Friday, 28 July 2023

3M Reports Strong Q2 2023 Results

3M has released its second quarter 2023 results.

"In the second quarter, the actions we took to strengthen our supply chain and restructure the company led to improved service for customers, reduced costs across 3M, and better than expected margins and cash flow," said Mike Roman, 3M chairman and chief executive officer. "As we execute our strategy, we are positioning 3M for long-term performance, including progressing the planned spin of our Health Care business and addressing a significant portion of PFAS litigation."

Second Quarter Highlights:

Q2 2023 Q2 2022

GAAP earnings (loss) per share $ (12.35) $ 0.14

Special items:

Impact of public water systems (PWS) settlement	14.19	—
Other net costs for significant litigation	0.24	2.34
Other special items, net	0.09	(0.03)
Adjusted EPS	$ 2.17	$ 2.45
Memo: GAAP operating income (loss) margin	(107.6) %	1.3 %
Adjusted operating income margin	19.3 %	21.6 %

GAAP loss per share of $12.35 and operating margin of minus 107.6 per cent include the previously announced proposed settlement agreement with PWS in the United States regarding PFAS, resulting in a pre-tax charge of

$10.3 billion payable over 13 years, negatively impacting earnings per share by $14.19.

Adjusted earnings per share of $2.17 includes pre-tax restructuring charges of $212 million, or negative $0.31 per share.

Adjusted operating income margin of 19.3% includes a 2.7 per centage point headwind from pre-tax restructuring charges.

GAAP

Adjusted (Non-GAAP)

Net sales (Millions) Sales change

Total sales

$8,325

(4.3) %

$7,993

(4.7) %

Components of sales change:

Organic sales¹	(2.2) %	(2.5) %
Acquisitions/divestitures	(1.2) %	(1.3) %
Translation	(0.9) %	(0.9) %

Adjusted sales exclude manufactured PFAS products.

Above adjusted organic sales decline includes a 1.7 percentage point headwind from the decline in disposable respirator demand.

Sales of $8.3 billion, down 4.3 per cent year-on-year, with organic sales decline of 2.2 per cent year-on-year. Adjusted sales of $8.0 billion, down 4.7 per cent year-on-year with adjusted organic sales decline of 2.5 per cent year-on-year.

Operating cash flow of $1.5 billion, up 34 per cent year-on-year; adjusted free cash flow of $1.5 billion, up 44 per cent year-on-year.

3M returned $828 million to shareholders via dividends.

The above includes reference to certain non-GAAP measures. See the "Supplemental Financial Information Non- GAAP Measures" section for applicable information.

Full-Year 2023 Outlook

Given the company's strong operational execution and cost discipline, 3M raises its full-year adjusted EPS expectations for 2023 to $8.60 to $9.10 vs. $8.50 to $9.00 prior.

Adjusted total sales growth² in the range of -5 to -1 per cent, reflecting adjusted organic sales growth of -3 per cent to flat, which remains unchanged.

Adjusted operating cash flow of $5.9 to $6.3 billion is contributing to 90 per cent to 100 per cent adjusted free cash flow conversion, which is also unchanged.

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