Embattled 3M beats expectations in financial results, but still loses the war

On January 23^rd, Post Its and safety equipment creator 3M (the Minnesota Mining and Manufacturing Company) reported above-expectations financial results, considering the ongoing costs of the company's combat arms earplug settlement.

The results included an adjusted operating income margin of 20.3 percent, and a loss per share of $12.63 and operating margin of minus 27.9 percent includes the previously announced settlements for CAE and PWS in the United States regarding PFAS, resulting in a pre-tax charges of $4.3 billion and $10.5 billion, respectively, negatively impacting EPS by a total of $20.39.

Silver linings

They did, however, also include an adjusted free cash flow of $2 billion, up 18 percent year-on-year (YoY) and an operating cash flow also sitting at $2 billion (three percent higher YoY).

Its adjusted EPS that was also up 11 percent year-on-year and adjusted operating income margin which were up 1.8 percentage points year-on-year.

Sales, also declined less than expected: down 0.8 percent YoY to $8 billion, and adjusted sales down just 0.3 percent in total.

A strong year?

Nevertheless, 3M was happy with the results, saying in a statement that:

These 'legal matters', namely the combat arms earplug settlement and also the public water systems settlement, took a sizable chunk out of investors' earnings, subtracting $5.94 and $14.45 from the EPS for the year respectively, leaving 3M investors with a loss of -12.63 per share for 2023, where they had instead had $10.18 EPS in 2022.

The financial results at a glance:

• Sales of $8.0 billion, down 0.8 percent year-on-year, with organic sales decline of 1.9 percent year-on-year.
• Adjusted sales of $7.7 billion, down 0.3 percent year-on-year with adjusted organic sales decline of 1.4 percent year-on-year.
• Operating cash flow of $2.0 billion, up 3 percent year-on-year; adjusted free cash flow of $2.0 billion, up 18 percent year-on-year.
• 3M returned $828 million to shareholders via dividends.

3M's 2024 outlook

The company also provided its 2024 outlook for Q1 and beyond in the same release. These were:

• Adjusted total sales growth in the range of 0.25 to 2.25 percent, reflecting adjusted organic sales³ growth of flat to up 2 percent
• Adjusted EPS in the range of $9.35 to $9.75.
• Adjusted operating cash flow of $6.5 to $7.1 billion, contributing to 95 to 105 percent adjusted free cash flow conversion