154 annotations
For example, in our consumer business, we have identified approximately 5% of the portfolio where we have limited market growth and a poor right to win.
While exiting these portfolios will impact consumers' growth rate in the near term, these actions will better focus our efforts on products that best utilize 3M invention and ultimately drive improved growth and margins in the long term.
At the same time, 3M succeeds across market cycles because we remain close to customers and invest in innovation.
exitng 5% of consumer portfolio
Transcript
2023 Q4
1 May 24
Just to be clear, you said 40% of adjusted free cash flow. Can you just help us with what the construct of that is? What is adjusted free cash flow?
Bruce Jermeland
You're referring to the dividend, Steve, I presume?
C. Stephen Tusa
Yes, just the construct. I don't need a number for cash.
Just how do you define that adjusted free cash?
Monish Patolawala
So if you look at all our material that we have submitted, you will see historically what we have broken out is from our GAAP results. There are certain items that we have been adjusting to get to adjusted results, which is litigation expenses, number one. Number two is PFAS because we've been exiting -- we've been showing PFAS as an exit. And number 3 was all the costs incurred to spin out Solventum or the Health Care business.
So it's the same construct there. And always, Steve, if we decide to change something, we'll keep you all posted on changes to adjustments.
So those are the big ones. And if you see our press release statements or schedules, you will see that split by category in there.
Bruce Jermeland
Yes. Steve, it's all right all detailed in our press release attachments.
C. Stephen Tusa
Right.
So whatever you're paying out in cash for these liabilities, that is adjusted out of free cash? So for example, the $4.3 billion or whatever in this year will be adjusted out, and then you take whatever we want to assume for free cash flow and then take 40% of that?
dividend policy color
Transcript
2024 Q1
1 May 24
That's helpful, Mike. And then, Monish, obviously, you mentioned a relatively good T&E start.
You did have a pretty easy comparison in Q1. But 7% growth, you're still guiding of low single digits. I know it's up a little bit.
You mentioned the buy ahead was a big part of the Q1 improvement. But is there any reason why your improved spec-ins wouldn't continue in electronics? And then are you seeing any improvement at all yet in semiconductors and those kind of end markets?
Monish Patolawala
Yes. I would say, first, we are thrilled that we've got the spec-ins, so that's a big positive.
As I said, 2/3 of the total 6.7%, that's approximate. We don't have the perfect number, we believe is partly driven by inventory normalization both in auto and electronics, plus customers starting to buy ahead as they start building for end markets or consumer end markets.
What I would tell you is second half is so important for the consumer electronics business, and we are watching that trend. If there is a big pickup in consumer electronics, we will definitely grow with it because we are now specced into many more devices than before.
So that -- I would say second half is what we are watching, but this is where we see it right now.
And then on semiconductor, our view is we saw the first quarter slow, and we believe that this will pick up in the second half, Andy. And that's what we are watching there, too. All indications keep saying it's going to get better, but we are watching those trends.
auto+electronics
Transcript
2024 Q1
1 May 24
Okay. More importantly, Mike, if you look back at the long-term growth rate ex Health Care of 3M, it's been kind of sub-2%, so below GDP. And that includes some price inevitably, I would assume. What do you think the entitlement growth rate of this business is longer term? I mean just -- go back 10 years, so I think that's a full cycle for sure. But when you think about the next 3 or 5 years, what do you think that the business should be able to grow at? Obviously, Bill is going to have his own initiatives. But what is your view on that?
Michael Roman
Yes. Scott, I won't get ahead of Bill and kind of how he's going to think about going forward.
You saw our guidance for this year. It's in line with macro.
Importantly, when you look at what drives our growth, it's really investing in the business. The organic investments have been the dominant driver of growth for us as a company, and we expect that to continue as we move forward.
Like I said in my speech, making indispensable products for our customers, and that means leveraging our innovation, our technologies, our manufacturing capabilities to come up with differentiated solutions for our customers and do that more and more prioritizing our investments as we've talked a lot about, where do we prioritize investments? In attractive markets, markets that are -- have growth dynamics that are better than the macro. That's kind of the way to really drive that this growth strategy forward. And that's how we think about it. That's how we focus.
It's important that we we really do prioritize leveraging our innovation so that we create not only the growth but the differentiated value leader in a way we deliver value to shareholders in terms of margins and cash.
whats wroing with growth?
Transcript
2024 Q1
1 May 24
Great. My follow-up question is on the dividend. There's been a huge sort of core industry about the potential dividend scenarios, but hopefully, that's now behind us. But the 40% payout ratio on adjusted free cash flow, is the intent, Mike, to keep that 40% relatively stable going forward so as you grow earnings and free cash flow going forward, the dividend should increase as well?
Michael Roman
Yes. I would think of it as a guide of how we're thinking about it. The approximately 40% of adjusted free cash flow, that's the way the Board -- that's the guide that the Board is looking at as we go forward.
So I -- that's where we start as we go forward with continuing operations. That's the best way to think about it, Nigel.
dividend policy
Transcript
2024 Q1
1 May 24
he guidance initiated today represents a return to growth, adjusted margins up 200 to 275 basis points year-on-year versus the illustrative midpoint of 18.7% for 2023 and over 15% earnings per share growth at the midpoint.
We anticipate full year adjusted organic growth of flat to up 2% or up 1% to 3%, excluding the impact from geographic prioritization and product portfolio initiatives we are taking. This estimated organic growth rate incorporates full year external forecast for major end markets, including an expectation of continued mix growth in industrial end markets. Automotive OEM build rates are currently forecasted to be down slightly. Consumer electronics are expected to grow low single digits for the year, while semiconductor market is currently forecasted to start the year slow and improve as the year progresses. And finally, consumer retail discretionary spending is expected to remain muted for the year.
