Solventum, a new public company based in Maplewood, Minnesota, is starting out with a heavy debt load and stagnant sales. The company has $8.3 billion in long-term debt and is projecting slightly negative to no revenue growth for its first full year of existence. Despite officially detaching from 3M on April 1, Solventum reported first-quarter results on Thursday, providing more specificity and details about its business compared to 3M’s earnings report last week.
The numbers showed some positives, including overall sales of $2 billion, which grew 0.2%. However, sales in its largest medical/surgical division were down 0.4%. Revenue in its purification and filtration business was up 6.1%, showing potential for growth. Joshua Aguilar, a 3M analyst with Chicago-based Morningstar, commented that Solventum looks like it has quite a bit of upside and is a strong cash-flowing business.
Looking ahead, the company intends to prioritize debt paydown for approximately the next 24 months and has decided not to pay a cash dividend on its common stock or authorize the repurchase of shares at this time. Solventum’s stock was down 2.6% in morning trading. Analyst Matt Arnold with St. Louis-based Edward Jones outlined some of Solventum’s challenges in an initial research report last month. He noted that the company is carrying an “above-average debt burden” and its revenue growth has “lagged peers.” He also projected that Solventum could cut some products from its portfolio that are “slower growing or less profitable.”
Arnold wrote in his report that repaying the debt quickly is a priority for the company but will likely delay the company’s ability to return capital to shareholders and pursue acquisition opportunities in our opinion.” Solventum is not making CEO Bryan Hanson available for comment.