3M FORECAST 2024 profits and sales growth below Wall Street expectations as it continues to contend with sluggish consumer demand that has weighed on growth for the better part of a year.

Adjusted earnings will be no more than US$9.75 per share this year, compared with the US$9.81 average of analyst estimates compiled by Bloomberg. Organic sales are expected to be flat to up 2 per cent; analysts had expected the figure to grow by 2.7 per cent.

Shares fell as much as 7.2 per cent in premarket trading in New York.

The cautious outlook was announced as 3M reported adjusted quarterly earnings well above Wall Street estimates, helped by a restructuring push to make the company more streamlined.

Adjusted earnings were US$2.42 per share in the fourth quarter, better than the US$2.31 analysts predicted. The company’s adjusted operating margin of 20.9 per cent came in just shy of Wall Street’s expectation for 21.2 per cent.

The company said the spinoff of its health-care unit is still on track to be completed in the first half of this year.

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Although slumping electronics markets are stabilising, industrial demand is mixed, retail spending remains slow and China continues to be soft, chief executive officer Mike Roman said.

“We’re not seeing meaningful changes in the end markets as we start 2024,” Roman said in an interview.

In addition, a higher tax rate and other expenses represented a 29-cent headwind to the company’s full-year earnings forecast, 3M president Monish Patolawala said in an interview.

Sales growth will also be affected as the company discontinues some products with less attractive growth and margin prospects, Patolawala said. That and other factors amount to about a percentage point of organic growth, he said.

Restructuring aftermath

3M last year launched a sweeping restructuring push including thousands of job cuts to become more streamlined as it confronted sluggish sales and made progress tackling huge legal liabilities that have put many investors on the sidelines.

Shares of the St Paul, Minnesota-based manufacturing giant had declined 12 per cent over the 12 months ending with Monday’s close, well behind the 21 per cent gain notched by the S&P 500 Index in the same period.

The company last year agreed to pay as much as US$12.5 billion to resolve claims by drinking water utilities that so-called forever chemicals produced by 3M tainted water supplies across much of the US. Other sources of liability from 3M’s legacy producing the substances remain unresolved. 3M also agreed to pay US$6 billion to settle hundreds of thousands of lawsuits alleging it supplied defective earplugs to US combat troops.

The cost of funding those payouts have raised questions about whether it will need to dial back its practice of paying out rich dividends compared with other industrial companies.

3M expects to generate as much as US$7.1 billion in adjusted operating cash flow in 2024. Prioritising cash generation and wider profit margins amid lacklustre demand will continue to be key priorities for the company, Roman said.

“We’re coming off a year where we came out stronger, leaner, more focused,” he said. “We’re going to continue to build on that momentum.” BLOOMBERG