3M Announces Plans to Create Long Term Value Through Spin-Off of Health Care Business
3M has announced its intent to spin off its Health Care business, resulting in two world-class public companies well positioned to pursue their respective growth plans. The New 3M will remain a leading global material science innovator serving customers across a range of industrial and consumer end markets, and Health Care will be a leading global diversified healthcare technology company focused on wound care, healthcare IT, oral care, and biopharma filtration.
As leading standalone companies, each is expected to benefit from:
- Enhanced agility and focus to better position for long term success;
- Ability to tailor capital allocation strategies and make company-specific investment decisions to drive innovation and growth;
- Compelling investment profiles appealing to different investor bases; and,
- Distinct boards and management teams comprised of world-class leaders with relevant expertise and track records driving value creation.
New 3M: A Leading Global Material Science Innovator
New 3M, with $26.8 billion in sales in 2021, will remain a leading global material science innovator, powered by an operating model rooted in science and technology, manufacturing, global capabilities, and iconic brands. The company will continue to leverage its unique and differentiated innovation to capitalize on customer opportunities aligned with key global megatrends such as electronics, safety, mobility, digitization, home improvement, and sustainability.
New 3M expects to continue to deliver profitable growth, generate robust cash flow, and return capital to shareholders while maintaining a strong balance sheet. New 3M will continue to prioritize strategic opportunities, including investments in growth, productivity, and sustainability while maintaining a proactive approach to portfolio management. 3M anticipates that there will be no changes to the Company’s capital allocation priorities through the completion of the separation.
Health Care: A Leading Global Diversified Health Care Technology Company
Health Care, with approximately $8.61 billion in sales in 2021, will be a diversified healthcare technology leader with a deep and diverse portfolio of trusted brands, global capabilities, and leadership in attractive end market segments such as wound care, oral care, healthcare IT, and biopharma filtration. Health Care will be better positioned to deliver industry-leading innovation that enables better, smarter, and safer healthcare for patients worldwide.
Health Care will focus on growth, grounded in its strong track record of profitability. With robust cash flow generation, Health Care will be well positioned to pursue its strategic objectives.
3M Reports Second-Quarter 2022 Results
3M has reported financial results for the second quarter of 2022. The highlights of the results are as follows:
- Sales of $8.7 billion, down 3% year-on-year, which included a negative 4% impact from foreign currency translation due to strength of U.S. dollar.
- Organic sales growth of 1% year-on-year which included a 4% headwind from the combined impact of China COVID-related lockdowns and decline in disposable respirator demand.
- Operating cash flow was $1.1 billion, down 40% year-on-year, while adjusted free cash flow was $1.0 billion, down 41% year-on-year.
- 3M returned $0.8 billion to shareholders via dividends.
“In a challenging macroeconomic environment, 3M executed well and delivered solid earnings, while continuing to drive growth through investments in large, fast-growing areas,” said 3M chairman and CEO Mike Roman. “Looking ahead, we updated our adjusted full-year expectations largely due to the strength of the U.S. dollar and uncertain macroeconomic environment. We remain focused on innovating for customers, driving operational improvements and advancing our environmental stewardship – while positioning 3M for the future through our plan to spin off our Health Care business and resolve Combat Arms litigation in a manner that is efficient and equitable.”
Full-Year 2022 Outlook
3M updated its full-year sales and earnings expectations to reflect the impact of the strong U.S. dollar along with the current uncertain macroeconomic environment.
- Total sales growth: -2.5% to -0.5% vs. 1% to 4% prior
- Organic sales growth: 1.5% to 3.5% vs. 2% to 5% prior
- Foreign currency translation: -4% vs. -1% prior
- GAAP earnings per share: $7.32 to $7.82 vs. $9.89 to 10.39 prior
- Adjusted earnings per share: $10.30 to $10.80 vs. $10.75 to $11.25 prior
- Operating cash flow of $6.6 to $7.2 billion contributing to 90% to 100% adjusted free cash flow conversion
To view the full results, visit the 3M website.