3M Fourth-Quarter and Full-Year 2022 Results

 3M has reported fourth-quarter and full-year 2022 results and provided its 2023 financial outlook.

"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 per cent -- versus our expectation of 1 to 3 per cent -- adjusted margins of 19.1 per cent, 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 control 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:

The 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 special items.

• Adjusted earnings per share of $2.28, excluding the impact of special items.

• Sales of $8.1 billion, down 6 per cent year-on-year, which included impacts of negative 2 per cent from divestitures and negative 5 per cent from foreign currency translation due to strength of U.S. dollar.
• Organic sales growth of 0.4 per cent 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 per cent year-on-year, while adjusted free cash flow was $1.7 billion, up 3 per cent 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 per cent year-on-year, which included impacts of negative 1 per cent from divestitures and negative 4 per cent from foreign currency translation due to strength of U.S. dollar.
• Organic sales growth of 1.2 per cent 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 per cent, while adjusted earnings per share was $10.10, down 6 per cent. 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 per cent year-on-year, while adjusted free cash flow was $4.7 billion, down 25 per cent year-on-year. The declines were primarily due to lower net income and the cash impact from capitalisation 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.

2022 Results Based on New 2023 Outlook Basis

In December 2022, 3M announced it will exit perfluoroalkyl and polyfluoroalkyl substance (PFAS) manufacturing by the end of 2025. Beginning in 2023, 3M expects to adjust for the results of these manufactured PFAS products in arriving at non-GAAP results. This expands the current adjustment for special items in 3M's non-GAAP results to include the sales and estimates of income, exit costs, and associated activity of PFAS manufacturing.

Comparable 2022 GAAP sales, earnings, and cash flow amounts are provided in the highlights section above.