As mentioned, we expect a strong expansion in adjusted operating margins of approximately 200 to 275 basis points year-on-year, up from an estimated midpoint of 18.7% in 2023.
With respect to adjusted EPS, we anticipate full year 2024 earnings in the range of $6.80 to $7.30 per share on a continuing operations basis or over 15% year-on-year growth at the midpoint.
FY guidance -- 3M outperfoming auto/elec end marets
Transcript
2024 Q1
1 May 24
Consumer business p
consumer weak -- home improveent
Transcript
2024 Q1
1 May 24
While our Transportation and Electronics business is off to a good start to the year, we estimate that approximately 2/3 of the strong first quarter organic growth was driven by initial buy ahead by customers as they ramp production and introduce new products, along with channel inventory normalization.
T & E v strog, but note 2/3 of the grwh was dfriven by "buy ahead"
Transcript
2024 Q1
1 May 24
Our electronics business outperformed the market, up mid-teens organically year-on-year. The introduction of new products continues to be well received in the market as evidenced by recent spec-in wins.
In addition, we also experienced continued channel inventory normalization as electronics demand stabilizes.
Our auto OEM business increased 13% in Q1 versus a 1% decline in global car and light truck builds.
We continue to win increased penetration, including strong momentum in automotive electrification, which was up over 30% year-on-year in Q1.
outperforming electronics and auto OEM markets
Transcript
2024 Q1
1 May 24
Transportation and Electronics
T & E
Transcript
2024 Q1
1 May 24
Safety and Industrial business,
S & I -- roofing good, , cons elec ok
Transcript
2024 Q1
1 May 24
Foreign currency negatively impacted adjusted margins by 60 basis points or a negative $0.09 per share as a result of the strong U.S. dollar. This headwind was larger than we had expected
FX headwinds of $0.09
Transcript
2024 Q1
1 May 24
We also accelerated certain nonrecurring benefits, including property sales as we progress on our asset-light strategy. This benefited first quarter year-on-year operating margins by approximately 70 basis points and earnings by $0.08 per share.
We accelerated restructuring actions in the quarter, incurring pretax charges of $122 million, which was higher than our guidance of $75 million to $100 million. This compared to last year's restructuring charge of $52 million, resulting in a negative year-on-year impact to margins of 90 basis points and $0.10 to earnings.
property sales hrelped EPS by $0.08, altghough there was q negative $0.10 from restructuring
Transcript
2024 Q1
1 May 24
Organic growth was driven by our Transportation and Electronics business as the team won share gains from spec-in wins and new product introductions with automotive and consumer electronics OEMs. This drove strong organic growth as the OEMs ramp production for new launches for end customers.
Geographically, year-on-year strength in China and EMEA was driven by our strength in electronics and automotive
elec + auto strong , npis
Transcript
2024 Q1
1 May 24
In Q1, we also finalized 2 major legal settlements.
First, our settlement agreement with U.S.-based public water suppliers received widespread support and participation. It was granted final approval by the court on March 29. We anticipate making total payments with a pretax present value of up to $10.3 billion over the next 13 years.
The first payment is expected in the third quarter of 2024.
It is important to note our agreement with public water suppliers addresses the detection of any type of PFAS at any level. This includes PFAS that have already been detected or may be detected in the future, including those that are the subject of the U.S. EPA's recently announced limits in drinking water.
Second is our settlement of the Combat Arms multi-district litigation.
As of today, more than 99% of claimants have chosen to participate. This provides us the certainty and finality the settlement was intended to achieve. We anticipate making total payments up to a pretax present value of $5.3 billion through 2029.
We also continue to make good progress on our exit of all PFAS manufacturing.
legal settlermtsnts payments
Transcript
2024 Q1
1 May 24
e delivered revenue of $7.7 billion, including improved organic growth, operating margins of 22%, up 400 basis points; and earnings of $2.39 per share, up 21%.
7.7 bn in rev skighnlty brtter thab 7.6bn
Transcript
2024 Q1
1 May 24
As mentioned, once the spin is complete, we will hold an investor meeting and provide an update on our outlook for 2024 that incorporates these factors.
In summary, we are building on our momentum and driving sustainable operating improvements that will drive improved financial performance. I want to thank the 3M team for their dedication and focus as they continue to deliver for our customers and shareholders.
That concludes my remarks.
update guidance when spin is complete
Transcript
2023 Q4
14 Feb 24
Overall, our restructuring program remains on track to deliver pretax savings in the range of $700 million to $900 million with a similar level of charges upon completion. We anticipate our actions will be largely done by the end of 2024, with benefits carrying into 2025.
700-900 by 2025, with ztions completde in 2024
Transcript
2023 Q4
14 Feb 24
an increase of 160 basis points year-on-year and 390 basis points sequentially
mgn expsansion 160bp
Transcript
2023 Q3
24 Oct 23
hen we started the year or we came into the year, we had said margin rates for the year are going to be around 19%. At the end of Q2, we said margin rates are going between 19.5% to 20% for the year. And now based on where we are with the midpoint of our guide, our margin rate will be approximately 20%.
So when you back into it, the fourth quarter is higher than the 19.5% that you have. It's somewhere in that 20.5% to 21% for the fourth quarter. And just to keep in mind, the reason you see this decremental. One is, of course, the restructuring is higher in Q4 versus Q3 plus it's higher of -- the midpoint is $95 million to $100 million of restructuring on a year-over-year basis if you're doing year-over-year decrementals.
margin colour
Transcript
2023 Q3
24 Oct 23