3M Co. (MMM:US), the maker of products ranging from dental braces to commercial sealants, posted a second-quarter profit that beat analysts’ estimates as gains in efficiency helped trump the drag from foreign-exchange rates.
Net income rose 0.6 percent to $1.17 billion, or $1.66 a share, from $1.16 billion, or $1.60, a year earlier, St. Paul, Minnesota-based 3M said today in a statement. Analysts projected earnings of $1.65 a share, according to the average of eight estimates (MMM:US) compiled by Bloomberg.
3M had to overcome a stronger dollar that eroded the value of local-currency sales outside the U.S. Sales fell 1.9 percent to $7.53 billion, according to 3M, citing a reduction of 4.3 percent due to currency translations. Analysts projected $7.78 billion, the average of 10 estimates.
“In a tough environment like this, what you really want out of 3M is to control costs and show reasonably good margins,” said Scott Davis, a New York-based analyst at Barclays Plc who has an equal-weight/positive rating on the shares. “From what I can tell, they’re doing that.”
The shares (MMM:US) climbed 2.1 percent to $90.59 at the close in New York, pushing their advance for the year to 11 percent. That has outstripped the 8.1 percent increase for the Standard & Poor’s 500 Index.
Operating profit margin was 22.9 percent, up from 21.5 percent a year earlier and exceeding 3M’s 2012 goal for a range of 21.5 percent to 22.5 percent, the company said. Operating profit rose from a year earlier for four units while falling at two others tied to the consumer electronics industry.
“Factory efficiency and cost discipline throughout the organization” helped 3M boost profit even as sales slumped, Chief Executive Officer Inge Thulin said in the statement.
Profit was buoyed by an average price increase of 1.9 percent last quarter and a reduction in costs for sales, administrative and general purposes of 3.4 percent to $1.53 billion, 3M said.
3M reiterated its 2012 forecast for earnings of $6.35 to $6.50 a share. Sales from existing businesses will increase 2 percent to 5 percent this year, with foreign currency reducing revenue by 3 percent.
Health-care sales climbed 1.1 percent to $1.28 billion, buoyed by gains of more than 10 percent in Latin America/Canada and Asia Pacific on increasing demand for products related to food safety and medical information.
Industrial and Transportation, 3M’s largest division, saw a 0.5 percent decline in sales to $2.63 billion, including a 5 percent reduction from foreign-currency translation, 3M said. Sales increased 2.3 percent at the Consumer and Office unit, known for Post-It Notes and Scotch tape, to $1.06 billion.
Weak demand for consumer electronics caused sales to drop 9.4 percent to $882 million at the Display and Graphics unit and to fall 4.6 percent to $824 million at the Electro and Communications business. The Safety, Security and Protection Services unit had sales of $991 million, down 2 percent.
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