3M Company (MMM) Earnings Call Transcript & Summary

I'm Andy Kaplowitz, Citigroup. And we are very excited to have 3M with us today, very, very excited. We have CEO, Mike Roman; and CFO, Monish Patolawala. Mike is Chairman of the Board, CEO of 3M, having become Chairman in May 2019, CEO in July 2018. Mike's been at the company basically forever, right, a very long time. Monish joined 3M as CFO in July of 2020 and later was named Chief Transformation Officer as well. He joined the company from GE, where he was at the company for a variety of roles. So maybe I'll just start off, Mike, and just ask you, you've been CEO of the company now for 4 years, almost 4 years, maybe talk about where you've had, you think, the most impact, most impact or success and where do you think there is still the most work to do?

Yes. Thanks, Andy. It's great to be with you today. It's great to be in person, too. All the lights don't let me read the body language very well. We'll work around that. Maybe I'll get to the question. I think it's really important question. We talked a bit about it on the Investor Day last week. But I thought it'd be good, just a couple of background remarks for those that are attending today and just a couple of words about 2021 and then just a brief view of how we're looking at '22. And so '21, we saw broad-based growth across our businesses. Our market-leading 4 business groups each had 8% or above growth, overall company, 9% organic growth, so good year. We saw trends in the marketplace. We invested. That helped drive our growth. We took portfolio actions that helped position us into attractive spaces as well as unlock some value with what we announced with the food safety business. And then we focused on, in a tough year, around supply chains, on operations, drove good margins, strong cash flow, $6 billion of adjusted free cash flow. So '21 is a good foundation for us, and we carry some momentum into '22. And as we look at '22, a lot of uncertainty still around supply chains. What's going to happen, expected some good macro growth as we go through and uncertainty around things like geopolitical issues and COVID hanging in there. We do see some end markets that are promising to drive some growth. Automotive looks to return to growth in build rates. Electronics, similar kind of return to growth and then elective procedures in health care getting back to 2019 levels by the end of the year. So all those are good growth drivers for us. So that really informed our guidance. We came out with guidance at 2% to 5%. I'm going to get to 4% to 7%. I just got to get to my 4% to 7%. 2% to 5% though really represented our businesses outgrowing the economies that they're part of and our EPS showing that with the headwind from respiratory. So we saw about a $700 million headwind from respiratory as we come down off the pandemic. So really our growth looks like 4% to 7% organic better than those economies. So the outlook with, even with the uncertainty, we expect improvements in supply chains as we go through the year and our ability to continue to drive growth above the macro and strong margins and strong cash flows as we go into '22. Now we'll come back to how is the year starting, still a lot of uncertainty around supply chains and some challenges there. So maybe coming back to beyond '21 and some of the things that we did in '21 to put us with some good momentum coming into '22. What have we done? What have we done to make a difference? And it starts back in 2019, we realigned the business around our 4 go-to-market models, really the way we take our innovation to customers around the world. Our safety and industrial business, our largest business, B2B industrial through channel partners globally. We have a transportation and electronics business, which is largely an OEM direct. They serve some of the largest OEM customers in the world in automotive and electronics. Our health care business and model around that, and our consumer business group, which is a retail model. And we aligned around them, then we built out a global business group-led operating model. We eliminated the country structure around business leadership. We still have a local execution capability, but tied to those businesses, end-to-end connecting customers better to our innovation, backed up by an enterprise operations model where we brought together supply chain, manufacturing and customer operations, not only in a regional capability but a global model end-to-end that's consistent across the world to support those 4 go-to-market models. That was a big foundational change for us. It put us in a position to streamline the company in many ways. You saw that in some of the actions we took in some announcements we had around restructuring parts of the company. It was really taking advantage of that. We continue to see opportunities to streamline the company around that change in the model. And so that's a big shift for us. We also stepped into investments in growth opportunities. And it's really part of how we manage our portfolio, so stepping up our management of our portfolio. We made acquisitions in health care in Acelity and M*Modal, which built out a strong capability for us in more attractive markets in our health care space. We made divestitures of businesses across each of our 4 business groups that enable us to refocus on higher, more attractive markets. And so we've used active portfolio management to shift the portfolio. We've also used it to prioritize where we make organic growth. So some of those trends that I mentioned coming through '21, those are areas that we have stepped into and prioritized our R&D, our CapEx, our commercial. So it's really been a shift in, I would say, the ability to end-to-end drive growth and to prioritize how we drive that. And then beyond that, we've continued to transform the company around digital capabilities and the data and analytics that we can leverage to drive our performance across each of those businesses and take advantage of new digital capabilities in operations, in our businesses, in our customer engagement. And finally, we stepped up in a big way in investing in sustainability. And we made some announcements at the beginning of last year. It's really a big commitment for us, $1 billion, a combination of CapEx and OpEx, to really step into leading and driving as a manufacturer carbon neutrality, water use, water quality. So those are pretty fundamental changes. They put us in a good position. It's not disconnected from the momentum that we saw in 2021. It's really been enabling us to drive some of those growth opportunities and also, I think, position the company for improved performance.

