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Home My WebLink About2015 04-23 Stong dollar drags down 3M profits STAR TRIBUNE � �c StarTribune Strong dollar drags down 3M profits �;x�,._; <, � Article by:David phelps �� StarTribune ''� �°'�� April 23,2015-9:06 PM � �....'� �` �. Minnesota's 3M Co.illustrated Wednesday just how unpredictable �;a 5�� `' the world economy can be. � �� r � � On a region-by-region basis,3M sales were up in terms of local �� currency.Factor in the strength of the U.S.dollar,however,and '� the Maplewood-based indusVial giant posted a siight decline in first-quarter net proft and sales and was battered in the srock �� ' market as a resulL , � �� ' �r d ar.y.ts.�er,.rr _ �'�ti.r,i„ �,�1s Virtually every mWtinational company is seeing the same trend as opEratlo;�s irrto!,.>.do�i=�sV 3M.Consumer giant Procter&Gamble said revenue for its most r��i?��; i .-.. _. recent quarter feli more than 7 percent.PepsiCo estimated an 11 percent decline in eamings for the year because of currency x�'�' -�"�: exchange rates. ' u. � This is a problem that fixes itself,"said Santiago Bazdresch, � ,,��,� �� Y � finance professor at the Cartson School of Management at the � ", � !�'. University of Minnesota."The dollar is strong because the U.S. ^� � + � , economy is doing well.IYs a temporary accounting mismatch. �1 � ..c;� ";. Margins will be smaller,but in the long term it will be a wash." �$ .��.�� "'� 3M CEO Inge Thulin said 3M experienced growth in every product j �� unit and geography,when measured in local currency.But the tl&c'Cl '� ' effect of translating 3M's operations into U.S.doliars reduced its � pretax proft by S90 million,or about 10 cents a share. _ "We executed well and delivered a solid quarter against a `�'��'^ chalienging economic background,"Inge rold analysts in a conference call Wednesday moming. . � 3M's net proft,which is after taxes,amounted to just under$12 .. � � billion,or$1.85 a share,in the 5rst three months of the year. Analysts had expected a profit of 51.93 a share.In the same � period a year ago,the company eamed just over 512 billion. ��' ' "�"'��' °-��' ` � '`""�"� £n�ve,a 1 mon-tre:lcr 3 an ann�ai�P� ie�Lry�in SL PaW. Revenue in the latest period was$7.6 billion,down 3.4 percent. �iP�,��tbe•siar 7noune r�ie, 3M said its sales rose 3,3 percent when measured on a local basis,or before being translated into U.S.dollars. strong dollar effect explained The dollar in recent weeks has been at its strongest level against When the dollar gains strength against other world currencies since 2001,and man U.S.fifrl'15 thet have e currendes,it squeezes the results ot big American Y companies that do considerable business overseas. major presence in other countries are reporting negative effects in To understand,consider how a big sale of Poshit notes ��. their financial results from currency iranslation. in Europe changed in the past year tor 3M. The same sale amount in euros is worth$2.6 million "This is not a 3M issue.IYs a broad economic issue,"said Matt less,as below. Amold,an equity analyst with Edward James."In terms of $13.8 million operating metrics,3M continues to do just fine,in fact quite fine in �/yhat a 70 miltion euro sale was worih on March i, a world of choppy economics." zo�4 $112 million Nonetheless,3M's stock price declined by$5.01,or 3.14 percent, �yhat a�o miilion euro saie was wortn on nnarcn 1, to close at 5159.66. z0�5 The company's biggest business segment,industrial products, reported a sales decline of 4.3 percent in dollars but a 2.7 percent jump based on local currency.Sales grew in every region except Europe.Its opereting income fell 3.3 percent compared with a year ago. 3M's electronics and energy business segment was the only one of the company's five units to report sales growth on both a dollar and local currency basis.The uniPs gains were driven by electronics materials and display materials and systems.Its energy-related products showed a sales drop.The uniCs opereting income surged 24 percent. 3M's other business units—consumer,health care,safety and graphics—reported small sales drops on a dollar basis with growth on a local currency basis.The health care business experienced a drop in operating income,while consumer and safety and graphics reported gains. 3M lowered its profit outlook for the rest of the year,citing the dollar's effect on financial accounting.It said il now expects per-share proft in a range of$7.80 to$8.10,below its previous guidance that ranged from$8 to$8.30. 'The most fundamental thing is that the U.S.economy is bewming more healthy while Europe,China,Japan and 8razil are not,"the U's Bazdresch said. Staff wnter Evan Ramstad contributed to this report. � David Phelps•612-673-76269