3M Co., the maker of Post-its and Scotch tape, said Thursday its second-quarter profit rose slightly on double-digit growth in international markets, led by sales in Latin America.
3M, which has broad exposure to the U.S. economy, also announced a 20 percent staff reduction in its struggling display and graphics business mostly in the U.S., with some job cuts overseas. The company believes its cost cutting efforts and consolidation its Asia operations combined will save roughly $30 million on an annual basis.
During the three-month period ended June 30, the Maplewood, Minn.-based company earned $945 million, or $1.33 per share, compared with $917 million, or $1.25 per share a year earlier. The latest results included a charge of 6 cents per share related to the sale of a software subsidiary, along with charges related to employee reductions in 3M's Industrial Transportation manufacturing facility in the U.K.
Excluding the special items, 3M said it earned $1.39 per share in the most recent quarter. Net sales rose to $6.74 billion, up 9.7 percent from $6.14 billion a year ago.
Analysts polled by Thomson Financial, on average, expected earnings of $1.35 per share on net sales of $6.69 billion.
Chief Executive George Buckley said the company's recent strategy to reinvest in its core and international businesses made the latest quarter's results possible, despite rising commodity prices and a challenging U.S. economic environment. Raw materials rose between 3 percent to 4 percent over the past year, according to the company.
The company benefited from the weak dollar, as two-thirds of 3M sales came from overseas. Sales were up 32 percent in Latin America, 18 percent in Europe, 14 percent in Canada, and excluding certain items, up 17 percent in Asia Pacific. Currency exchange rates boosted 3M's sales growth in the quarter by 5.4 percentage points.
Of its six core business, 3M reported double-digit revenue growth in three of its largest, including Industrial Transportation, Health Care and Safety, Security and Protection Services.
3M's largest division, Industrial and Transportation segment, saw operating profits rise 18.1 percent to $425 million. The company said a 15.5 percent rise in revenue was led by sales of industrial adhesive tape, abrasives and its closure business for hygiene products.
Its Health Care business saw double-digit revenue growth of 13.1 percent, driven primarily by demand for its orthodontics and dental oral care products.
Sales in 3M's Safety, Security and Protection services, which makes products for the safety and productivity of workers, reported a record $1 billion in revenue for the quarter, led by its acquisition of Aearo Technologies Inc. Included in its quarterly results was a one-time charge of $20 million related to acquisition costs of Aearo.
Profit declined 15.9 percent to $846 million in its display and graphics business, which makes the LCD screen coating. Flat-panel LCD TV sales are growing quickly, but price competition has been cutting 3M sales of what was once a fast-growing, high-profit product.
"Display and graphics saw the effect of the slowdown in the U.S.," said Patrick Campbell, senior vice president and chief financial officer, in a conference call with investors.
3M reiterated that it expects 2008 profit to increase at least 10 percent over 2007 earnings per share of $4.98, which excludes special items.
Separately, during the quarter 3M also returned $1 billion to shareholders through dividends and share repurchasing.
Shares of the company rose 25 cents to end at $71.05 Thursday.
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