Yes. No. That's great, Mike. And maybe what is the 1 or 2 things that you still think you have to do? What's the biggest challenge as you sit here today for 3M?

Yes. It's tough in boiling it down to 1 or 2. There's always more to do. I think we are at the beginning of our ability to take advantage of the growth opportunities that we're talking about. And we are taking learnings and accelerating investments. And we've talked about a number of large commercial platforms that we have that we're putting significant investment into that will help drive growth forward. And so I think there's more to do in how we prioritize and drive organic investments and really continue to shift to where we can create the biggest impact, create value for our customers, create value for our shareholders, it's really about that. And so I think there's more to do on the growth investments, the growth strategy, leveraging the 3M innovation capabilities into where we can create the most value for customers and took a nice step with the things that we talked about in '21, more to do as we come into the year. Similarly, on what we're doing to execute the model globally, there's more to do to drive efficiencies. There's still a lot of waste in our processes. We've got more we can do. And there's certainly challenges in the middle of the supply chain issues that we're all facing. That shows up as inflation and cost. It shows up as cycle time increases. It shows up as inventory, working capital that should, there's more to do there certainly coming through those challenges. But even beyond that, I think there's more for us to do operationally. And so it's following through on the things that we have, the priorities that we've laid out that will enable us to drive that differentiated value in the marketplace and for shareholders over time.

So I should remind people in the audience who weren't here with us in the first session that you can ask a question, just use the QR code there and you can ask a question that show up on my handy-dandy iPad here. So Mike, let me ask you just responding to some of what you just said. Like you did grow nicely last year. Underlying growth this year is sort of 4% to 6%. So maybe talk about sort of why you kind of stopped short from sort of saying that's your long-term guidance? Like what's the hesitation there given the sort of underlying growth?

Well, I would say, Andy, we're very much focused on '22 and taking advantage of that momentum. And I would say the uncertainty that's around us has us focused on '22. We're still managing through the supply chain challenges. There's still uncertainty related to COVID that we face into. So just looking through that for '22 has been an important focus for us. And we talked about it, we expect to outgrow the macro. Absent the headwinds from the decline in disposable respirators coming off the pandemic high, we expect to outgrow the macro. We expect to deliver margin improvement and strong cash flow. And that's the focus on '22. That also is what drives our businesses longer term. That's the kind of focus that we're driving. Now as we get through, I think, the pandemic to endemic and uncertainty around supply chains, we'll get a better view of how we see things longer term, right? We're just near term, we've got, I think, a pretty challenging '22 external market dynamic that we're facing into. That's got our focus.

So this question might be for Monish. It's kind of a follow-up. So you just had your Analyst Day last week. You gave your '22 outlook, all that kind of stuff. So that's very fresh, right? So when we look at sort of the numbers, you could argue a few points of price in the sort of underlying mid-single-digit guide means not a lot of unit growth when it comes down to it. I look at segments like consumer, for instance, where you've had strong momentum. It seems like you're not forecasting that to continue, maybe just tough comparisons, all that kind of stuff. So maybe talk about, if you look at your segments, best opportunities for outgrowth, things you're most worried about as you look at sort of '22.

Yes. And we put a lot of thought into that, Andy, as we gave the guide. I think Mike hit the first one that's on all our minds is there's still a lot of uncertainty. Everyone assumes that we are all fine and everything is great.

That's not what the market is assuming these days.

