Industry Giants Show Signs of Economic WoeMay 7th, 2009 by Editor
Though several recent predictions suggest that the economy may bottom out and begin to show signs of rebound as early as this summer, there’s little doubt that the current recession is still in full swing. And industry giants with more than just window film in their portfolios are not exempt.
3M released the results for its first-quarter sales recently and reported a 21.3 percent decrease overall. The St. Paul, Minn.-based company’s net income was reported at $518 million, a figure that sounds impressive until compared to the previous year’s figure of $1.0 billion. Solutia Inc., the St. Louis-based owner of CPFilms, reports that its net sales decreased to $339 million from $517 million in the first quarter of 2008. The CPFilms division witnessed a 45 percent decrease from the same period in 2008. Solutia has taken several actions recently in response to deflated earnings, including slashing the bonuses of its top executives.
“As expected, the global economic slowdown dramatically affected our businesses in the first quarter,” says George W. Buckley, 3M chairman, president and chief executive officer. “Substantial end-market declines and continued inventory takedowns in major industries, including automotive, consumer electronics and general industrial manufacturing, resulted in significantly lower sales and profits.”
And regardless of what some economic experts suggest, 3M doesn’t feel its current dip in sales is over yet. The company adjusted its 2009 sales and earnings expectations to reflect this expectation, including a decline in 2009 organic sales volume between 11- and 15-percent, versus a previous planning assumption of negative 5- to negative 9-percent.
Though 3M highlighted its Safety and Security sector, including many of its window film products, in past reports for strong performance amid decreases in other areas, first quarter 2009 did not produce the same results. The segment shows sales of $694 million, down 15.4 percent. The company has also moved its Scotchtint™ and 3M™ Ultra Safety and Security window films from this division to its newly created Renewable Energy sector.
Solutia reported a consolidated loss from continuing operations of $4 million for the first quarter of 2009, compared to income of $1,234 million for the same period in 2008.
“Demand in the first quarter was negatively impacted by the difficult macro-economic conditions affecting the global markets,” says Jeffry N. Quinn, chairman, president and chief executive officer for Solutia. “However, we were able to greatly offset the impact of these conditions through the decisive actions we began to implement in the fourth quarter of last year to reduce our operating costs, working capital levels and capital expenditures. In total, our efforts resulted in an improvement in our liquidity over the course of the first quarter. While we expect continued softness in demand throughout 2009, we do expect modest volume improvement in comparison to our first quarter levels. Further, we have taken actions to further reduce costs over the remainder of the year.”
Recent and perhaps compensating moves for Solutia include the announcement on April 1, that it has entered into a definitive agreement to sell its nylon business to an affiliate of SK Capital Partners II, L.P., a New York-based private equity firm. At closing, Solutia is scheduled to receive $50 million. On April 22, the company also announced that, in light of current economic conditions, it was reducing the previously-approved pool for all annual bonuses under the company’s 2008 Annual Incentive Plan by approximately 80 percent from $30.3 million to $6.2 million—including the bonuses of approximately 2,700 employees, among them named executive officers. Kent Davies, who served as executive vice president and president of the company’s CPFilms division until May 1, did not receive a bonus in 2008, according to the company’s recent SEC filings, due to the fact that his business did not meet the threshold level of performance necessary for bonuses to be paid. For 2009, Solutia reports a dismal first quarter net sales of $34 million for its CPFilms division, down a whopping $28 million or 45 percent from the same period in 2008.