3M
(NYSE: MMM)
officials say they remain on track to spin off the company’s healthcare business by late 2023 or early 2024.
“We’ve made good progress on our planned spin of our Health Care business, including regulatory filings and system updates in preparation for a soft spin [in November]. We’re also in the final steps of naming a CEO,” 3M CEO Mike Roman told analysts during the manufacturing giant’s Q2 earnings call this morning.
In April, Roman said Jeff Lavers would solely serve as interim group president of Health Care to support the transition to a new management team. (Until then, Lavers was also group president of the consumer business, which is now led by Karina Chavez.)
The Health Care business will stay headquartered in Minnesota during the transition period, but 3M told the Star Tribune of Minneapolis in April that the new company’s eventual management will decide on a headquarters location in the future. Meanwhile, 3M is spending $468 million over the next three years to expand its healthcare manufacturing facility in Brookings, South Dakota, according to the Star Tribune.
3M Health Care is one of the largest medtech businesses in the world, with more than $8 billion in annual revenue.
3M Health Care sales were down 4.8% year-0ver-year to $2.075 billion for the quarter ended June 30, 2023.
“These businesses continue to be impacted by lower post-COVID-related biopharma demand and ongoing stress on hospital budgets,” said CFO Monish Patolawala. “As procedure volumes continue to improve, hospital budgets stabilize, and we work through post-COVID-related impacts, we are confident in the long-term outlook of this business.”
Overall, 3M swung to a massive loss of $6.841 billion, or $12.35 per share, off of $8.325 billion in sales during the second quarter. The loss included charges related to 3M’s proposed 13-year, $10.3 billion settlement with public water systems across the U.S. for testing and cleanup related to so-called “forever chemicals” — perfluoroalkyl and polyfluoroalkyl substances, known as PFAS. In addition to the PFAS litigation, 3M continues to engage in mediation involving lawsuits related to present and former servicemembers seeking billions of dollars in relief from hearing loss caused by allegedly defective earplugs.
Sales were down more than 4% in Q2.
Adjusted to exclude one-time items such as the PFAS settlement, 3M’s earnings per share were $2.17 per share. The results were 62¢ ahead of the average predictions of Wall Street analysts, who expected earnings of $1.55 per share off of sales of $7.07 billion.
Roman reported significant progress on restructuring, which includes thousands of layoffs, a simplified management structure and a streamlined supply chain.
“In the second quarter, the actions we took to strengthen our supply chain and restructure the company led to improved service for customers, reduced costs across 3M, and better than expected margins and cash flow,” he said in a news release.