But unfortunately, there's a lot. So that's why the range we gave you was 2% to 5%, 4% to 7%, excluding the disposable respirators. So I'll just start with the first one is disposable respirators. We believe that 1Q of '21 was the peak. And so you're going to see disposable respirators down $100 million to $150 million on a year-over-year basis for the first quarter that gives us 2% for the year. So that's the first, it's $700 million of revenue. So then if I go from there, that segment, which is SIBG, is the segment where you're going to see all of that is the one that you will see the highest impact, and that's why the guide we gave you for SIBG was in that range. Another way to look at SIBG is look at industrial activity, look at IPI and see where that's going to be. Both IPI, GDP right now is in the 4% range. So that's great. Could there be more there? It could be. Could there be less? Absolutely. That's possible. If you go to TEBG, which is the next segment where we give you the largest width from a guide perspective, a lot of that has to do with the recovery of semiconductors and consumer electronics. Semiconductors is going to continue to create an issue. We believe that the first half of '22 is going to be harder. The second half gets better. Auto was expected to be up 9% for the year. Consumer electronics is up 6% for the year. But for the first quarter, actually, auto is going to be sequentially down 2% and on a year-over-year basis also down 2%. So I think that's going to decide what TEBG becomes based on that. There's also a piece of back to work which impacts our commercial cleaning business in that TEBG segment. So that's going to play itself out. So that's TEBG. Health care, again, I think it's more a GDP-plus business, not an IPI business. And the growth opportunities there, again, are going to be determined by what happens with COVID. With some of the labor shortages that are going on right now, it is impacting elective medical, elective procedures. And so that's going to have an impact on the health care business. But the flip side is oral care is pretty much at pre-pandemic levels from that. Biopharma continues to be extremely strong. We grew double digits. We continue to see demand. That industry itself is going to grow 8% to 10%. So there's growth opportunity there. And then you come to consumer, which you talked about. We are investing. We have had a great 2 years with consumer. And we are continuing to invest a lot. Mike talked about it. Jeff Lavers talked about it. We have $0.5 billion franchises in there, whether you take our home improvement business or you take our air quality with Filtrete, both of them have tremendous growth. So we're going to continue to invest in that business. We just announced a $500 million investment in Clinton, Tennessee, 600 jobs by 2025 because we see that area keep growing. I think that opportunity continues. I think as offices open up, the office and stationery business continues to grow strong. So at the end, I would say the opportunities are tremendous. It's going to get determined by actual GDP growth, IPI growth, what happens with COVID. First half is going to be tougher than second half, at least that's what we see right now. But if I look sequentially too, nothing much has changed from fourth quarter to first quarter as of right now. And then you've got all these other geopolitical factors that are coming into play that's going to create its own round of issues on demand, inflation that we are watching so.

So I mean, we asked you 12 questions last week on supply chain. So let me just ask you about the last thing you said. Like you guys are pretty European-focused. There's obviously the Russia-Ukraine stuff out there. So any commentary you'd make sort of on that or is it just kind of we'll have to wait and see?

Well, I think the last part is the answer. It's early. It's early to be able to draw any conclusions. We'll be watching it closely too.

You have minimal direct exposure, right?

Yes. I think if you look at the, it's less than 1% of our revenue tied up in the region, but what everybody is watching is the knock-on effect. What's the impact on the broader European market, with global markets. And we'll all be looking at that.

Monish, I wanted to ask you about sort of your initiative, transformation leader. I think something that struck me last week is you said you're closing the books 20% faster than you have before. That's a pretty big deal and you're embracing the red. So maybe you could talk a little bit more about sort of what that means in the context of, you've said incrementals for the year at 30%. But if you exclude masks, really 35%, and that's with all these supply chain headwinds. So it strikes me if I'm being bullish that you could do a lot more than that if these sort of headwinds go away. So maybe talk about sort of the impact. When do you see sort of max impact from your initiatives? Is it this year? Is it next year? Like how do you think about that?

Yes. So Andy, I'm a student of Lean so things progress over time. It doesn't happen in 1 year and stop. The spirit of continuous improvement, you're every day trying to make it better. I would say, if you look at just 2021, if you just did the math on leverage, it was around 17%. But if you take out price/raw for a second, which if you just take that out, that would have taken leverage up to 25%, 26%. So right there, it shows you that the 3M model can generate a lot of leverage provided we get volume. Volume is the first thing that gives us the highest amount of leverage, right? From there, you take yield and efficiency in our factories where Lean management, Six Sigma can do a lot in driving waste improvement. Just those 2 items should give you enough leverage. Then from there, it creates the oxygen for us to invest in growth, productivity and sustainability. So you reduce the leverage from there. And then, of course, we have all these headwinds. Mike talked about some of the issues we have right now, whether it's our, some of the legal-related matters, the issue in Zwijndrecht, et cetera, you take that off that. And that's why you get to the 30% to 40%. But to answer your question, where can you get max? I think it's volume and then you continue to drive efficiency. You continue to not just drive efficiency in the factories, but you got to continue driving efficiency in the SG&A side of the house, too. So some of the work that we have done when we announced the fourth quarter charge in 2020 about making the organization more nimble, more agile, more effective based on what Mike had done even before my time on creating 4 business units gives us the opportunity to take that money that we save and put it back into investment, which will give us longer-term growth. So 30% to 40% is doable. Another way to look at it, Andy, is you look at gross margin is somewhere in the 46%, 47%. So you can look at that as a start and say, from there, how much are you going to invest and you get in that range.

That's very helpful. And then, Monish, maybe I'll ask you just a follow-up there. Digital was a big sort of theme last week, digitization of 3M. I don't feel like, the company has always talked about it. But at the same time, it feels like sort of the company is sort of doubling down on it over the last few years, especially as you've become CFO. So what does that mean for 3M? Like were you behind a few years ago when you started? Like how do you think about digitization and what does it mean to our crowd?

