3M reports .4% organic growth for 2022
3M reported fourth-quarter and full-year 2022 results and provided its 2023 financial outlook, which anticipates a -6% – -2% adjusted total sales growth.
"3M continues to focus on delivering for customers and shareholders in a challenging economic environment," said 3M Chairman and CEO Mike Roman. "We posted organic growth of 0.4 percent – versus our expectation of 1 to 3 percent – adjusted margins of 19.1 percent, and adjusted earnings of $2.28 per share. The slower-than-expected growth was due to rapid declines in consumer-facing markets – a dynamic that accelerated in December – along with significant slowing in China due to COVID-related disruptions. As demand weakened, we adjusted manufacturing output and controlled costs, which enabled us to improve inventory levels.
"In a year impacted by inflation, global conflicts, and economic softening, our team took actions to position 3M for future success," said Roman. "We managed our portfolio – including the divestiture of our Food Safety business, planned spin-off of our Health Care business, and commitment to exit PFAS manufacturing by the end of 2025 – while continuing to work towards a mediated resolution for Combat Arms litigation. We invested in growth and productivity, while following through on sustainability commitments.
"We expect macroeconomic challenges to persist in 2023," Roman continued. "Our focus is executing the actions we initiated in 2022 and delivering the best performance for customers and shareholders. Based on what we see in our end markets, we will reduce approximately 2,500 global manufacturing roles – a necessary decision to align with adjusted production volumes."
Fourth-Quarter Highlights:
- Company reports GAAP earnings per share of $0.98, which included a $1.15 per share pre-tax charge relating to PFAS manufacturing exit costs adjusted for in special items.
- Adjusted earnings per share of $2.28, excluding the impact of special items. Sales of $8.1 billion, down 6 percent year-on-year, which included impacts of negative 2 percent from divestitures and negative 5 percent from foreign currency translation due to strength of U.S. dollar.
- Organic sales growth of 0.4 percent year-on-year which included a 2.6 percentage point headwind from the decline in disposable respirator demand, along with the exit of Russia.
- Operating cash flow was $1.9 billion, down 4 percent year-on-year, while adjusted free cash flow was $1.7 billion, up 3 percent year-on-year.
- 3M returned $1.4 billion to shareholders via dividends and gross share repurchases.
Full-Year Highlights
- Sales of $34.2 billion, down 3 percent year-on-year, which included impacts of negative 1 percent from divestitures and negative 4 percent from foreign currency translation due to strength of U.S. dollar.
- Organic sales growth of 1.2 percent year-on-year which included a 2.0 percentage point headwind from the decline in disposable respirator demand, along with the exit of Russia.
- GAAP earnings per share of $10.18, up 1 percent, while adjusted earnings per share was $10.10, down 6 percent. Earnings reflect year-on-year changes in special items, headwinds from manufacturing productivity, increased raw materials/logistics costs, investments, and negative foreign exchange impacts. Benefits to earnings included selling price actions, strong spending discipline, and lower shares outstanding.
- Operating cash flow was $5.6 billion, down 25 percent year-on-year, while adjusted free cash flow was $4.7 billion, down 25 percent year-on-year. The declines were primarily due to lower net income and the cash impact from capitalization of R&D for U.S. tax purposes.
- 3M returned $4.8 billion to shareholders via dividends and gross share repurchases.
- Received approximately $1 billion in consideration and reduced outstanding shares by 16 million via exchange offer due to Food Safety divestiture.
Full-Year 2023 Outlook
3M's full-year expectations for 2023 include the following:
- -6 to -2 percent adjusted total sales growth^ reflecting the following:
- -3 percent to flat adjusted organic sales growth^, includes -2 percentage point impact from disposable respirator decline and exit of Russia
- -2 to -1 percent adjusted foreign currency translation impact^
- -1 percent adjusted divestiture impact^
- Adjusted earnings per share^ of $8.50 to $9.00, versus 2022 of $9.88 on a comparable basis
- 2023 adjusted earnings per share include -$0.55 to -$0.80 of combined year-on-year headwinds from the decline in disposable respirator demand, exit of Russia, foreign currency translation, and divestitures
- Adjusted operating cash flow^ of $5.8 to $6.3 billion contributing to 90% to 100% adjusted free cash flow conversion^
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