Manufacturing conglomerate 3M reported its 2023 third quarter financial results on Oct. 24, which were highlighted by continued sales declines that weren’t as severe as in 2Q while the company took a major net loss on impacts from its recent $6 billion payment to settle military lawsuits.

3M posted total 3Q sales of $8.3 billion, down 3.6% year-over-year, with organic sales down 3.7%. That compares with 2Q sales of $8.0 billion that were down 4.7% year-over-year and a 2.5% organic decline, and 1Q’s overall 9% sales decline.

The company’s 3Q gross margin of 44.9% tipped from 45.1% a year earlier. 3M took a 3Q operating loss of $2.65 billion (vs. a $4.16 billion gain a year earlier) and a net loss of $2.08 billion (+$3.86 billion a year earlier). Those earnings losses were primarily driven by the company taking a $4.2 billion pre-tax charge as part of its $6 billion settlement intended to resolve all Combat Arms Earplugs lawsuit claims against the company.

The lesser declines in 3Q led 3M Chairman and CEO Mike Roman to note a positive trajectory for the maker of adhesives, Post-It notes and a myriad of safety products and PPE.

“We are building momentum through strong operational execution. In the third quarter 3M again delivered for our customers in an uncertain environment, positioning us for a solid close to 2023,” Roman said in the company’s earnings release. “Our actions led to underlying earnings ahead of our expectations, as well as better than expected margins and cash flow.”

Those “actions” Roman refers to include the pending divestment of 3M’s Health Care business unit, which the company notes is progressing toward completing in the first half of 2024. That unit had $8.4 billion in 2022 sales and $2.1 billion in 3Q23 sales (up 2.4% year-over-year). Earlier in the year, 3M slashed 8,500 jobs amid financial restructuring that was to generate annual pre-tax savings of $700 million to $900 million.

“Our results reflect continued execution of our priorities — driving operational performance, spinning off Health Care, and reducing risk and uncertainty,” Roman added.

By 3M business unit in 3Q:

Safety and Industrial 3Q sales of $2.75 billion fell 4.9% year-over-year, with organic sales down 5.8%. 3M noted the organic decline included a -4.3 percentage point headwind from disposable respirator decline and 3M’s 2022 exit out of Russia. 

• Low-double digit decline in closure and masking; 
• High-single digit declines in industrial adhesives and tapes and personal safety; 
• Mid-single digit decline in abrasives; 
• Low-single digit declines in electrical markets and automotive aftermarket; 
• High-single digit increase in roofing granules

3Q operating profit was $652 million on operating margin of 22.5%. The unit’s adjusted operating margin improved 250 basis points year-over-year, and jumped 350 bps sequentially. Overall, 3M said the Industrial end-market demand was mixed in 3Q as distributors continue to right-size their inventory levels.

Transportation & Electronics 3Q sales of $2.17 billion fell 3.0% year-over-year, with organic sales down 4.1%. 3Q operating profit was $389 million with operating margin of 21.2% (adjusted 26.3%).

Health Care 3Q sales of $2.07 billion fell 3.5% year-over-year, with organic sales up 2.4%. 3Q operating profit was $460 million with operating margin of 22.2%.

Consumer 3Q sales of $1.32 billion fell 6.1% year-over-year, with organic sales down 7.2%. Operating profit was $269 million with operating margin of 20.5%.