On July 25, manufacturer 3M reported its second-quarter 2023 earnings, which included sales of $8.0 billion, down 4.7% year-over-year, with organic sales declining of 2.5% year-over-year.

The 4.7% decline was a sequential improvement from 1Q 2023’s YoY sales decline of 9%. Operating cash flow for 2Q was $1.5 billion, up 34% year-over-year. Adjusted free cash flow also was $1.5 billion, up 44%.

Overall, however, the company reported a net loss in income of $6.84 billion, largely driven by a settlement over contaminated water.

In June, 3M agreed to pay up to $12.5 billion to settle an environmental lawsuit brought by cities that claimed the chemicals in the firefighting foam provided to them contaminated drinking water. The company announced that the settlement will provide funding to public water suppliers nationwide that have detected PFAS in drinking water and other public water suppliers that may detect the chemicals in the future.

Under the settlement terms, 3M said it has agreed to contribute up to a present value of $10.3 billion, payable over 13 years.

Despite some losses, 3M reported better-than-expected quarterly results, boosted by higher prices and cost-cutting measures. As consumer electronics demand declined, the company also reduced its global workforce by 10%.

“In the second quarter, the actions we took to strengthen our supply chain and restructure the company led to improved service for customers, reduced costs across 3M, and better than expected margins and cash flow,” said Mike Roman, 3M Chairman & CEO. “As we execute our strategy, we are positioning 3M for long-term performance, including progressing the planned spin of our Health Care business and addressing a significant portion of PFAS litigation.”

The company’s Safety & Industrial business segment had $2.765 billion in adjusted net sales in 2Q, down from $2.924 billion during the same quarter in 2022. Organic growth for 2Q was 4.6%. Adjusted operating income for the quarter was $614 million, down from $630 million in 2Q 2022. Operating margin was 22.2%, up slightly from 21.5% during the same quarter last year.

During 2Q, GAAP loss per share was $12.35, with an operating margin of -107.6%, including the previously announced proposed settlement agreement with PWS regarding PFAS.

The company also said it returned $828 million to shareholders via dividends during the quarter.