Minnesota Mining and Manufacturing
said on Tuesday that it would stop making many of its popular Scotchguard products in order to avoid potential future conflicts that might arise due to environmentalists' concerns.
"These materials will be more difficult to get (into the market)," said Charles Reich, executive vice president of the specialty material markets at 3M. "When you look at what it's going to take vs. what we can do in other areas, we believe it's a much better use of our resources to allocate them elsewhere."
Reich said the company would stop using perfluorooctanyl chemistry, a process used to make chemicals in some of 3M's repellants and coatings. These chemicals have been shown to linger in very low levels in tissue samples, although they have not been shown to cause any adverse health effects.
"This is definitely not a health issue," Reich said. "But we don't need a crystal ball to see what's going on with environmental groups."
The market reacted positively to the announcement, sending 3M's shares up 3 7/8, or 5%, at 89 13/16. (3M closed up 4 1/8, or 5%, at 90 1/16.)
Douglas Christopher, an analyst at
, said investors were likely also reacting to the company's announcement that it would beat Wall Street's current earnings estimates for 2001.
"They said the right things -- earnings will be up in 2001 and they will be reallocating resources from these products," said Christopher, who rates 3M a buy. His firm has not done any underwriting for the company.
Wall Street expects 3M to earn $5.21 a share in 2001, according to a poll conducted by
First Call/Thomson Financial
. The company said it would take a charge against earnings of about $200 million sometime in 2000 due to the discontinuation of some of its products but added that it expects to meet consensus earnings estimates of $4.69 a share for the year.
The product lines that are to be phased out represent about 2%, or $300 million, of 3M's annual revenues, the company said.
Reich said the company would seek to find employment for the 1,500 employees who manufacture the products.