New Public Company Solventum Faces Financial Challenges with High Debt and Slow Sales

Solventum, a new public company spun off from 3M’s health care business, is facing challenges with a heavy debt load and stagnant sales. With $8.3 billion in long-term debt and projected negative to no revenue growth for its first year of existence, the Maplewood-based company is starting out on a difficult path. However, analysts see some upside for Solventum as it has strong cash flow and positive growth in certain areas.

Solventum reported its first-quarter results on Thursday despite officially detaching from 3M on April 1. Unlike 3M’s earnings report last week, Solventum provided more specificity and details about its business. The numbers showed that overall sales were $2 billion, which grew 0.2%, but sales in the medical/surgical division were down 0.4%. Revenue in the purification and filtration business, however, was up 6.1%. Analyst Joshua Aguilar with Chicago-based Morningstar believes that Solventum has potential for growth and is a strong cash-flowing business.

Looking ahead, Solventum plans 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. Analyst Matt Arnold with St. Louis-based Edward Jones outlines some of Solventum’s challenges in an initial research report last month, including carrying an above-average debt burden and lagging revenue growth compared to peers. He also projects that the company could cut some products from its portfolio that are slower growing or less profitable to reduce debt faster.

Repaying the debt quickly is a priority for Solventum, but it will likely delay the company’s ability to return capital to shareholders and pursue acquisition opportunities in our opinion,” Arnold wrote in his report. Despite these challenges, analysts believe that there may be opportunities for growth within the company if they can focus on reducing their debt load while maintaining their strong cash flow position.

CEO Bryan Hanson was not available for comment about these issues.

3M shareholders received 80% of Solventum stock in the spinoff while retaining 19% of shares themselves but plans to sell those holdings within five years.

Overall, Solventum faces significant challenges as it tries to navigate its new identity as a public company with a heavy debt load and stagnant sales