3M (NYSE:MMM) today announced fourth-quarter financial results that missed the consensus earnings per share (EPS) forecast.
The company also announced that it plans to reduce its global manufacturing workforce by 2,500. 3M Chair and CEO Mike Roman attributed the decision to a need to align with adjusted production volumes.
MMM shares dipped 4.5% at $117.11 apiece before the market opened this morning. They dropped even further after the market opened, falling 5.7% at $115.63 apiece. MassDevice‘s MedTech 100 Index, which includes stocks of the world’s largest medical companies, was up more than 9%.
The St. Paul, Minnesota–based company posted profits of $541 million. That amounts to 98¢ per share on sales of $8.08 billion for the three months ended Dec. 31, 2022.
3M posted a 59.6% bottom-line slide on a sales decline of 6.2%.
Adjusted to exclude one-time items, earnings per share came in at $2.28. That fell 8¢ short of Wall Street projections. Meanwhile, 3M posted a sales beat as analysts expected revenues of $8.04 billion.
3M’s Health Care business — which it plans to spin off — saw revenues decrease by 6.7% in the quarter. The segment registered a 2% decrease for the entire year. Roman said the company saw “rapid declines” in consumer-facing markets and slowdowns in China due to COVID-related disruptions. Weakened demand led to adjusted manufacturing output and controlled costs, he added.
More color on the Health Care spinoff
On the 3M earnings call this morning, Roman said the company has “a dedicated team” that is “making very good progress” on the spin.
The expectation remains for the spin to take place by the end of 2023 or in early 2024. Roman explained that the dedicated team’s focus centers around that timeline. A lawsuit seeking to prevent the Health Care spinoff was dismissed, he said, so there won’t be a legal impact stopping the company at this time.
“It’s really about our teams working to execute the spin and as I said, they’re making very good progress,” Roman explained. “We’re confident that we’re moving in the right direction and moving ahead at pace.”
Challenges to continue for 3M
“3M continues to focus on delivering for customers and shareholders in a challenging economic environment,” said Roman. “In a year impacted by inflation, global conflicts, and economic softening, our team took actions to position 3M for future success. 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.”
Roman added that the company expects macroeconomic challenges to persist in 2023, hence the decision to reduce 3M’s workforce.
3M’s projections for 2023 include a sales decline of between 6% and 2%. This reflects the potential impact of disposable respirator declines and the exit of Russia, among other things. The company projects adjusted EPS to fall between $8.50 and $9, compared to $9.88 this past year. That reflects headwinds from the decline in respirator demand, the exit of Russa, foreign currency translation and divestitures.