‘Forever Chemicals’ Settlement Weighs on 3M Earnings
Scotch tape maker raises full-year guidance despite hefty payout agreement 3M, which makes industrial and consumer goods, saw total sales fall 4.3% in its latest quarter. Photo: Nicholas Pfosi/REUTERS By Ben Glickman Updated July 25, 2023 8:38 am ET 3M raised its earnings expectations for the year despite swinging to a quarterly loss because of a large litigation settlement. The St. Paul, Minn.-based maker of Scotch tape and Post-it Notes agreed to pay over $10 billion in a settlement of a class-action lawsuit last month. The company’s tentative agreement with plaintiffs settled claims that the company had contaminated drinking water with PFAS, also called “forever chemicals” because they take a long time to break down. Despite the charge, 3M said it expected a
3M, which makes industrial and consumer goods, saw total sales fall 4.3% in its latest quarter.
Photo: Nicholas Pfosi/REUTERS
3M raised its earnings expectations for the year despite swinging to a quarterly loss because of a large litigation settlement.
The St. Paul, Minn.-based maker of Scotch tape and Post-it Notes agreed to pay over $10 billion in a settlement of a class-action lawsuit last month. The company’s tentative agreement with plaintiffs settled claims that the company had contaminated drinking water with PFAS, also called “forever chemicals” because they take a long time to break down.
Despite the charge, 3M said it expected adjusted per-share earnings of $8.60 to $9.10, higher than 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 reported a loss of $6.84 billion, or $12.35 a share, for the quarter, compared with a profit of $78 million, or 14 cents a share, a year earlier.
Adjusting for one-time expenses, such as 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.
3M, which makes industrial and consumer goods, saw total sales fall 4.3% to $8.33 billion, surpassing the $7.88 billion forecast by analysts polled by FactSet.
Meta, Alphabet, Microsoft, and other big names in tech will report their earnings this week. We’ll also get the latest report on U.S. economic growth and hear from Fed Chair Jerome Powell. Photo: Justin Sullivan
Demand for 3M’s products has slumped in recent months, particularly for its electronics products. The company has sought to give priority to faster-growing areas of its business, such as climate technology and semiconductors.
That trend continued in the second quarter, with sales for all of 3M’s business segments declining compared with a year earlier.
3M has trimmed its global workforce as it seeks to emphasize the faster-growing parts of its business. The company cut about 6,000 jobs in April to streamline operations and shed 2,500 manufacturing positions in January.
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Altogether, the company expects the layoffs of around 10% of its workforce to save $700 million to $900 million pretax.
3M has also faced litigation efforts on other fronts. The company is in the midst of a federal lawsuit in which about 230,000 veterans allege earplugs made by 3M’s subsidiary Aearo Technologies didn’t work properly.
Shares rose 2.7% to $107.00 in premarket trading.
Write to Ben Glickman at [email protected]
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