3M Posts Lower Sales for 2022, Announces Workforce Reduction Plans
3M reported fourth-quarter and full-year 2022 results on Tuesday, January 24, and also provided its 2023 financial outlook. As part of the announcement, the company stated that it will reduce approximately 2,500 global manufacturing roles, due to reduced production volumes.
3M reported sales for 2022 of $3.42 billion, which is down 3% year-on-year. The decrease included impacts of -1% from divestitures and -4% from foreign currency transition due to the strength of the U.S. dollar. In its earnings call, 3M listed declines in consumer-facing markets such as consumer electronics and retail, slowing growth in China due to COVID-related disruptions, and moderating demand in all industrial markets as reasons for the slower than expected growth. The company also saw declines due to falling demand for disposable respirators and its exit from Russia, which negatively impacted organic sales grown by 2 percentage points for the year and 2.6 percentage points in the fourth quarter.
Looking to 2023, 3M expects organic growth of -3% to flat, which includes -2 percentage points from the impact of the decline in demand for disposable respirators and the impact of the company’s Russia exit. In December 2022, 3M announced it will exit per- 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 its 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.
3M chairman and CEO Mike Roman commented on the results, "3M continues to focus on delivering for customers and shareholders in a challenging economic environment. We posted organic growth of 0.4 percent -- versus our expectation of 1 to 3 percent -- adjusted margins of 19.1 percent, 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 controlled 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. 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. 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."
Learn more about 3M at www.3m.com.
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