And we have also said this before that the restructuring actions that we have taken, one, it’s a way of how we work, but two, it will help us partially reduce the stranded costs associated with the pending spin of Health Care. So all put together, I still see the programs on-track at $700 million to $900 million. But as I mentioned before, too, I would just ask you all to think through, there’s a side of cost cadence, which once we are done with those actions, those cost cadence will go away and the benefits will continue into 2025 and beyond at an annualized basis of $700 million, $900 million, assuming Health Care remains as a part of 3M.
Operator: Our next question comes from the line of Chris Snyder with UBS.
Christopher Snyder: I also wanted to ask on 2024 margins. And if we look through the restructuring, it seems like the guide is implying flat margins year-on-year from the business. And I guess, why isn’t there expected margin expansion because the company is expecting to grow volumes or at least grow organically in the year. And it sounds like some of the exits the company is making should be accretive for margins of the underlying business. Just what are some of the headwinds there?
Monish Patolawala: So I would say exactly the same thing I said before. When you look at it in total, our plan for 2024 assumes a margin expansion of 75 to 100 basis points, which includes a piece — which includes the restructuring benefits and the lower restructuring costs. But at the same time, it also includes many other factors that we take into. For example, we’re going to continue to invest in growth, productivity and sustainability as the macro starts improving. We’re going to continue to invest in product areas. We’re going to continue to invest in our people. So I would again ask you to look at in total, if you exclude restructuring costs in 2023, we expanded margins 60 basis points. And in 2024, our total margin expansion, including the benefits of restructuring is 75 to 100 basis points.
So Chris, I would say as the year progresses, and I’ve said this before, volume gives us the best leverage. So as we get more volume, we’re going to continue to see leverage increase.
Christopher Snyder: I appreciate that. And then just a follow-up on the margins. I know you guys said $150 million to $250 million year-on-year net restructuring for the full year. But could you tell us what is implied in the Q1 guidance? And then also, I believe you said that the margin — the Q1 margin includes some level of standing up cost for Health Care. Could you just tell us what those are expected to come in at?
Monish Patolawala: Yes. So the benefits, I would say, again, it depends on which way you’re looking at it, Chris. I would tell you, on a year-over-year basis, as I said, there’s approximately 75 to 100 basis points — sorry, $75 million to $100 million of restructuring cost on a year-over-year basis. So if you exclude that margin rates are 19.5% to 20% for Q1. No, sorry, 19.5% — my number is all getting. It’s 19.5% to 20% is the guide, which includes $75 million to $100 million of cost. So if you adjust for that cost on a year-over-year basis, margin rates will be up 250 to 300 basis points. And then on standup costs, again, timing will determine what the final standup cost is. But currently, we see approximately $0.07 to $0.08 of total cost that we are incurring, as Bryan and the team get ready for spin of Health Care.
Operator: Our next question comes from the line of Joe Ritchie with Goldman Sachs.
Joseph Ritchie: Good morning, everyone. Just — so obviously, like the volume environment remains fairly muted. But I’m curious like how are you guys thinking about pricing for ’24 and particularly like what’s embedded in the guide from a price cost standpoint?
Monish Patolawala: So 2024 outlook assumes we will have selling prices year-on-year. It’s helping us offset some of the moderate inflation we are seeing in certain raw materials, and then the labor market continues to remain strong. But I would just tell you, you have seen we’ve become good at monitoring this. We’ll make sure we continue to take actions as needed. And you’ve seen it, we’ve done that in ’22. We have done that in 2023. But I would say, more importantly, when you think about margin rate, and the supply chain teams and the business teams, we are not just taking price raw as one item. In total, we are just saying how do we improve margins. So a lot of actions has been taken on, whether it’s through selling price increases, driving global sourcing benefits, dual sourcing, driving yield in the factories and of course, prioritizing demand.
And all of that put together, including the new way we work with all the restructuring-related items we have announced last year just help us continue to drive margin between 2024, ’25 and beyond.
Joseph Ritchie: Got it. That’s clear, Monish. I guess there’s been a lot of discussion on the restructuring expenses and the benefits coming through in the next couple of years. I guess just for 2025, as we’re thinking about the low-end versus the high-end of the benefits range. Maybe like how would you kind of handicap what are the key drivers that potentially puts you guys at the low-end of the in versus the high-end of the $900 million benefit range?
Monish Patolawala: So I would first say, number one, again, I keep reiterating this just because there’s an assumption that’s out there that we have assumed that Health Care remains as a part of 3M. That’s just the guide but Health Care is on track for a first half ’24 spin. Keeping that in mind, when you think about $700 million to $900 million, it’s driven by two pieces. One is the pace at which we can execute some of these actions as well as some of the rooftop consolidations that we are working on. In total, I still feel good that the range of $700 million to $900 million is good for the overall program. But as you have seen, Joe, quarter-to-quarter, there’s always going to be a little movement because there are multiple actions that we’re working through regulations in countries and we’re working through making sure we are doing it in a safe manner that you could have a month or two delay.
But overall, I still feel good $700 million to $900 million is a good range.
Operator: Our next question comes from the line of Stephen Tusa with JPMorgan.
Stephen Tusa: I’m still not 100% clear what the sequential decline is in EPS from 4Q to 1Q. Can you maybe just help bridge that a little more specifically? I know there’s tax impact there, maybe a little bit of sequential sales decline. I’m just having a little bit of a hard time reconciling the walks. I mean I think you had a $0.07 charge in Forex from Argentine devaluation, maybe that’s a factor. I don’t know, just maybe a little more color on the sequential EPS bridge from 4Q to 1Q.
Monish Patolawala: Sure. And Steve, as I said, as you start lapping quarters and the benefits of restructuring starts showing up in the results, it’s going to get harder and harder to do sequentials. But anyway, I’ll do my best, and hopefully, that answers your question. So I would start by first saying you’re going to see another strong quarter of execution on a year-over-year basis, and I would ask you to look at that first. When you look at our guide for January, we’re saying it’s approximately $7.6 billion. And there are no surprises in January so far. It’s very similar to Q4 trends. So volume is a little lower Q4 to Q1. That has an impact. Secondly, there is usual seasonality that we see in our business when it comes to resetting some of our pay plans and some of the other compensation things that we do.
