MMM - Earnings call transcript Q2 2024

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the 3M Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded Friday, July 26, 2024. I would now like to turn the call over to Bruce Jermeland, Senior Vice President, Investor Relations at 3M.

Bruce Jermeland

Thank you, and good morning, everyone, and welcome to our second quarter earnings conference call. With me today are Bill Brown, 3M's Chief Executive Officer; and Monish Patolawala, our President and Chief Financial Officer. make comments, will your we'll Monish questions. and some then formal take Bill today's slide Investor release call note X. earnings Please that and Xm.com. Please to on homepage at are the presentation of website our Relations turn Slide posted this accompanying to a forward-looking the moment statement. Please read take

financial subject our financial assumptions During factors hand be today's release. With are throughout results. most that we X, references our that, attachments Item will in to events are on certain differ reflect These expectations cause uncertainties. non-GAAP be about the and of XM's Slide that I'll predictive results statements making risk making the important XX-Q off press statements Bill. today's risks Reconciliations conference measures views certain non-GAAP future and XA call from future recent measures. call, our most the found that to of list can presentation, we'll please and actual predictions. Please current today's Bill? be to to performance and based to note certain the turn of could to some of Form

William Brown

work thank you, earnings XM nearly the Thank our flow share with will provide reported it. for visiting results have months, against second Q&A. I've $X.XX, been labs delivering our Bruce, busy the then all look taking a I non-GAAP billion up before guidance how a well with I'll second as the Adjusted in $X.X our and to wrap fresh hard morning, prepared been at number details now opening with further was for job solid I'd and morning, organic and to quarter the of employees as nearly This quarter, XXX%. and strategy Okay. executing everyone. remarks up year revenue X% factories we're in like XX% we the X cash and quarter with of on results. call growth. per good free their of Monish conversion for

of know, including change manufacturing with you As the health risks, legal lot matters. years few past effort the a mitigate COVID. PFAS significant care end recently of of business, a the following in to working spin-off discontinuing and the successful by XXXX and undergoing XM has executing on restructuring been most settling

also and seen You've executed a of to our has really structure transformational from global and senior has geographic well. this Collectively, to massive a centralizing one business the unit number supply team global model, organizational been changes our activities a for XM, a under leader. change chain shifting

hand you're steady job But seeing matters. leverage company have As solid the a the my have low including we through made, in guiding much been changes. forward. navigating look legal the to ongoing sheet exit is generation of result more more do incrementally we team and Monish with ratios positive matters, our view from where a to cash And an PFAS-related has managing strong expansion, margin the terrific these a fortunately, while these progress operating to agencies. Credit rating efforts, and balance for Mike the in and benefits strong in

As essential code I know the the on cracked organic operational which see haven't we early it, yet we're I excellence journey, value. innings is of creating and still growth, our shareholder in to

operational top three, my one, effectively number performance number line the capital. organic driving sustained deploying So priorities and are, top improving enterprise; growth; across number two,

have secular priority, trends as organic markets and I company believe first a with favorable participate and opportunities has we innovation. the long history On foundation material strong in the in end significant science that growth

up well over requires only below organic year-to-date. years more as both commercial of indices and market organic several peers However, well out growth getting excellence. Driving know, R&D as been you X% growth about has and as sustained improving

and the reduce learned lower been I've health per what within PFAS nominally revenue, was the details, and constraints. the spend, XM, new invest has as the R&D care into to basis, COVID-related or as even of over cost down company $X which year about efforts ex is more has we on chain billion and work X.X% for gotten Solventum focus flat years the investing declined the sourcing development is in about to that shifted a business. And dollars further real I've strengthening core on amount resolve manufacturing the product running investment to As exit X on and past supply

to products result declined the are introductions As over is decline larger revenue opportunities, past our aging. fact fewer The in that in from of a of innovation the new decade. with the shift number but strategic product steadily a along investment, simple has

adjustments in markets growth are higher-growth quickly erosion While to also centers need electrification, platforms like products we've enough remain, part, investing what the for opportunities data shifting auto portfolio budget, efforts our to before any appropriately today. But industrial attractive investing balance the towards our that They R&D our to to offset we in others. been we get more from want climate tech to I continue semis, aren't spend. explore evolving and to first and and have make most markets incrementally core sustain today automation, core. while we These we currently to material

capacity XM to activities redeploying can and our but and fruit. of data resources governance reinvigorating These bottlenecks to we a the PFAS-exit projects. product For time innovation will eliminating the R&D on increasing development on effectiveness coordinated And engineers currently transparency enhanced machine, are bear work. highest return deploying and process, to by take those the effective more improve non-value-added efforts growth initiatives. example, by our working With over improving of new the process, velocity time, essential

full part better second in performance have time pricing currently So better effectiveness, operational to my near targeted force customer on marketing, term, more sell and a is what at priority, of performance. focus we which the much key optimized particular, in sales commercial offer excellence means the to and in and that execution we interface, on distributor of

so leadership a at terrific some to ops executing place want on been to looking a seeing I'm of far. you I've have of in team manufacturing and number what opportunities, I capabilities. network We lean opportunity and color our increased lower give chain global drive improve and levels and manufacturing lower understand inventory. chain distribution yield and logistics, I loss with see to service management, reduce complexity, supply distribution our supply

served most While reaching factories XXX distribution customer. and with multiple factories of we network the our complex touching and historically centers have before XX is interconnected well, produce incredibly it SKUs XM

strip flows freight This consistent manufacturing costs. lower effectiveness. increase supply goods efficiency, and and transit freight logistics, In and in rein our lean we For distribution costs. equipment around significant points logistics distribution in X and X the before hits drives or equipment factories metric developing sourcing up In cycle operating spending modes we're and have times example, a opportunities extends shelf. improve OEE, increases and command and store a touches it capital mapping chain, to to to utilization and

suppliers, We have more and materials more XX,XXX Yet our direct X,XXX manufacturers. including indirect raw of than nearly than are and XX% component sourced. contract sole

the much scheduling and we only to but yield at too our and also at changeovers. cost hold the scale running been is as beginning $X waste We and products haven't mid-XXs. to goods to the our we're of service leverage loss, production manufacture holding to our same to close and Relative QX. reduce customers delivery in inefficient And our quality in to finally, are XXX part of [ have design to only in about us due X% cost. raw to inventory And of standards yet ] our we how sold, suppliers our material accountable days end billion due levels

bottoms-up over organic it's and drive or growth, for the attractive CapEx which $XXX Solventum, same using repurchased capital a remains XX%. My to in in indicates second balance paying effectively do sheet, recalibrated million capital time XX to and while the we share the billion half next which been. year. Investing the quarter buybacks. dividend, be in and fund of Our the excess our or about on-time R&D second full of would have strong above days M&A in we opportunity stock maintaining should spin more lower, and with in just an about priority capacity approach We closer imply $X cash analysis third we as is and to deploying inventory

