OCTOBER 28, 2010, 4:31 P.M. ET.

3M Profit Jumps 16% on Sales Growth

By JAMES R. HAGERTY

3M Co. reported a 16% increase in third-quarter earnings as surging sales in developing countries made up for slow growth in Europe and the U.S.

The St. Paul, Minn., manufacturer—whose products range from Scotch tape and O-Cel-O sponges to electronic stethoscopes and films used in solar panels—said sales in emerging markets, such as China and India, grew 25% in the quarter and now account for one-third of its world-wide total.

But 3M warned that one of its most important products, films used to enhance flat LCD television screens, is in a temporary slump because makers of the screens are working off an inventory glut. The slowdown in screen production is likely to reduce fourth-quarter profit by about $70 million, 3M said.

Shares of 3M slipped 6.3% at $84.64 a share Thursday afternoon on the New York Stock Exchange amid concerns about those films and slower sales growth ahead.

It forecast sales growth of 11% for 2011. That's much slower than the 17% sales growth in this year's first nine months.

3M's health-care business suffered from lower hospital admissions as the weak economy caused people to delay elective surgeries and even basic care, the company said. Sales of face-mask respirators and hand sanitizers also were down sharply from a year earlier, when they were spurred by the H1N1 flu scare.

3M said its strongest product areas in the latest quarter included films for solar panels and a variety of adhesives and other materials used in making smartphones and other electronic products.

The company has been striving to ramp up its growth through acquisitions, new product launches, deeper penetration of developing countries and efforts to compete at the low-end of markets such as tape as well as the high end. "We're playing all the strings on the fiddle, and so far the music is coming out OK," George Buckley, 3M's chief executive, said during an analyst briefing Thursday.

Net income increased to $1.11 billion, or $1.53 a share, from $957 million, or $1.35 a share, a year earlier. Revenue jumped 11% to $6.87 billion.

Analysts polled by Thomson Reuters expected a profit of $1.51 a share on revenue of $6.83 billion.

The company also forecast full-year earnings in a range of $5.59 to $5.63 a share, up from $4.52 in 2009. It previously forecast $5.54 to $5.69 a share for 2010.

3M expects to keep making acquisitions at a brisk pace, Mr. Buckley added. In the past few months, 3M has announced purchases of companies making fingerprint-processing gear, box-sealing and masking tape, products that keep patients warm during surgery and electronic equipment used by retirement homes and police to track the movements of people.

"You have plenty of firepower," Terry Darling, an analyst at Goldman Sachs, told Mr. Buckley during the call. 3M had cash and short-term securities of $4.47 billion as of Sept. 30, up 38% from a year earlier.

Write to James R. Hagerty at bob.hagerty@wsj.com

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