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3M plans 1,500 job cuts as US dollar pinches overseas sales
[NEW YORK] 3M Co plans to cut 1,500 jobs in a global restructuring effort as the maker of touchscreens and Post-it Notes fights sluggish growth overseas and a strong US dollar that's crimping sales.
The workforce pullback, about 1.7 per cent of 3M's total at the start of the year, was announced Thursday along with a reduction in the top end of the company's 2015 profit forecast. 3M said the move will result in pretax savings of US$130 million next year, and the stock rallied.
"The current economic growth environment remains challenging," Chief Executive Officer Inge Thulin said on a conference call. The restructuring is designed to make 3M "a stronger, more agile, more focused company."
The currency squeeze highlights 3M's dependence on international business, which accounts for about two-thirds of revenue, and echoed the experience of many US manufacturers. Since becoming CEO in 2012, Mr Thulin has emphasized organic growth in overseas markets and new-product development. This year, he has reshaped 3M with deals that include its largest-ever acquisition.
3M rose 4.1 per cent, the biggest gain in almost a year, to US$156 at the close in New York as major US stock indexes advanced. That pared the shares' 2015 loss to 5.1 per cent.
3M said its restructuring plan, which will result in a fourth-quarter pretax charge of about US$100 million, will focus on reducing US overhead and retrenchment in slow-growth international markets.
The St Paul, Minnesota-based company had about 89,800 workers at the beginning of the year.
Excluding restructuring costs, 2015 earnings will be US$7.73 to US$7.78 a share, 3M said. The previous high end of the range was US$7.93 a share. Third-quarter profit of US$2.05 a share topped the US$2 average of 13 projections compiled by Bloomberg.
Organic local-currency sales growth will be 1.5 per cent to 2 per cent, compared with a previous projection of 2.5 per cent to 4 per cent. Quarterly sales fell 5.2 per cent to US$7.7 billion, trailing the average estimate of US$7.84 billion. Foreign currency translation trimmed sales by 7.4 per cent, 3M said.
While sales grew 1.2 per cent on an organic local-currency basis, the total "was significantly below our expectation," Steven Winoker, an analyst with Sanford C Bernstein & Co, said in a note.
During the quarter, Thulin extended a plan to overhaul 3M with the hiring of Goldman Sachs Group Inc. to study selling or spinning off the Health Information Systems unit. The move built on agreements earlier this year to buy Polypore International Inc's separations media business for US$1 billion and a safety- equipment maker for about US$2.5 billion.