While but I good my near-term further fit no you be can have taking determine to any if line, on value are fresh a what have prioritization our regarding to from portfolio hear markets. horizon, our the I'll I by on deepen today, portfolio that to me end expect assets at and acquisitions others. assets businesses be understanding a more XM. for of owned as the say dispassionate don't greater same anything look might along And

pretty busy been So X still for learn. a past it's to months, the with lot

value and growing to in turn and those that have status this and upon I things top us foundation to at I'm back distract to quarter, Monish? I'll I'll basics challenge to and good cover over will XM act the day discuss speed every build it believe and focus fundamentals, things from innovating bottom with on and the a with customers we've to drive guidance. urgency way back the encouraging off-board to the Monish creation. quo to everyone for done to past think from that executing shareholders. And come we and to approach that,

Monish Patolawala

stranded a pre-spin the dissynergies periods turn good to Slide prospectively to business quarter's includes in of corporate I quarter, and call. unallocated. remind dis-synergies moment a and or reflected like items for you associated Please Thank previously presented, take briefly second Therefore, income earnings operating for few highlighted you, Solventum. the with segment the that historical Bill, X. our are morning, with of results impact costs to Beginning everyone. last during we would

between and started started a category cost reimbursed by April. incorporates picks retrospectively agreements transition added for activity. business the that unallocated with Solventum include agreement we QX retained certain health in the former corporate and on associated service Other of and And addition, be named X which operations care In operating up to commercial a for XM. XM Other supporting for agreements April XM new finally, Solventum the

spending. quarter our results, delivered to margins billion. of of of posted earnings share strong trends or free solid end in initiatives. to operating flow mixed have operating cash of up share, $X.X of points sales per of retail flow $X.X second with previously quarter. adjusted We discussed, XX% consumer product per geographic discretionary we adjusted billion excluding We adjusted in XXX markets versus adjusted delivered quarter conversion had points XX.X%, $X.XX including basis execution XXX%. $X.XX $X These of year's organic adjusted basis, earnings electronics an up delivered Turning up of billion, performance. We Slide Please including last XX.X%, industrial X.X%, operating second growth margins and turn and X. On prioritization of strong and the basis cash softness another margins growth we X.X% free results reflect of XXX and expanding that with continued portfolio and year-on-year

driven and second organic basis share. Our strong by productivity, points which savings was $X.XX XXX restructuring combined margins growth, spending by performance by discipline benefited quarter earnings operating per and year-on-year

basis a what points last $X.XX addition, providing the are were increased points income by we in of negatively to impacted margins discussed and spin with year's XXX by into change earnings XX benefit the stock-based $X.XX to timing transition Lower quarter to of call. versus during we Solventum. second line This basis which by $X.XX per partially share earnings. basis per due by quarter. benefits to in by services our was Solventum offset restructuring XXX margins earnings This shifted In first second were and quarter the from margins earnings year-on-year compensation, charges was points share. These and operating

were For lower restructuring than the anticipated. quarter, million, charges which were second $XX

continue expect restructuring to $XXX year, For range million. to we full the in the $XXX of charges pretax million

first was benefit and range unallocated XM items due to of a combined A was and This moving $X the a of on were other year million corporate commercial adjusted million. now a the the U.S. full to cash of were interest to adjusted balance QX the unallocated range with between operating year benefit nonoperating This $XXX per $XXX of $X.XX related operating million prior a divestitures with by with to to Below-the-line of performance, with negative increased in unallocated be we to $XX earnings margins earnings basis range reconsolidation along by dollar. expense stronger sales share in part of and due adjusted to loss higher from $XXX Aearo loss. our currency million our to $X.XX with income impact to benefit proceeds line spin primarily $XX the points received flow. cash Acquisitions per Technologies, on to of year-on-year of quick on account to million cash is quarter This $XX XX result Foreign Solventum. $XXX benefited last before an a corporate full share. sales $XXX the $XX were year's year-on-year. million and comment Solventum. Taking agreements the and expect million versus half is million in and as million. $X.XX a second of loss $XXX year sales our of and million in anticipated million. million range corporate forecasted operating $XX Year-to-date, into

full million, and of Slide our level million. is had loss of Our reflects Solventum. income expectation which other the Other flat operating to of a line operating an $XX of in to the activity Year-to-date, of year with had X. to category million, spinout successful turn $XX of Please $XX which effort support loss

adjusted was quarter flow cash free billion. $X.X Second

was Our and sustainability. operating performance by were growth, we million working Adjusted second lower in quarter CapEx productivity partially driven as income quarter continue to strong capital $XXX in by invest offset higher the capital. spending, expenditures

end returned and results share quarter, cash record between approximately $X split the to And repurchases. finally, track on million of at a total our strong billion. The we debt the $XXX shareholders, robust of net stood dividends QX During of generation. build equally at

we adjusted billion For the have flow. free generated of first cash the half $X year, of

cash our combined and flow to Our supplies legal water to $X.X related to business, Arm strong of invest that in we continues the July, Please and matters. to structure the shareholders note total related of combat to meet us capital financial needs will the settlements. month capital make the return provide in public flexibility billion payments

results. I were couple business that to a of want awareness move Before items at to arriving on adjusted segment in our for our your highlight performance, excluded I QX

multiple we million additional remain in anticipate We First, of future recoveries. insurance discussion approximately carriers settlements reach note carriers related $XXX with that arms. combat with to and

