3M Is Making Progress in Tackling Liability Lawsuits, CEO Says
Company posts $10 billion charge after settling some ‘forever chemicals’ claims The manufacturer of consumer and industrial products increased its profit forecast as it reduced costs. Photo: Nicholas Pfosi/REUTERS By John Keilman and Ben Glickman Updated July 25, 2023 12:44 pm ET 3M said a more than $10 billion settlement to resolve contamination claims related to so-called forever chemicals showed progress in the company’s efforts to resolve waves of litigation that have weighed on its stock. The St. Paul, Minn.-based maker of consumer and industrial products agreed last month to settle allegations by about 300 cities that 3M -manufactured PFAS chemicals tainted drinking water. Chief Executive
The manufacturer of consumer and industrial products increased its profit forecast as it reduced costs.
Photo: Nicholas Pfosi/REUTERS
3M said a more than $10 billion settlement to resolve contamination claims related to so-called forever chemicals showed progress in the company’s efforts to resolve waves of litigation that have weighed on its stock.
The St. Paul, Minn.-based maker of consumer and industrial products agreed last month to settle allegations by about 300 cities that 3M -manufactured PFAS chemicals tainted drinking water. Chief Executive Mike Roman said Tuesday the move aligned with 3M’s broader strategy of managing the lawsuits and resolving claims through mediation when it makes sense.
“We don’t like the overhang on the stock and we want to manage it, but we’ve got to, as we move forward, do what’s in the best interest of the company for the long term,” Roman said.
3M on Tuesday reported a quarterly loss of $6.84 billion, which included a charge of $10.3 billion related to the June PFAS settlement. The loss of $12.35 a share compared with a profit of $78 million, or 14 cents a share, a year earlier.
Adjusting for one-time expenses, including the settlement charge, the company reported per-share earnings of $2.17, down from $2.45 a year earlier but surpassing analysts’ expectations, according to FactSet.
The company’s stock was up 5.6% in midday trading.
3M is battling liability lawsuits on multiple fronts. In addition to claims related to PFAS, many of which have yet to be resolved, the company is in the midst of a federal lawsuit in which more than 230,000 veterans allege earplugs made by 3M subsidiary Aearo Technologies didn’t work properly. 3M has said the earplugs worked when used correctly.
3M has said that PFAS are produced safely and used widely in modern products, but the company has also said it no longer will make the chemicals by the end of 2025 because of increased environmental regulations. 3M ceased manufacturing some PFAS chemicals in the early 2000s but has continued to make other types.
Meta, Alphabet, Microsoft and other big tech names will report their earnings this week. The latest report on U.S. economic growth and comments from Fed Chair Jerome Powell are also scheduled. Photo: Justin Sullivan
The company is dealing with slumping demand for its products, particularly in electronics markets. That trend continued in the second quarter, 3M said, with sales for all of its business segments declining compared with a year earlier.
Total sales fell 4.3% to $8.33 billion for the quarter, 3M said, though they came in above the $7.88 billion forecast by analysts polled by FactSet. Monish Patolawala, 3M’s chief financial and transformation officer, said cost cutting and improved manufacturing productivity more than made up for lower sales volumes as the company boosted its margins by 1.4 percentage points.
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Despite the settlement charge and muted demand in many of its markets, 3M said it expected full-year adjusted per-share earnings of $8.60 to $9.10, higher than its prior guidance of $8.50 to $9.
The company attributed its raised expectations to “strong operational execution and cost discipline.” In the second quarter, 3M brought in more income from its business operations, with operating cash flow rising 34% compared with a year earlier.
3M has been giving priority to faster-growing areas of its business, such as climate technology and semiconductors. It has also ramped up cost-cutting efforts, shedding 2,500 manufacturing positions in January and eliminating about 6,000 jobs in April to streamline operations.
Altogether, the company expects the layoffs of about 10% of its workforce to save $700 million to $900 million pretax.
Write to John Keilman at [email protected] and Ben Glickman at [email protected]
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