expected weak demand for TV parts and other electronic materials, including insulation and fluids used to make computer chips, but they said actual sales were worse than feared.
"We expected a challenging start to the year, but in fact market conditions were tougher than we had expected," Chief Executive Inge Thulin said on a conference call with investors.
The machines 3M uses to make the TV films are complex and expensive, and the trick for the company will be to find even more ways to use the machines for touchscreen products, William Blair & Co analyst Nick Heymann said.
Already, Apple Inc is a key 3M customer.
"You just have too much capacity" in the TV market, Heymann said. "3M is working through it. Now, they've got to move to the next market."
While a 56 percent drop in pension payments boosted first-quarter margins, analysts were wary because higher sales failed to contribute more to the margin strength.
3M now expects to earn $6.60 to $6.85 per share this year, a range mostly below the $6.82 average analyst estimate, according to Thomson Reuters I/B/E/S.
3M previously had expected to earn $6.70 to $6.95 per share this year.
Also, the rising value of the U.S. dollar compared with other global currencies harmed results, executives said. Previously, the company had not expected foreign currency changes to harm 2013 results, but now it was seen cutting revenue by 1.5 percent.
3M shares were down 2.4 percent at $105.33 late on Thursday morning on the New York Stock Exchange. The stock has gained about 16 percent this year, outpacing the Dow Jones industrial average's rise of roughly 12 percent.
St. Paul, Minnesota-based 3M posted first-quarter profit of $1.13 billion, or $1.61 per share, compared with $1.13 billion, or $1.59 per share, in the year-earlier period.
Profit per share missed analysts' estimates of $1.65. The number of outstanding shares fell, boosting the most recent earnings per share.
Revenue rose 2 percent to $7.63 billion, missing the $7.81 billion estimate from analysts.
Thulin, who took the top job last year, began a restructuring in January. He merged 3M's security and traffic-safety units, eliminating about 300 jobs, and identified other units that 3M would need to fix, sell or close.
Thulin has said 3M needs to prune its broad portfolio of products, and is likely to focus on fewer but larger takeovers.
(Reporting by Ernest Scheyder in New York; editing by Gerald E. McCormick, Maureen Bavdek, Jeffrey Benkoe and Matthew Lewis)