St. Paul, MN-based 3M, parent firm of Top 40 supplier 3M/Promotional Markets (asi/91240), announced Thursday that it was laying off 2,000 employees as part of a restructuring plan aimed at boosting productivity and trimming costs. The restructuring – which will realign the company’s five operating units – comes following a poor first-quarter performance in which revenue and adjusted earnings dipped. In pre-market trading, 3M shares fell 8%.

Mike Roman, 3M’s CEO

The multinational conglomerate, known for its adhesives like Scotch Tape, reported first-quarter sales dropped by 5% to $7.9 billion. The firm said its electronics/energy (-11.8%), industrial (-6.6%), safety and graphics (-4.2%) and consumer (-1.9%) segments all suffered declines. Only the firm’s healthcare business was up, but by just 0.3%. Analysts were expecting sales closer to $8.1 billion. As is customary, 3M did not break out promotional products sales.

On a geographic basis, 3M’s revenue rose by 0.1% in the U.S. Sales fell, though, by 6.5% in Latin America/Canada, 7.4% in the Asia/Pacific region and by 9.4% in Europe, Middle East and Africa.

3M reported earnings of $891 million, or $1.51 per share, in the first quarter. After adjusting for one-time costs, earnings improved to $2.23 per share, however that still was about 25 cents below consensus forecasts and down 10.8% year-over-year.

“The first quarter was a disappointing start to the year for 3M,” said Mike Roman, 3M’s CEO. “We continued to face slowing conditions in key end markets which impacted both organic growth and margins, and our operational execution also fell short of the expectations we have for ourselves.”

“We continued to face slowing conditions in key end markets which impacted both organic growth and margins.” — Mike Roman, 3M CEO

Within its earnings statement, 3M noted two “significant” litigation issues that affected Q1 results. The company said it established a reserve of $235 million “to resolve certain environmental matters and litigation, in which 3M is a defendant, related to its historical manufacture and disposal of PFAS-containing waste.” The company also bolstered its respirator reserve by $313 million “to address the cost of resolving all current and expected future coal mine dust lawsuits in Kentucky and West Virginia.”

Looking ahead, excluding the impact of litigation-related charges, 3M expects its adjusted full-year 2019 earnings to be in the range of $9.25 to $9.75 per share versus a prior expectation of $10.45 to $10.90. 3M also cut its organic local-currency sales growth guidance to be in the range of -1% to 2, versus a prior range of 1% to 4%.

As it looks to improve financials, the planned restructuring, according to 3M, will lead to an estimated annual pre-tax savings range of $225 million to $250 million.

Over the last several years, Counselor has estimated that 3M’s impact in the promo market has been reduced. In its most recent listing, Counselor pegged 3M’s North American promo products sales at $93 million. Counselor’s numbers show 3M’s industry revenue has fallen by about $7 million, or 7.5%, since 2009.