By Bob Tita
Of DOW JONES NEWSWIRES
CHICAGO -(Dow Jones)- 3M Co. (MMM) Chairman and Chief Executive George Buckley warned Thursday the company's recovery could lose momentum late in the fourth quarter when restocking of the company's products is completed.
Buckley offered the cautious outlook even as the diversified manufacturer's third-quarter results exceeded expectations by a wide margin and the company raised its profit projection for 2009.
Buckley said this "flat spot" in demand would be temporary, but also unpredictable, as wholesale orders for 3M's products reach an equilibrium with end-market demand.
"That flat spot, if it comes, may begin in the late fourth quarter," Buckley said during a conference call with Wall Street analysts. "It's what gives us the continued note of caution and conservatism."
Buckley said 3M's recovery has followed the course he anticipated, included the 8.3% increase in third-quarter sales from the second quarter as customers rebuilt depleted inventories of 3M's products, which include Scotch tape, Post-It notes, furnace filters, industrial adhesives and disposable medical supplies.
3M reported a profit in the quarter of $957 million, or $1.35 a share, down 3.4% from $991 million, or $1.41 per share, a year earlier. Revenue decreased 5.6% to $6.19 billion, far less than the decreases reported by other industrial companies.
Excluding such items as restructuring charges, 3M's profit fell to $1.37 per share, topping analysts' projected earnings estimates $1.17 a share on revenue of $5.77 billion.
The St. Paul, Minn., company raised its 2009 profit forecast to $4.50 a share to $4.55 a share, well above its July guidance for $4.10 to $4.30. It also predicted that overall sales would decline by 9.5% to 10.5% from 2008, compared with a drop of 10% to 13% forecast earlier.
3M's third-quarter results were aided by an estimated $80 million to $100 million of additional revenue from sales of face masks and other medical products connected with global prevention of flu viruses, particularly the H1N1 virus, or swine flu.
3M said its plants that manufacture face masks are operating around the clock, prompting the company to raise its production capacity on top of the 30% capacity increase added this summer. Plant expansions are planned in Singapore and the U.S. The expansions are expected to cost about $25 million.
3M also noted that orders increased for screen filters used on flat-screen televisions, an indication of rising demand for consumer electronics. Nevertheless, the company said a lackluster back-to-school retail season and rising unemployment levels among office workers held down sales of its office and school supplies.
Buckley said the U.S. economic stimulus program has had almost no effect on 3M because most of the money has gone to prop up state and local government programs, rather than infrastructure projects, such as highway construction. 3M is a major supplier of reflective material used in road signs and transportation safety equipment.
"Very little stimulus money has bled into the U.S economy at large," he said "It's not a big factor in the U.S. demand equation for us."
Just two of 3M's six segments reported increases over a year ago: health care and display and graphics, which rose 1.5% and 4.5% respectively.
3M's share were up recently trading up 3.4% at $78.99.
-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com
(Joan E. Solsman contributed to this report)