Q1 results reported, 3M restructures senior management
On April 25, 3M reported first quarter sales of $8 billion, down 9.0% year-on-year, with organic sales decline of 4.9% year-on-year, a 1.3% headwind from divestitures, and a 2.8% headwind from foreign currency translation due to strength of U.S. dollar.
Adjusted sales of $7.7 billion, down 9.7% year-on-year with adjusted organic sales decline of 5.6% year-on-year which included a 3.4%age point headwind from the decline in disposable respirator demand, along with the 2022 exit of Russia. Operating cash flow was $1.3 billion, up 26% year-on-year, while adjusted free cash flow was $0.9 billion, up 24% year-on-year.
"In the first quarter we continued our relentless focus on serving customers and aggressively managed costs," said 3M chairman and CEO Mike Roman. "Market trends were as we expected, and we made changes to improve our operations and position us for success as supply chains improve."
"To strengthen 3M for the future, today we announced actions that will reduce costs at the corporate center, further simplify and strengthen our supply chain structure, and streamline our go-to-market business models, which will improve margins and cash flow," Roman continued. "We will continue to prioritize investments in high-growth end markets where 3M science gives us a clear competitive advantage."
Restructuring Actions
3M is taking restructuring actions it says are intended to make the company stronger, leaner, and more focused. The structural reorganization will reduce the size of the corporate center of the company, simplify supply chain, streamline 3M's geographic footprint, reduce layers of management, and further align business go-to-market models to customers.
The following changes to the senior management team were announced:
Effective April 25, Michael Vale has been appointed to group president and chief business and country officer, a new role on the company's Corporate Operations Committee, reporting to chairman and CEO Mike Roman. In this new role, Vale will have responsibility for three of the company's four business groups (Safety and Industrial, Transportation and Electronics, and Consumer), customer operations, country governance and emerging markets.
Vale was previously group president, safety & industrial business and has 30 years of experience at 3M, leading multiple businesses and divisions, across multiple geographies.
Business group presidents reporting to Vale will be:
Karina Chavez, group president, consumer business. Chavez has extensive experience at 3M, internationally and leading strategy and operations, including portfolio experience in our consumer business. Most recently, she was senior vice president and chief strategy officer.
Chris Goralski, group president, safety and industrial business. Goralski brings extensive experience at 3M, advancing industrial businesses, leading in environmental stewardship and business transformation. Most recently, he was president, industrial adhesives and tapes division.
Ashish Khandpur, will continue to serve as group president, transportation and electronics business.
Jeff Lavers will continue to serve asas group president, health care business, and report to Mike Roman. For the past nine months, Lavers has served as both group president, consumer business and interim group president, health care business. In this role, he will focus on leading our health care business, and support the company's progress toward a spin off and the transition to a new ceo and management team.
Also, the company is expanding the responsibilities of Monish Patolawala, executive vice president, chief finance and transformation officer, and John Banovetz, executive vice president, chief technology officer, and environmental responsibility. Patolawala adds responsibility for enterprise strategy development and the company's global service centers. Banovetz assumes responsibility for new growth ventures, which include the company's venture investment arm and early-stage R&D organization. Both continue to report to Mike Roman.
These restructuring actions are expected to affect all functions, businesses, and geographies and will impact approximately 6,000 positions globally, in addition to the reduction of 2,500 global manufacturing roles announced in January 2023. 3M anticipates annual pre-tax savings of $700 million to $900 million upon completion of these actions, which are expected to meaningfully reduce costs and drive long-term improvement in margins and cash flow while enabling a more efficient and effective structure for driving long-term growth.
The company stated it will continue to focus its commercial efforts in high-growth markets including automotive electrification, home improvement, personal safety, electronics, and health care. In addition, 3M will prioritize emerging growth areas such as climate technology, sustainable packaging, industrial automation, semiconductors, and next-generation consumer electronics.
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