the solutions and million transfer incurred as Overall, our reduce pension EMEA margins billion of due adhesives mixed with Tower electronic and strength volume [ ongoing user by $X.X during by markets administrative remain year-on-year. of and Slide benefits end cautious. posted actions billion, year-on-year U.S. of a points ] pension of was X. Starting we while operating $XXX Safety up on offset the single sales driven action were to These the cost adjusted defined benefits roofing we automotive to of year-on-year organic and due digits. and aftermarket organically. industrial our sales quarter, with obligation declines quarter low Adjusted from higher XX.X%, growth single with up for abrasives posted low compensation $X.X risk Second, and us spin XX unplanned market the inefficiencies industrial end glanules mid-single-digit in Electrical charges. Life. was operating consumer turn to digits Industrial sales channel the grew manufacturing challenges. noncash fees $XXX Solventum. restructuring This lower basis customer to partially pension U.S. experienced and devices. helps productivity million in industrial Met Pacific, safety to specialties. Geographically, single a U.S. Asia approximately by while And X.X% performance and This timing grew business, be charge to organic stock-based restructuring and in income continued down finally, which demand low related was and of tapes driven a plan. portion Industrial was Markets Personal in to slightly Please our risk flat bonding related digits. was up

and or $X.X Slide Transportation sales to X, billion X.X% of posted Electronics which adjusted up Moving organically. on

and outperformed electronics double market, Our gain wins as devices on in consumer low business the up semiconductor spec-in organically continue to manufacturing. digits we electronic

business point OEM and nearly in versus X.X truck auto a QX car Our in increased X% decrease builds. global light

OEM gain business cars rate the of flat to as our year, of platforms. versus new up the penetration trucks organically first on we and build light X% global half at auto Looking a was continue

the Electronics, rest single adjusted strong ongoing Electronics The were XX.X%, income, mid-single margins grants up $XXX organically, Transportation this Advanced inefficiencies at of actions volumes, of operating operating electronics to stock-based transportation and restructuring down team due year-on-year. XXX XX% Adjusted points basis year-on-year. commercial Materials these and year-on-year. benefits branding timing charges. achieved delivered grew and digits the in result and productivity on of low up leverage the were digits and and Partially Solventum. restructuring compensation was through lower Transportation cost offsetting year-on-year from Looking spin and benefits million

$X.X business single point single safety and sales expression percentage year-on-year prioritization. geographic Consumer mid-single second U.S. Consumer Auto with continued discretionary digits. and spending. to and consumer up organically. Home digits, well-being portfolio grew X. The digits Slide from Home X.X Turning slightly. of the grew a X.X% posted softness and mid-single improvement Organic declined included low digits low in Packaging sales declined was Geographically, quarter billion. impact Care declined This while

benefits Asia Pacific second EMEA operating to lower by due single XX inefficiencies down driven was of Solventum. income along and million, down was to margins down of the the was basis charges. volume these X% mid-single XX.X%, with year performance operating grants with margin $XXX spin stock-based year-on-year. from last timing digits. Consumer was points offsetting high down digits, quarter Partially cost lower compensation headwinds compared and were restructuring of Operating

the improved create to that over in Slide made and to am leadership, thank managing our team productivity turn uncertainty under Before focus driving to our reducing to I discussions for to moment guidance. have by and matters. success. to Bill momentum an they value Bill? out turn also value this years X our our create business for our I confident the care our I build update Bill. XX, the on will the efficiency, teams of our the would of and company health over risk for team the legal continue I back analysts take please have positioning shareholders like through engagements investors relentless brought to for the am and Bill's thank our spinning people, by the customers I and I proud all last rich performance to that, years. With and back consistent over to on to very for will XM and come. turn want a it progress it tremendous

William Brown

Thanks, Monish.

are to XXX first up in operational year, to for $X.XX raising the Full to line up at the midpoint. now previously, operating strong adjusted year-on-year. expected Given XX% earnings $X.XX be by year basis full half bottom up adjusted unchanged the to first at $X.XX performance flat growth $X.XX half execution versus in the XX% adjusted year the of a margins XXX now to and growth with half of organic year of with we're points. X% remains $X end range expectations organic guidance our to second to Full

business and largely While out and of as Industrial to organic versus expected. Year-to-date, digits. growth playing significant market full our flat macro up remains, are a expectation Safety trends single uncertainty approximately segment low is year flat

along remain demand remain On continue and to and a basis, consumer end electronics, channel first digits. We nearly the in expect was low automotive. trends. end as overall organically that Strength markets large transportation to electronics year single part with industrial first partners adjusted up mixed will of full in in an half half. cautious versus the up expectation is X% on due customers

for of through finally, year digits. organically electronics rates monitor with down full down the expectation first auto holiday And back-to-school X% of to is build half trends the season. continue consumer single We consumer versus low the a year demand and along nearly

to on goods discretionary in expect to the We that spending continue consumer of hardline remain muted balance retail year. the

and up over to your years. recognize contributions open XM all past for take like thank on and the to I we would Before questions, X moment a Monish impact his to

enjoyed partner short through has make with working let's a the had and that, only them. a strong appreciate helped speed done to challenges call I've a to he's has the to number questions. and and him, I've along stronger company, to open your up get navigate working he While I time XM everything with me the been of on way. With

Operator

[Operator with Instructions] Our from first Jeff question Research partners. Vertical Sprague comes

Jeffrey Sprague

that comment of deconstruction and for thank Bill, kind And already? time it thorough appreciate to But kind of organic a put after to are growth, some very the of growth Can and will your you on these it maybe us on you in take get business these the very front like. sense the of much of I of detailed actioning things. that ideas some end as kind some history give of how the relates changes these of action. you organic

William Brown

So thanks for the question.

