3M to cut costs as business cools beyond masks

3M will trim capital spending this year to $1.3 billion

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3M Co., the maker of coveted N95 face masks used by workers treating coronavirus patients, said sales grew in its medical business while a deepening industrial downturn is weighing on its business overall.

3M said Tuesday its adjusted sales in the Americas region fell 20% in April as factories suspended production, dentists cut back on operations and office managers bought fewer supplies for workforces at home.

The company withdrew its guidance for the year, citing uncertainty about the broader industrial economy. While the pandemic has sharply increased demand for some 3M products, most notably its face masks, the company said demand has fallen for other goods in its vast product line, like industrial glues, as factory closures ripple through the industrial economy.

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"We saw strong growth in personal safety, as well as in other areas of our portfolio experiencing high demand due to the pandemic," said Chief Executive Mike Roman. "At the same time, we experienced weak demand in several end markets that were more severely impacted by actions taken around the world to slow the pandemic."

Shares in 3M rose 3.4% in premarket trading to $158.79, after revenue and profit for the first quarter came in above analyst expectations.

3M said it was cutting its capital investments this year to about $1.3 billion, down from as much as $1.8 billion planned previously. 3M also said it was furloughing some staff and temporarily shutting down some nonmask production lines due to weakened demand.

About 25% of the company's factories and warehouses were closed as of earlier this month, 3M said. The company expects the second quarter, which began in April, to be the weakest for the global economy.

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3M has ramped up production of N95 masks, so-called because they block 95% of very small particles including those containing the virus. The company, based in St. Paul, Minn., has doubled global production to around 100 million a month and plans to double production again by early next year. 3M had $100 million in extra face-mask sales in its first quarter.

The increased production hasn't kept pace with the vast demand for the masks from front-line workers confronting the pandemic. The Trump administration in early April invoked the Defense Production Act to compel 3M to import 166.5 million masks from its facilities in China by the end of June.

The Department of Defense and the Department of Health and Human Services have also placed mask orders with 3M of nearly $250 million combined that will further increase domestic mask capacity.

Some hospitals have said they are turning to unknown resellers for masks they can't find through 3M's main distributors, such as W.W. Grainger Inc.

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"We received orders for the same quantity of safety masks that we've usually received over several years, and in some cases even decades," Grainger's Chief Executive Donald Macpherson said last week.

3M has said it hasn't raised prices on its masks. The company has filed lawsuits against alleged price gougers and is working with authorities to clamp down on allegedly fraudulent behavior.

The maker of Post-it Notes also said that sales of office supplies decreased as many people began working from home.

Revenue grew 2.7% to $8.08 billion in its first quarter. Profit rose 45% to $1.29 billion, or $2.22 a share, up from $891 million, or $1.51 a share, a year earlier.

Profit last year was negatively hit by legal charges related to chemicals-product lawsuits. The company posted adjusted earnings per share of $2.16, above the $2.03 expected by analysts.