3M(US:MMM)2023-04-24 16:00Earnings and Profitability - 3M's diluted earnings per share for Q1 2023 was $1.76, a decrease from $2.26 in the same period last year, primarily due to special items such as litigation costs and PFAS product impacts[271] - Total organic growth/productivity and other factors negatively impacted earnings per share by $0.38, driven by declines in disposable respirator demand and lower sales volumes in electronics/consumer retail[273] - Net income including noncontrolling interest for Q1 2023 was $981 million, down from $1,303 million in Q1 2022[336] - Net costs for significant litigation, including respirator mask/asbestos and PFAS-related matters, impacted earnings per share by $0.39 in Q1 2023[280] Sales Performance - 3M's total sales change for Q1 2023 was -9.0%, with organic sales declining by 4.9% and divestitures contributing to a 1.3% decrease[282] - Net sales for the first quarter of 2023 decreased by 9.0% to $8,031 million compared to $8,829 million in the same period last year[284] - Safety and Industrial segment sales decreased by 8.9% to $2,779 million, with organic sales declining by 6.0%[284][306] - Transportation and Electronics segment sales decreased by 12.4% to $2,050 million, with organic sales declining by 8.0%[284] - Health Care segment sales decreased by 5.6% to $2,010 million, despite a 1.4% increase in organic sales[284] - Consumer segment sales decreased by 9.0% to $1,192 million, with organic sales declining by 6.8%[284] - Sales in Safety and Industrial decreased by 8.9% in Q1 2023, with organic sales impacted by a 9.9 percentage point decline due to disposable respirator sales and Russia exit[308] - Transportation and Electronics sales decreased by 12.4% in Q1 2023, with organic sales down 8.0% and divestitures impacting sales by 1.0%[311] - Health Care sales decreased by 5.6% in Q1 2023, with organic sales up 1.4% but offset by divestitures and translation impacts[316] - Consumer Business sales decreased by 9.0% in Q1 2023, with organic sales down 6.8% due to shifts in consumer spending patterns[319] Geographic Sales Performance - Americas geographic area sales were flat, with U.S. organic sales increasing by 1% and Mexico organic sales increasing by 10%[286] - Asia Pacific geographic area sales decreased significantly, with China organic sales declining by 18% and Japan organic sales declining by 10%[286] Foreign Currency and Market Risks - Foreign currency impacts decreased operating income by approximately $76 million year-on-year in Q1 2023, primarily due to the strength of the U.S. dollar[275] - The stronger U.S. dollar negatively impacted sales and earnings in the first quarter of 2023, despite the company's hedging strategies[288] - The company is exposed to market risks including foreign currency exchange rates, interest rates, and commodity prices, which could impact financial performance[356] Restructuring and Divestitures - Restructuring pre-tax charges increased to $52 million in Q1 2023, compared to $18 million in the same period last year[274] - Divestiture impacts included lost income from divested businesses and stranded costs, with 3M completing the split-off of the Food Safety business and deconsolidation of the Aearo Entities in 2022[276] - 3M plans to exit manufactured PFAS products by the end of 2025, with related sales and income impacts being adjusted in non-GAAP measures[280] Tax and Financial Metrics - The effective tax rate for Q1 2023 was 17.7%, a decrease from 18.8% in the prior year, primarily due to deferred tax impacts of 2023 activity[277] - 3M's total debt at March 31, 2023, was $15.96 billion, consistent with December 31, 2022, with $1.1 billion in commercial paper outstanding[324] - Total debt was approximately $16.0 billion at March 31, 2023, with $1.1 billion in commercial paper outstanding[346] - Net debt decreased by $55 million to $11.97 billion at March 31, 2023, compared to December 31, 2022[331] Liquidity and Cash Flow - 3M had $4.0 billion in cash, cash equivalents, and marketable securities at March 31, 2023, with $2.7 billion held by foreign subsidiaries[330] - 3M maintains a strong liquidity profile with a $3.0 billion revolving credit facility and a $1.25 billion 364-day credit facility, both undrawn at March 31, 2023[327] - Net cash provided by operating activities increased by $264 million to $1,275 million in Q1 2023 compared to Q1 2022[340] - Free cash flow for Q1 2023 was $800 million, with a free cash flow conversion rate of 82%, up from 45% in Q1 2022[350] Capital Allocation and Investments - The company repurchased $29 million of its own stock in the first quarter of 2023, compared to $773 million in the same period last year[289] - The company repurchased $29 million of its own stock in Q1 2023 and declared a first-quarter dividend of $1.50 per share, marking the 65th consecutive year of dividend increases[347] - Capital spending for 2023 is expected to be between $1.5 billion and $1.8 billion, focusing on growth, productivity, and sustainability[341] - The company is actively considering additional acquisitions, investments, and strategic alliances, and may divest certain businesses[344] Working Capital and Financial Position - 3M's working capital decreased by $758 million to $4.41 billion at March 31, 2023, compared to December 31, 2022[329] - Working capital decreased by $0.8 billion compared to December 31, 2022, with current assets increasing by $0.3 billion and current liabilities decreasing by $1.0 billion[334] Forward-Looking Statements and Risks - Forward-looking statements highlight risks such as global economic conditions, COVID-19 impacts, PFAS liabilities, and potential disruptions in IT systems[354]