I revenue. innovation organic up So major One growth. my X line the in turn ] innovation to certainly as driving is here driving mentioned top drive and spur there's to remarks, thrusts organic [ on

about new less we'll XXX. year, reflect over over X XX This And I point is than XX, this and it did new on turn out spending of half And part in on development back launched product introductions. we've we one of we're of X, X,XXX. ship much product bottom so time, last at -- first the years, how the start the probably year, got we or as do to sort to XX

really So turn the do some take so around. to time got that we've to that. going -- It's to

some XX% coming continue to be supply dollars R&D stabilizing over in to of to comment to PFAS precious raw made We've qualify on materials [indiscernible] our other cost cost of chain. reduction reduce invest vendors our We We time. exit about got source. and our able a

researchers it an I'm well we think to effective well effectiveness. ] I So our is of that's One on We activities both efficiency X, really from [ comes team. drive time. What some going really in as in capacity themes. working offload for opportunity engineering as ideas -- to R&D X there's is non-value-add can our how as take

we and through dollars. to R&D we govern our where to we the I place new think we product differently an opportunity how precious velocity differently pipeline have think have drive an opportunity on development

investment. can that to the highest the So ROI move across they company

focused what that's of So I'm take time. R&D. bit little going a But on again, on, it's to

today. to got on we That's we've have commercial market simply excellence. So sell the more what of

I'm last partly So model people. a X,XXX into the That's force. X X about factors. XX%. of today. a we've at our our export moved we got our sales around take a just or of because We force over to. opportunity know our years, have look over down digging to It's We've number different sales the coverage training But an incentives, it's

opportunities we think are distribute I there some there. to almost XX,XXX distributors.

to I there. think and see It's level, were very customer, some look have opportunities to merchandising. there's at to and a size level, that. we of the you business. get quite done at in the between pricing discounts job substantially volume that's down we packaged It's were type and covering probably margins from opportunities opportunity our we've a good this very some But hard We a have some important down. before at pricing to high down goods hard we'll a were we positive We're in an or granular looking consumer disconnect lever pricing. At take a consumer year. relative inflation, companies when incrementally where advertising and

tactically So differently think to and and around opportunity advertising merchandising. we an very have

woods, respirator into always are that should a places I surface that. products lastly, sell buying service a looking be There where to products customers do different by But they examples, they or us, to those distributor do we're and example, customers, certain a use for cross-selling. customer. think metals conditioning product into from -- you at we a but for polish, don't certain

a want You our looking the be customers, don't bunch that respirators there's at from buy us.

opportunity an there's So there.

keep we're short which things be we that those going in analysts value Jeff, pulling top we the more investors as driving and really do term, at so the and learn about to crucial we'll here levers is XM. creation of how to are All updating drive line,

Jeffrey Sprague

maybe like. and other a not maybe quick just the require coming of to as equation of company lot And through of heavy one answers. of to more of quick and On you're of kind or just speaking detailed do this view of that the the Does The the of excellence lot that of side operational of delivery it's kind lift a kind on on a maybe program nature? Great. just end recently, things these one. a KPIs appreciate process restructuring. quality gone I big kind these has well, the you improvements a and including sort just restructuring --

William Brown

right, through and actually drag a into and XX% So very restructuring are will getting you're we've complete. It been we're substantial through program, about XXXX.

if well improving get the are substantial go, can't in inefficiency and execute without restructuring. as OpEx, factories broader today, incremental team reducing of think about just you're the almost you there. opportunities, executing waste covering talking our There additional some seeing on I'm potentially almost and But things of you there type over things terms the I time, the that. bites could investment. the network lot A size savings against now, of as pay-as-you-go I'm that a in it few do are is think of opportunities can very you there be you bigger right to about get years are out, complexity are I pay charges

Operator

from Coe comes next Wolfe with Our question Nigel Research.

Nigel Coe

good a and luck. Bill, it's been while Monish,

you might answered want distribution think the I well do I So question, kind the about footprint. and have my set plants of to but of just ask

XX I plants, plants XX think DCs. you XXX and DC, XXX mentioned

growth then velocity like sounds are about we to around talking about reduce still you're can And margins product can't the efficiency. it complexity tell network? sort significant that the of drive investing you footprint? going to grow over beyond to we Or we But the a think a that 'XX, here in opportunities So should of How even reconfiguration versus about 'XX? margins was beyond be more there though investing. thinking around shrinkage time

William Brown

Okay.

of quickly. questions. So try couple I'll good pretty hit on a And to

distribution in we been network. that The number number time, the back restructuring of in-flight And some if XX here team there's in reducing the factories, fact in XXX has go actually the have you our centers. right, You're program DCs is, today. the of factories,

don't is at happen, we decide also effective but we When hard within it's it's -- we you I look that we're necessarily don't what have have to not a forward, opportunity these coating we you think half we Looking Or need of factories, cadence exactly I we those look taking can't when all factories. might at sit through what in within cells and cells assets factories. just capacity. are it. But in XXX. we to those need spread And that an do factories? as XXX have operating equipment factors, increase do all back drive have really and ask assets almost assets efficiency, our

things This these to and I working a has time. that's required the job we're get the how to many restructuring an margins, team is that over happen So are of Relative job. doing done size, outstanding there. to Peter really Gibbons are going on. this. team at can't factors great the

first points. can the half this up of You basis see in XXX year, almost

terms have going up ratio back, be substantially. margins for tackling clearly the to do basic high just come leverage volume We've more comes got quite it is Volume in as us. we a of So and here clearly, can blocking productivity.

outlook into as go from lots But levers the here. we there's can't including the get So of here, on year it you to where size I we'll volume. give organic they some 'XX, driving more can of today. balance that. Certainly,

Nigel Coe

a Monish, then And color. great That's follow-on. Great. quick

the up opportunity just to ]. bring recovery, within just water [ disclose negotiating news on the Arms. with that's the insurance of how Combat what you Combat And are you in Can recovery. speed the many us terms carriers on On obviously maybe great Arms

Monish Patolawala

Yes.

here. know, as a Nigel, you there's of So insurance tower

getting team be keep are providers. Kevin we and this in more [ there happen. multiple we'll with prepared have that on ] the were that remarks pleased dealing my mentioned And to these believe as with had So we all what the XXX here. I've quarter. Rhodes and legal We you as informed insurance is done definitely things

Operator

We Scott now Davis go next with Melius to Research.

