Too early to assess toll of Japan quake on Minn. exports

With the fallout from the earthquake still unfolding, it's unclear whether the turmoil in Japan will cause a big revenue loss for Minnsota firms -- and whether the state's exporters will see a dropoff in sales to Minnesota's third largest foreign market.

Stocks of Minnesota companies with significant exposure to Japan took a hit Tuesday, as did the broader market. Shares of 3M, St. Jude Medical, and Medtronic fell 1 percent or more.

Stocks overall had a bad day, as investors speculated that Japan's natural disasters could wreak havoc on the global economy. Losses abated somewhat after the Federal Reserve said the U.S. economy's recovery is on firmer footing.

Stocks of several Minnesota companies followed those fluctuations.

"Overall, I think we still think 3M is worth quite a bit more than where it's trading today. Nonetheless, Japan could have some effect on the company," said Adam Fleck, an analyst with Morningstar in Chicago.

3M's stock fell 1.67 percent Tuesday. Fleck said Japan fears fueled part of that decline. But the company may also have seen some reaction to news of its chief financial officer retiring. Fleck says that could signal a bigger shakeup in the company's executive team.

As for 3M's Japan exposure, Fleck notes that the country is a meaningful but not enormous market for the Post-It Notes maker. About 9 percent of 3M's revenues come from Japan. And Fleck said the company's sales of consumer and office products could take a hit in Japan, as well as those tied to auto manufacturing.

"They go in there with paint prep and window treatment type of products. If the auto production is set down for a lengthy period of time, 3M's sales into that end market are going to suffer," said Fleck.

On the flipside, Fleck imagines that demand will grow for some 3M products as Japan recovers. Building products could see a bump, as could health care products.

"They have a pretty sizeable health care business that does respirator masks, that does bandages, topical treatments. They could see some pickup there as relief efforts take hold," said Fleck.

Some of those same questions are in play for Minnesota's medtech companies, too.

Joanne Wuensch, an analyst with BMO Capital Markets, said use of some medical devices could spike because of the tragedy's toll. But the opposite could be true, too.

"Can the patient get to the hospital? Can the hospital service a patient? Do they put off procedures that normally they would be doing sooner rather than later?" said Wuensch.

St. Jude Medical says it suspects that "the volume of medical procedures at hospitals in Japan will be impacted by the disruption caused by the earthquake."

About 11 percent of St. Jude's revenues come from Japan. Medtronic's share is smaller, at 5 percent. For Boston Scientific, which has major operations in Minnesota, that share is 12 percent.

Wuensch says the three companies don't have manufacturing facilities in Japan, which moderates their potential financial losses.

But an estimate of the financial effects is impossible with logistical questions up in the air. Blackouts and transportation problems are choking parts of the country. Medtronic spokesman Brian Henry says it's not clear when those problems will be resolved.

"In terms of when the infrastructure of the country will get to be where it needs to be, it's tough to speculate at this point," said Henry. "We at Medtronic stand ready, willing, and able to help in any way that we can to make sure that patients are getting access to the treatments that they need."

Representatives of Cargill and Ecolab, which also have operations in Japan, said it's too soon to guess how revenue will be affected with parts of Japan's infrastructure in chaos.

At the Minnesota Trade Office, executive director Katie Clark notes that Japan is Minnesota's third largest export market. She says if history repeats itself, the earthquake won't have much effect either way.

"The earthquake ... in 1995, that was right in the heart of the industrial area -- that really had little overall impact on our overall trade with Japan. So we're hoping that we'll see a similar result," she said.

Clark says her agency is offering assistance to Minnesota companies that export to Japan.