3M Co. will take a $160 million charge after suspending operations in Venezuela because of ongoing unrest in the South American country.
The Maplewood, Minn.-based manufacturing giant said in a regulatory filing on Tuesday that Venezuela presented an “unstable environment” and that its “heightened unrest” was expected to continue for some time.
As a result “3M has concluded that it no longer meets the criteria of control … and therefore deconsolidated its Venezuelan subsidiary as of May 31,” 3M officials said in the filing with the U.S. Securities and Exchange Commission.
3M said in the filing that it notified relevant employees on Tuesday. It was not immediately clear how many employees were affected.
3M’s exit from Venezuela will result in a pretax and noncash charge of $160 million, or about 27 cents a share against second-quarter earnings.
The noncash charge was not previously included in 3M’s forecasts for 2019, officials said.
“There is no economic impact to 3M from the deconsolidation of the subsidiary. The operations were immaterial to 3M’s overall operations,” 3M said in its SEC report. “The charge is noncash and primarily relates to foreign currency translation losses previously” factored in.
3M’s stock slipped $2.16 to close at $166.69 a share on Friday.
3M — which makes a range of products from Scotch tape to safety harnesses and automotive films — is the latest company to walk away or downsize operations in Venezuela.
In 2015, the St. Paul-based sanitizing chemical firm Ecolab took roughly $275 million worth of charges as it dealt with Venezuela’s currency-devaluation problems and unrest there.
Other companies that either suffered losses or largely shut operations there include Cargill Inc., Kellogg, Goodyear Tire & Rubber, Kimberly-Clark, Ford Motor Co. and Brink’s, to name a few.
Venezuela’s economic unrest involves skyrocketing inflation and food shortages.
The country also is dealing with massive emigration as opposition leader Juan Guaido attempts to wrest the presidency from Nicolas Maduro.
The United States and several other countries have backed Guaido’s claim as the rightful president, while Maduro has dug in largely with military support and blocked humanitarian aid from reaching citizens.
3M officials said the upheaval has halted demand for products and disrupted 3M’s access to various exchange mechanisms.
It has also hurt 3M’s ability to manage its subsidiary’s capital structure, purchasing, product pricing and labor relations, the SEC report said.