Scott Davis

diversified with much want XM welcome, miss a that of -- is read your I you, even needs we'll kind too it little to but as cement narrow Monish. more Bill, Bill, this, you're already too down and is what the than into Bill, we've view seen bit and to don't spin? just

William Brown

would It's lot as lot that goes different it's think in business different big go a A I make these complicated a of markets, ways in end across all today, the say to sure we factories. not Well, stuff segments, I Scott, about I'm the of of it, different business, business. market. a that fact,

by a across kind lot interconnection hard I've here, in there's business. better what prepared remarks, as thing do hard that look But owned I'll businesses dispassionately done look is same at that. my owned some and my us, the that as same aren't time a and a we in as well. on that time, past, business So do that of at we by really we'll are in. there Mike fresh as over better said And what we're be just determinations at want take the think that. At here, about of over piece XM owned the take there where we'll assets the to in, look time, hard make are we that

take something to going and owned forward remarks value my that all we'll any about it, draw than conclusion better we're wouldn't for other They're that. owners. I creation specific in elsewhere, look move a then at hard is determine we So from

Scott Davis

fix Fair and enough. feels of into this kind don't priorities, was ceded these done for or fingers, situation things basic. of look is lot it to all minimize, of just you're where want things things weren't And a -- -- but get almost guess around operational And your ceded but of Was were change I fail? to a priorities early arms I are your I to kind don't when my just lean a is enough? I'm excellence, like manufacturing were right. to these at just point plan? trying it compensation long people's want placed I walking compensation what of just like that not where point followed you just being lot the it need XM and -- Was list we've who get your what. you that a to this, tick number that have was want to the to I'm fail this, and similar of had had long time, just around and list a arms but in main different of come struggled CEOs this think kind trying my there. And and of coming get we -- have question, What of a the kind main a there just of it's through but of lift. know tough pretty little that's heavy And you work to of we a kind where are saying trying and box can list thing kind led and fingers kind first bit again, the to one that us pick that I is not point today? do a

of to lot fix. tried I people a pretty think things hard these some of

William Brown

I success that fail from I'll different fresh the in come different the look experiences, with Look, wrong. way things It's a business at in done about set background, -- or No. do right the or say we I've past. it's of or just not

I day. fundamentals hard at challenges as a program, that the It's margins. what through that you the just team from lot at with was And That's that And have top a enormous is with from line R&D materials of of about we complete. think on at operational focusing that the speed Mike growth I through there's business see excellence, I created the to a I've the do has basic, in of think with the talked before. just driving be we facts. done. trap well. faced. I today a been of very encouraging to through have they XX% just this been gone complex situation like the remarks, is in in COVID. basics, And managed said this there's back is that's of effort. That's urgency. single has on improvement done people encouraging here do. I changes, is transformation of the my it's way things and commercial the launched and very in but what come have so all the it And things of I've a CEO looking the how end look does these a in the XM structural a situations. way very, the I'm the to dealt the bring with that said, liabilities short top as on that company sort a way growth in restructuring through that, been It's to that the a And of I easy well well. I to things lot culture really the focus things real job it at and move excellence turn you every continuous marvelous through value lot driving people can of and can approach cold you sound done the the company fall past here, and gone we're into managing day, challenge do an about we've of and team And raw that,

from looking forward, a here opportunity see I'm I value for great So creation. and

Operator

comes question next from Julian Our Barclays. with Mitchell

Julian Mitchell

thanks all reinvestment Maybe down growth. the question the Monish, And the and help Bill. to first around years. just Welcome for organic the point

can So you moving, in it sufficiently if medium sounds the as to in term get business reasonable Bill, expansion. see growth but still reinvest margin the

XM. it's at growth confirm for wanted you you're view were its on the sort aggregate to addressable Maybe you I Just rate of how initial rate of wondered point, growth thoughts are peer on what saying. that, growing entitlement that your then growth is And set. the that what markets think what

X XM Solventum. is rate market ex X% suppose, years I I context, around was has wondered grown you the X% to last the the that? versus growth XX thought to Just what

William Brown

a couple of in invest capacity in we some half questions. the we back incrementally have mean, good that So first, I the do business. to expect

focus some and in savings the back incrementally Monish see back to said more reinvested would might we in business. about this where capacity savings year. the generating or comments case comments still I that of at on But always the sales That's least my that think force, growth. today. some from of items. I be and at to a much we we be the couple want that about more today? model, we around And investment so far, of guidance can't streamlined opportunities that's the restructuring we're and see be in been talked up how redeployed merchandising, invest. mine. harder some We'll different do top already line My have say of additional of half around opportunities R&D Mike effectively advertising, big really our make in that talk the free back the about I a look half. can And we

of on But probably than it be portfolio. ] But [ midpoint for of basis, give organic, X%. comments we not the terms geographies you adjusted we're X% certain X.X%, [ X.X% that. go. is growing year certainly, exiting X% have. GDP growth, We than ] end more guiding [ X% at get better outlook still, of more thereabouts. [ or better. X.X% is ] of might the in as 'XX range year towards think [ because perhaps slightly this around we into ], X% be an and we of to In parts We company I be our bit a economy, to know IPI. at mean, entitlement should and should X% the there's and headwind least level back should longer-term We growing of ] the the some where if

Julian Mitchell

operating maybe to lot short just a sort we're for toggling half-on-half. asked term just year-on-year or has about half in it's better the of been XX% then margin an thinking guidance, maybe back medium bit a second half little so And implying the and the helpful. framework And second That's think perhaps. that's about as the flattish If of term. I the fairly

looks right, if and wondered because Just the shrinking had top and are that steady. line restructuring half-on-half charges I it is like year-on-year pretty

sort third versus So and on the assumption that? thoughts was if that preliminary any just dynamics if And there of wondered drivers correct fourth quarter behind was here? any

William Brown

to here, to half, to half and We that revenue just offer be expect trends. me bit let first -- blanks of of so very of -- cadence do couple you're terms the the quarterly comments the a you've on maybe in little historical second I'll But right Monish similar the yes, a reflect fill here. in and in does ask So the progression.

