Cooling China worries some multinationals

Thu Jan 26, 2012 2:32pm EST
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By Nick Zieminski

(Reuters) - Slowing growth in China is emerging as a concern in some of this quarter's earnings reports from U.S. multinationals that have long relied on strong growth in China and other emerging markets to drive their profits.

Though China's economic growth is still well above that in other economies, its efforts to cool that growth -- for example, by restricting credit -- are now translating into weaker sales at some U.S. companies that do business there.

The trend is not yet widespread and companies are quick to stress the many advantages of China's market, but the commentary this earnings season has taken a more cautious tone.

3M Co's (MMM.N: Quote) Asia-Pacific sales rose 3 percent in the latest quarter, weaker than in recent results, reflecting softer demand in China.

"The Chinese government successfully slowed activity to stem inflation," 3M Chief George Buckley said on a conference call with analysts. "Our China team anticipate continued below-trend growth in the first half of 2012."

The maker of Post-It notes, Scotch tape and components for consumer electronics reported net earnings of $954 million, or $1.35 per share, beating estimates by 4 cents a share.

One weak spot was the company's display and graphics segment, hurt by what 3M called "deteriorating" demand for consumer electronics. The business showed its largest sales declines in Asia Pacific.

Another global manufacturer, Eaton Corp (ETN.N: Quote), singled out China as one of several factors behind its sales miss.   Continued...