3M Announces 2019 Financial Results, Additional Restructuring Efforts
3M has initiated a restructuring that will reduce approximately 1,500 positions, spanning all business groups, functions, and geographies.
3M recently reported fourth quarter and full-year 2019 results. For the year, sales declined 1.9% to $32.1 billion, with an organic local currency sales decline of 1.5%. The combination of acquisitions and divestitures increased sales 1.3%. Foreign currency translation decreased sales 1.7%.
In the 2019 fourth quarter, sales grew 2.1% year-on-year to $8.1 billion. Organic local currency sales declined 2.6%, while acquisitions, net of divestitures, increased sales by 5.1%. Foreign currency translation reduced sales by 0.4% year-on-year.
Total sales in the fourth quarter grew 25.4% in Health Care and were flat in Consumer, with declines of 4.8% in Safety and Industrial, and 6.2% in Transportation and Electronics. Organic local currency sales increased 0.2% in Consumer, with declines of 0.2% in Health Care, 2.8% in Safety and Industrial, and 5.9% in Transportation and Electronics.
On a geographic basis, fourth quarter sales grew 7.4% in the U.S. and 1.2% in Latin America/Canada, with declines of 1.7% in Asia-Pacific and 2% in EMEA (Europe, Middle East and Africa). Organic local currency sales were flat in Latin America/Canada, with declines of 2.7% in both Asia-Pacific and EMEA and 2.9% in the U.S.
“Our team executed well in the fourth quarter and delivered results that were in-line with our expectations,” said Mike Roman, 3M chairman and CEO. “While we continued to manage challenges in certain key end markets, we generated solid underlying margins and robust free cash flow.”
3M also announced a new global operating model and streamlined organizational structure. As a result of these actions, 3M initiated a restructuring that will reduce approximately 1,500 positions, spanning all business groups, functions, and geographies. On a pre-tax basis, 3M took a restructuring charge of $134 million in the fourth quarter of 2019. The company expects annual pre-tax savings of $110 million to $120 million, with $40 million to $50 million in 2020.
On January 1, 2020, 3M implemented a new global operating model that further aligns its four business groups (Safety & Industrial, Transportation & Electronics, Health Care, and Consumer) with the company’s customers and go-to-market models. In the new model, 3M’s business groups now have full responsibility for all facets of strategy, portfolio optimization, and resource prioritization across their entire global operations.
Under the prior model, the area and country teams that comprised 3M’s International Operations organization were responsible for setting priorities in their regions. All of 3M’s international employees now report into the business groups and functions they are part of, and 3M no longer has an International Operations organization.
3M expects that the new business group-led operating model will create several benefits to customers and shareholders, including:
- Driving more accountability to business groups to serve global and local customers
- Enabling stronger customer insights to drive more powerful innovation
- Empowering 3Mers to make faster decisions and improve speed and service to customers
- Streamlining the organization and simplifying reporting lines
- Leveraging strengths across markets while maintaining strong local capabilities and expertise
To support 3M’s new operating model and ensure cross-functional efficiency, the company has made enhancements to its business group support functions. These include:
- The consolidation of manufacturing, supply chain, and customer operations into a new Enterprise Operations organization focused on optimizing the customer experience end-to-end
- A newly formed global Corporate Affairs organization focused on advancing and protecting the company’s brand and reputation in all areas of the world
- Realignment of all existing corporate functions to drive more effective operations across geographies
“3M continues to transform how it operates and build a more customer-driven and streamlined organization for the future,” said Roman. “The latest phase of our transformation journey is designed to improve growth and operational efficiency, and will enable us to create even more value for our customers and shareholders. This is a defining moment in how we run our company, and positions 3M for success in the years ahead.”
Additional details are available at www.3m.com.