last cost, time execution and half, ] XX-XX We just it from lower [ first the see thought spending ]. we continue in is operational was discipline, second benefit we half. half, tailwinds to some see [ strong of XX-XX restructuring first like we'll now which saw the

step the same higher shifted we in agreement we of has some transition down. And of half, bit do time, do see but back back But began year. see wages a half the reimbursement services Solventum, So have which to you April. a at with the the in of

wage quarters X have full a with increase. We

but Our X, April wages went quarter, out so in the first not in second. on the

of out headwinds expenses to cause some of quarter. higher in inventory So interest some factories. grants that's our here driven or lower We in some our higher July do absorption. the the year. the lot in Cash That's second down quarter. here by stock a back of see we cash there. And then positive know, half went some some by some going the offset for some We -- made nonoperating see that through caused in We'll headwind. coming a second legal in headwinds absorption negative settlements. you balance and comp, the bit pension had second payments, door the we a That's legal as inventory quarter. costs built

And back I So before, as our see investments do mentioned the of down some we income course, to of are interest come the some in go expense year. then we -- in have interest back the we interest in up, of our step-up half year. half will is cost, going the

tax of QX, on the comment So last, geography, biggest those on those bit little are the drivers. a QX Monish drivers biggest Maybe cadence. but are

Monish Patolawala

points. restructuring. on just another on $XXX million half second in the be that spent Julian first at on half, data second We've just midpoint, to to half, Bill's million And And the points half. the would in Sure. add $XXX first

around be half versus in will XX% in rate first half. the tax the the that's So XX% second

what XQ, If you will similar trends XQ we be very XQ, guidance now to saw XQ, XQ between XQ. go or just the revenue in to

what about already Bill talked think it market. looks in like the I

in where is the strong seeing and now. I also. say team XQ would that's continued operational spending So right execution

will in the comp, matures Solventum same tailwind in between execute also exiting at time, stock back to they its XXX it we the ability from as comes in of a of that independently, will that But [ timing tailwind a we get which keep You announced QX. ] approximately believe TSAs. as -- their

still XQ. Bill is Restructuring the the flat we EPS in the down up begins and could that's an on X As you, X short impact about an TSA, to on approximately a the exit, we costs are some which in fees headwind years, from that and term, overall go XQ perspective, I've as inventory heavier long will was is Solventum talked now QX QX. are see right XQ in to $X.XX based some as seasonal to QX. impact our as range, bleed years, lower than as told sees factories team what of

-- on So Combat will the see PWS. about. will for balance you then And Arms the we into go impact about talked second EPS QX, talked half as $X.XX we and

As you know, we have made payments.

Arms So by the balance a PWS, payments have billion we under which you EPS. Combat QX of settlements cash lower under in July, $X.XX agreements means our the $X.X made end of have under impacts and our would of that and

cost, And QX, So to a can is fourth investments. the whole to the up the continues headwind interest -- to long-term quarter the for tax step between range to that step QX year believe XX% the quarter of pension second then is and they -- is rate drive mean be to will third XX%. up And team that's I the in half XX%. growth

get to into lower. your you be can helpful So this right. back Hopefully, the which fourth would quarter, is models

Operator

Tusa comes question from next of Our JPMorgan. Steve

C. Stephen Tusa

visibility front Monish, your us but being for and thanks on always help. give best the you with details for appreciate easy things. the really center you to and guys, always wasn't It all doing

there. and usually this be the have question it reset shot a so is, Bill, give any my supposed like will new because options for some I've ever vacation in seen really a the this not help you get -- cannon get year detail. long-term of first summer sure sounds point CEO I'm you the and first at about appreciate the a months target. And we you So X like out before kind wait of to can

here. really you've we sounds It busy. detail been appreciate So like the

that the though, there's you it's will, room, balance the negative the is And sheet, allocation. in that you elephant if think I narrative capital from obviously a about the PFAS Just drag. talked a around optionality lot

bit about foot in the more And on X, place from that perspective. legal talking little mentioned You're is your Slide a front the only disclaimers. as which the being in is PFAS

all about talk do the really strategy what What's take around pivot perhaps -- And it your PFAS didn't have that You there? you in liability? at slides. and any -- and

William Brown

I within of all, inside great team When the other water first for of been, supplier step thanks where legal -- to important sort from public a really was managing we've just back PFAS the question. outside some in opt-outs. Look, a of there. hanging first there's MDL that But great out some settlement cases Other step look manage we've We're and is and and Well, the Europe are continuing liabilities. the that's advisers, done. at the the more litigation an got managing to of step, be of risk.

I'm drive to in for that in control saw continue team the ideas further are owners have cash XXX% really We're the at the what half, area. We've see over I excellence time conversion exhaustive flow leverage our we operational in cash We can in for that the top very a do year. business. we time. great X.X driving again, Q the on how great things first and focused we best creation my that have We got to ratio. I've line generate it quarter. -- and We value free drive that's -- XX% we just flow. we control We the are on where the putting driving and K. And in think that got the managing a disclosures that.

sheet. that to we in I very have when balance back, that, think sheet. through options see balance do I here a risks step So appropriately the can manage our us. even strong with of we actually front And things have we We

market or So overhang long may pivoted you excellence. comment around Steve. on the negative the the that, a that to I we we do thoroughly, in a I'm missing to and I'm on queue it growth do. be read control. drive takes harsh we think not you've things pretty back what very, all it. really on things narrative getting what do What get can't missing focusing to is like really What our on market control need its from PFAS can the this operational what team time very and through and may I of focusing investors the heard?

I we've area I doing. been It's a great because what job spend think do And do what they do and think of great him a there. But he got a best dynamic the well. situation, again, of disclosure He done on of that's trust placed the is do value on team people my where other got on to PFAS. as drive XX,XXX what to it, to lot the to time here had we is I employees, are We've relying managing focused we've going drive at creation. XX,XXX time in again, that. a they're the has very this in this. We expertise I'm it. lot a helpful. involved Mike's of

focused people the what core get on to things have XM We great. back that makes

C. Stephen Tusa

Right. sit in the know scotch reading Good your the to Q. with back travels nice time to you're Q the read and some

Operator

We'll Andrew of Bank now Obin America. take our next from question of

Andrew Obin

pleasure. the over Monish, for thank It's the all been years. you help a

more clearly stock particularly What Board of capital a opportunities. a right, What's transformational message and buying as longer on of thoughts very tends is focus, positively. stories follow-up It are you know one buyback delivery. off the at view market I -- the maybe improving bottom of the of But reacting that buyback, sort just What key the in about to on-time operational visibility front-loading you a pay right, your term. the allocation. working the as on highlighted share to Just -- seems question PFAS, on capital, with the release lot buybacks? sort on and view like this, is

William Brown

you, Amit. thank Well,

capital You're for horizon. was And I just M&A. right, on around priorities repos was the excess There's deployment. for I X very M&A number cash X the in do. or Aman, purposeful top not

have and Monish's So the market that under million the We of Mike you worth quarter us leadership. $XXX into step was capacity. in do buyback. second saw

balance sheet looks strong. very Our

an next sort our in cash to the and manage have $X as keep look to generate we back -- more drive through today. as the our down open authorization of half We'll with cash, hard well ability that that's Nothing capital those excess do to as with to there, about to all this back -- we'll into working we happen be out that evaluating close as half the say year. in that We levers, we risks what board than billion.

