MMM 3M Company

By Bob Tita 

3M Co.'s first-quarter profit rose 6.3% with an accounting-related tax gain, but sales dropped from continued lower demand for 3M's materials used in cellphones, computers and other consumer gadgets.

The St. Paul, Minn.-based manufacturer of Post-it Notes, Ace bandages, Filtrete furnace filters and Scotch tape topped sales and profit expectations for the quarter and backed its earlier profit outlook for the year.

3M's electronics and energy business was the company's weakest unit during the quarter, continuing a pattern seen in recent quarters. First-quarter sales from the electronics unit dropped 14% to $1.1 billion. Operating income from the business plunged 27% to $208 million. Performance of the electronics unit has lagged behind amid lower demand for 3M's films and other components used in electronic products. Sales of 3M products to the renewable energy market and the telecommunications industry were lower during the quarter as well.

Chairman and Chief Executive Inge Thulin said the weakness in electronics wasn't unexpected, adding the company remains committed to the business and revealed the company intends to record a $20 million charge in the second quarter to restructure the unit.

"This is a very good business for us," Mr. Thulin told analysts during a conference call Tuesday "We have worked on this business for four years to be more relevant for us."

Mr. Thulin reiterated 3M's expectation that the electronics business will improve as the year progresses. Even with a better second half of 2016, the company predicted sales will be moderately lower this year from 2015.

3M's other consumer-related businesses fared better during the first quarter. Sales from the company's health care business rose 4% to $1.4 billion as the unit's income rose 12% to $455 million. Sales from the consumer unit, which includes some of 3M's best-known brands, were flat at $1 billion, while income edged up 1% to $238 million.

Fourth-quarter sales from 3M's industrial business -- the company largest business unit -- fell 3% to $2.6 billion. But income rose 3.6% to $617 million on an improved profit margin.

3M's ability to raise its margins has helped the company increase income, despite sluggish sales growth lately. The company's first-quarter operating margin grew to 24.1% from 22.8% a year earlier. Meanwhile, changes in the way 3M accounts for stock-based compensation for employees added 10 cents to per-share income for the first quarter.

Overall for the quarter ended March 31, 3M reported a profit of $1.28 billion, or $2.05 a share, up from $1.2 billion, or $1.85 a share, a year earlier. Sales decreased 2.2% to $7.41 billion. Organic sales -- which exclude revenue from acquisitions and the effects of currency exchange rates -- edged down 0.8%. Analysts expected per-share profit of $1.92 and sales of $7.33 billion. For 2016, 3M said it continues to expect to earn $8.10 to $8.45 per share.

3M's stock was recently trading down at 1.2% at $166.40 a share.

Write to Bob Tita at robert.tita@wsj.com

(END) Dow Jones Newswires

April 26, 2016 11:44 ET (15:44 GMT)

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