3M Co. said it will cut 2,500 manufacturing jobs worldwide as the company faces turmoil in overseas markets and weaker consumer demand.
The maker of tape, sticky notes and thousands of other industrial and consumer products said Tuesday it expects lower sales and profits in 2023 after demand slowed significantly in late 2022 and impacted quarterly performance.
The St. Paul, Minnesota-based company is forecasting a year-on-year decline in sales this year as demand for consumer and electronic goods, particularly smartphones, tablets and televisions, for which 3M supplies components, is weak. Fourth-quarter sales of 3M’s consumer business declined nearly 6% compared to the prior-year period.
“Consumers have sharply cut discretionary spending and retailers have adjusted inventory levels,” 3M chief executive Mike Roman said during a conference call. “We expect the demand trends we saw in December to continue into the first half of 2023.”
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3M shares fell 5.2% to $116.25 on Tuesday afternoon, while major US stock indexes were little changed.
The company said demand for its disposable face masks is falling as healthcare providers spend less on Covid-19 response and mask demand returns to pre-pandemic levels. 3M expects mask sales to fall by $450 million this year to $550 million from 2022.
3M executives said the spread of Covid infections in China is weighing on sales there and sporadic plant closures are disrupting industrial production. China is also reducing consumer electronics production due to weaker consumer demand, and 3M’s exit from its business in Russia last year will also contribute to lower sales this year.
The 2,500 layoffs represent about 2.6% of the company’s workforce, which was about 95,000 according to a regulatory filing as of late 2021. Mr. Roman declined to specify where the job cuts will take place or whether the company may be cutting more jobs, is reviewing its supply chains and preparing to spin off its healthcare unit.
“We review everything we do as we navigate the challenges we face in the end markets and focus on driving improvements,” he said.
The company said it would take a pre-tax restructuring fee of $75 million to $100 million in the first quarter.
Mr Roman said the job cuts were unrelated to litigation the company was facing. 3M defends itself against allegations that the so-called “Forever Chemicals” produced for decades have contaminated soil and drinking water. It’s also embroiled in litigation over foam earbuds that its subsidiary Aearo Technologies LLC sold to the military. About 230,000 veterans have filed lawsuits in federal court alleging that the earplugs failed to protect them from work-related hearing loss.
According to 3M, the earplugs were effective when military personnel received adequate training in how to use them. In a lawsuit over firefighting foam that contained forms of everlasting chemicals, 3M is expected to argue that the products were made to US military specifications, giving the company legal protection as a government contractor.
In both cases, Mr Roman said the company is focused on finding a way forward.
3M said the US dollar’s strong value continues to erode sales from other countries when foreign currencies are converted to dollars.
The company forecasts that revenue for the quarter ended March 31 will decline by 10% to 15% from the same period last year. For the full year, the company is forecasting sales to decline between 6% and 2% and expecting adjusted earnings to be between $8.50 and $9 per share. The company made $10.10 per share in 2022, excluding special fees, and analysts polled by FactSet expected the company to make $10.22 in 2023.
For the fourth quarter, the company reported earnings of $541 million, or 98 cents a share, compared to $1.34 billion, or $2.31 a share, a year ago.
After deducting one-time items, including costs associated with phasing out chemical production forever, adjusted earnings were $2.28 per share. Analysts were expecting adjusted earnings of $2.36 per share, according to FactSet.
Revenue fell 6% to $8.08 billion in the quarter, slightly beating expectations of analysts polled by FactSet.
Mr. Roman said there are promising signs for some of 3M’s businesses, including biopharma processing, home improvement and automotive electrification, which he said will grow by 30% in 2022 to a business of around $500 million. dollars had grown.
“There’s more than consumer electronics, but the dynamics of consumer electronics is certainly the story of the day,” he said.
Write to John Keilman at [email protected] and Bob Tita at [email protected]
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