Andrew Obin

bottom Sure. one as And historically, would towards towards I the companies XM investors of economic X-part has buy that the reaccelerate question. been guess bottom things the

think First, like is ] can a into of quite away as there? And this do from just second fundamentals can cyclical question ] do just [ you leverage seems still do the But down because bit. XM -- and bottom. about no industrial there fundamental you maybe one day find b, introduction this is we think [ sort you has still product a of end because bottom being quality how talked industrial PMIs are you -- reaccelerate business it consumer think really we far improving to -- is generally,

your your bottoming us view on on a sort know any things just appreciate with If provide there's visibility you but answer. question, long when could of I out?

William Brown

No, U.S., with Fed the and inflation. bottom. on question. what I of going the questions the world. hope what's the rates lot no, on here a the in mean happens half certainly, It bouncing do in what interest geopolitical depends that with we're There's all does good back around I and along

a market I'm I really So optimistic going call start is But again, the does. crystal have the like ball recover. don't to to on that nobody

that thousands what of to differentiate end has with long look on. spirit innovation it can that's the and focused pockets in company reignite To me, lots that we employees there's do I we innovation grow, about XM markets I'm core do offerings that think that of where at long-term day. drive we back the lots I we and on invest innovate, single to ourselves reground different at I mission, back culture penetrate, can of of versus we ideas. And that That's this great So history what out what I sit that the places our of in competitors. I have. as that And in, think to across every to the of control. There's assets the new-to-the-world day,

I'm and in drive some market. can we it's where just So where watching to be economy my focusing trends think time The places that's investing the what and on. do going do. is the differentiation happen to grow to going higher I'm we what than

to So long that's but answer question, way about think your the it. I

Operator

Andrew Our from at Kaplowitz Citi comes next Group. question

Andrew Kaplowitz

all working help. Bill, Monish, thanks you. your for with forward to look

any across original but So single-digit know I would yet business difficult you low semiconductors? improvement second upside that maybe and there? seen QX, electronics your Do a consumer growth in say there's comps holding some you But have forecast has with as mentioned and the you up see half? line And in you Bill your your generally little get in growth Monish, Transportation just in focusing more expectations. on been Electronics.

William Brown

half. a There pretty It's partly was we half there. had to the in to good first consumer that for We very spec-in have We a had electronics. auto. good thanks happen first Well, question. actually some due wins

As the basis in it A remarks, his year. half going of of to points now in the the last going the of Monish we up A rate. which back the XX that year, segment. XXX X%. days, company-wide, down year. the is build watched the for basis be was to rate mentioned lot down points, for build over outgrowing lot prepared we're in TEBG XX it's we're But be as

a of that, anything Monish So more. guidance I'll there's which little that is general, the into provided. Maybe we've on commentary to on builds auto in if we more factored bit offer got caution ask a little

Monish Patolawala

thing. No, same

we'll this cyclical. think as have you know, I to, is Andy,

watch what to in the the second have watching. Bill what prior that we'll mentioned happens in half. that's the team is question. So even And

and to that the We are on the on team out watch, that turns what feels based right the is [ which rates the given guide is they've that which we now, whole, continue past watched company here watching. season ]. trends be, a will I holiday electronics, build -- what in for know all team rates as is all watching And are factors on cars, all of think build the you will we've consumer you, it the

Andrew Kaplowitz

Helpful. its I limited across ability can price maybe XM's intros and And R&D. portfolio. then, to all Bill, thought the is When talk price. about conversation hear impact regarding that you can new product Obviously, the

So of hard you then be And to how for how muted. impacting remains consumer, notice instance, fast pricing. sort can in structurally, it's how pretty effective and not

challenging market, just that's segment. think I particularly the price is but it in to that

William Brown

year, [ last significant center sort we we had significant -- very, a did pretty point what X% guidance, And I question. price [ increases. X% to This have in tell, of ] price cover We X% positive That's our very -- inflation. year, of within our from can that. ] good we

we It's on So lower basis certainly pricing. a see than last continue to year. year-over-year was than it

an things believe just at been what at should more as new by margin features, but you price we better through we basis, mentioned But and around to pretty how price market But pricing looking data on price on a those macro don't the months couple granular And our segment, do opportunity product the sometimes pricing development, and analysis. area is innovate number much are systems, some sometimes get gross next go on going is good look of of and customer, a opportunity take we have lot But there's not price more and at I'm net that and here, better all be net better. My price. level, as an other focus which on a we better the inflation. opportunities to price. sometimes you're price there. or visibility. an is of I find discounts, this real a and And I that. that training, job is it's know the And So differentiating capturing a I'm level there product the point funds, able by coming to we'll about to to by a is at we details in it's those right, attention that back quarters more gross exactly between micro on development instinct out. an new how develop products time has opportunity there's ability it's do

we margin expect the NPI as as improvement, hopefully, improvement to I drive does price engine, reinvigorate do, over which well. time So that

Operator

Our Fargo of Joseph next question comes Wells from Securities. O'Dea

Joseph O'Dea

are I'll I it In curious you if no comments. you a of could on that to but you of line these, of metrics one. time for reviews. if key as focus the talk to specifics then little interest keep on as Bill, the today, the time, just And sort the in you review present just decision-making leaders understand on dispassionate there? could you completing just But portfolio ask do reviews about your what expand sort business

William Brown

So on I'm trying job, Look, the days the XX to in meet the understand what's learn good going team, question. in learn business, business. the

and of -- near and something happening looking NPI is so we focused not hard And contrast to fit I'm with can our point now, customers differentiation I are we the any don't compete value where business able the really technology provide in at lifeblood on look that's there. -- our hard. versus like? through we segments. At not opportunity the lot the are it necessarily And an a We competitors? the have technology is certain right an each new our I'm What's that's differentiation in innovation-driven that. we path of on against, that based The we're growth businesses perhaps We're expand growing to there's at end But teams really operations, of we down is I'm mind. so through who something the to better commodity-like the well. better compete how positioning do So our company. earnings that to particular we be are look different conclusions products execution, growth as bring through the to segment -- well, not? outlook or into this pipeline than we businesses looking margins are how I'll going coming -- day, that's competitors. improve What's

what's look to that take conclusions also and some at as the we business other hard lens but company. should and in in be coming arms specific get next our be no outside So the businesses at this. we'll than quarters year we a around the make that, which looking we ought

Operator

Ritchie next from Mizuho Goldman Linzey comes our from question now Joe with Brett next question We'll take Sachs. Securities. of Our

Brett Linzey

drive Welcome changes? -- of look was about thought Yes, luck thinking these I you quite Are do third internally incentive strips you strategically parties. think resources internally, appreciate priorities. as points, the rundown striking. some the at to Bill, optimizing of Bill, on the I and these best the structure on the example the you have touch you're to to Monish. Command personnel

to line understand the and here? be trying done needs Just what time to

William Brown

a you. problem. lot a a Thank of lot distribution is points. a It's across Yes, this SKUs it's of -- factories of products, complicated a lot and

mean you going I look it's a a net on are there's the operations -- and flows, you this. at here. spider hard on the the all have factories, a team that basis, DCs at If this a map global in And do we all all lot looking great

quarters to that at have have hard and networks time. will quarter, optimizing look flows. away. some It's this a -- and advisers take the a involved not -- the We'll been outside take X are continue We

think we And that at structures I have do people we've incentive the well as have -- got we So right for motivations the and team. the around top do right the level.

Operator

Deutsche take now Bank. of Nicole from We'll next question DeBlase our

Nicole DeBlase

probably And of months of really to Maybe, a change making a engagement. in all how level bit the talk and you to just your could would And employees the to response suspect welcome, I for few have help. thanks, Bill, been world you'd that of Bill, Monish, tour employee this -- about and what to like do. sounds responding been love exciting. first all hear you've I

William Brown

to here want the Look, engaged. up. come excited. see want are I see They They to a world share see make XM They great want grow. difference. doing things for want in employees price They're to recognition They to think employees more the detail to today. offering is you you, my and message as developing employees hall. are I'm new That's explained with what I I've explained I'm town That's products. the some to message our in in providing to priorities

well. resonating it's think I is this So

make people. difference and to got that here energizing I it's we've really here have a people a I'm again, been strong think that. a lot -- for appealing But hopefully, to while of want

been the again, good XX far, think has I So response in. so days

Operator

of next RBC our Deane take Dray from We'll question now Markets. Capital

Deane Dray

Bill in game of Monish. all of once. plan the it Bill. can't best you and And for impressive at all of raises initiatives, me Welcome -- is the terms question everything just operational do the Lots different how

your element the of is have internal show, what's deputizing are an about consultants. of not this Do one-man Talk folks? So -- army a you And also, triage. team you

then CFO there once? the too in fixing, needs there a disruptive. a how search, element change change layer can can organization you've mean, these do sense to Is but and got much of lots is be I and got handle any can at -- -- You of stuff how you --

William Brown

think important that try operational can to well look, growth I priorities. question. great as we are I through mean, it's excellence. drive -- mentioned both the a And these mechanisms do as I No, all we

been getting I employees we done. team first see rode things. through a on path -- think It's these a fundamental. I've here. it's my this this work -- can of great not I to before. We there's have

yes, different these is dimensions. and of team some think it's to focus to -- outside but these start, advisers have pieces We a across help engaged busy we us This it. in the have I deliver right

yes, and I'm pieces. But the optimistic. priorities have the going capacity sort we and to these all manage right to to think respond the of it team I focus we're of manage

time I've I of of of pieces full think we'll to to a in do, the percent should we out factories results, pretty end but the list want below the be quarter not operational a you're we'll look back go grow, to at mid-XXs, driver. laid When XX-and-change excellence, these fact, would things forward. be missing prioritize year. say towards able laundry we're excellence. unless you're and And the was XX%, I your we drive we operational as to But is invest as above second fact we're on running day, at of your XX%. The when our going things growth these sales. get we individually we end out full at

we run getting lever. our better, by growth to So operations a that -- is

that's create our savings a lever. growth and productivity growth that reinvest can we in we drive As initiatives, in there factories

you I got at I work and time what So same pieces to the to of that's think the do. both plan do X and these pedals

Operator

now next question Alexander from our take Company. Laurence with We'll & Jefferies

Unknown Analyst

Estok Laurence. on [ is ] This Kevin for

what terms shoots I just of give any seeing it's green you're little on So whether there? granularity I'll just and wondering more was seeing could in a leave if you great it And demand you're bit -- time. there, Chinese

William Brown

for so maybe is up us even good So XX% of We're pretty multinational at seeing about better and sort that's question. other you multinational, what half. it's lot will, revenue. a half. thank that the you of had you for similar X%, look When than of a China. the in the other local is China in Part first with piece about local, to for XX% our of about We if electronics. first are flattish

good our auto the electronics of seen front consumer So and because important simply growth it's of the the business, in an about of and half year builds. market, Again, we've XX%

Operator

over conclude This our now the Brown turn back comments. conference does portion closing of the call some will I question-and-answer Bill for call. to

William Brown

and you, wish to want thank the well I thoughtful I and all today dedication, to joining their everybody, for hard Okay. want Monish and around their participating thank in future for his for and XMers world endeavors. work Well, the questions.

wish for again thanks you. the and day. joining So a Thank call, everybody I good

Operator

Ladies and that you conclude We disconnect at you your that today's conference thank please gentlemen, participation time. your ask does call. this and lines for

3M (MMM) 26 Jul 242024 Q2 Earnings call transcript