Yes. So I was telling someone at the session. I think when I look at my 18 months in, I look at the amount of data 3M has, it's mind-blowing. The question is how do you organize that data and curate that data to help solve customer problems. So the strategy that we have is 4 and a lot of people talk about digital as ERP. But I think it's bigger than ERP. So the 4 strategies, one is digital customer. How do you make it easier for your customer to order product? Think about all consumers that buy on the Internet. How do I make it easier when you're searching for 3M product that you can go find 3M product? So that's one. And now take consumer and go into the industrial side. There's a lot of movement that's happened where industrial customers are wanting to buy products which have specs, et cetera, that we are working on. So that's digital customer. And the more we can move in that in the emerging markets, too, that's where there's a growth opportunity because you've taken away the brick-and-mortar and having distribution warehouses, right, in each country, but you could have centralized warehouses. The second one is digital product. Our Health Information Systems business itself is a 100% software business. But if you just leave that aside and say, where else can I do? The power of using data or smarts that help eliminate customer problems and increase their productivity is clearly something that will add more value. I gave one example which was the Filtek Matrix that we have, which is in our oral care business, where it's restorative composites that you're creating through a digital because each one's face is very different and people manually do it. This is based on a scan that gives you in 3 steps what would have taken 8 steps. So that is where the customer has benefited. And then the consumer has benefited because the fitting happens perfect. Then you go into digital operations, which pretty much everyone will talk about. It's digital factory, how do you use smart data to help increase yield and efficiency. And then the last one is digital operations, which is one is ERP, but the second piece which a lot of people don't talk about is, there's data and what do you do with that data. 3M, before my time, has moved 60% of the data to the cloud. And that actually, if you think about it, eliminates the need to add, invest in new data centers. Yes, we are variabilizing the cost, but it's better from a security perspective. We pay as we go, and so that's the benefit. So you will see the benefit of digital show up in growth. You'll see it show up in productivity. It'll show up in SG&A. And that's how I think the power of digital can help 3M. I'm not saying we are going to be like 100% software business. But we have data that we can use to improve our own operations, data that we can help customers with. And I think that's what makes 3M where you say you're marrying material science now with digital science.

Yes. No. That's very helpful, Monish. So we have a question here on Belgium. So I might as well ask you my Belgium question, and then I'll ask this question. So I obviously know you're limited in what you can say on Belgium. But what, if anything, can 3M do as a workaround in Belgium if, in fact, you're limited longer term in what you can produce there?

Yes. Let me tell you, Andy, what I can say about Zwijndrecht, Belgium. I would say it starts with, we've been there for 50 years. So it's an important operation for us as a company. Back to the investment in sustainability, it's an important part of that. EUR 125 million invested, a big part of that is that investment in improving water quality. So we're committed to the community, and we're working with the local authorities around the safety measure that was implemented and has impacted and shut down certain operations there. We continue to work with them on our water regulations. And so we're in the middle of working with them on that. And depending on how we work through that, it can impact our operations. It can shut down and impact additional operations at the site, and we'll come back. What I can say at this point is we'll come back and keep you updated as we get better view of how it impacts current or future parts of operations. Now we produce at that site product that we sell directly and we produce at that site product that we use in other factories as an input, not raw material, kind of a semifinished goods in our other factories. So all of that has the potential to be impacted by this. And so it's, we are in the middle of working through the process in Zwijndrecht and then we'll be working through the impact, any impact that there might be potentially on our global customers in Zwijndrecht.

Mike, that's helpful. And then, Monish, 2 questions for you. What's sort of baked into your guidance? What kind of outcome in Belgium? And then the question here is, with the appeal going on that you guys have, is there any risk that other, the plant in Germany could face a similar regulatory burden?

So I would say, first, the guide that we gave you all has 2% to 4% organic growth and $10.15 to $10.65 from an EPS perspective. We, of course, factor in a lot of things when we give the guide. And this is a very fluid situation, as Mike talked about, and the team is doing everything they can. We've got the best engineers on the ground trying to make sure that we solve this issue. I think time will tell where it plays out. The team is committed to continuing to drive growth above macro. We are continuing to drive margin expansion using data, data analytics, daily management and then controlling to invest, control our costs and spending but at the same time making sure we are doing the right investments in growth, productivity and sustainability for the long run. So that's where we are on the guide.

And then maybe I can shift to R&D. So it was a big topic of discussion. And I think I remember when you became CEO that you had something like 46 technologies, now 51. So maybe talk about sort of where you go with that? Are these technologies sort of move-the-needle technologies? And then maybe you can also talk about sort of since you joined, how do you sort of expedite the process of getting R&D spend and CapEx spend to growth? Because that's one of the big questions I get with you guys is, are you converting your 5% to 6% of R&D to growth?

Yes. Well, it starts with the fundamental strength that is technology for us, and we represent it in our periodic table. When I started as CEO, we had 46 technology platforms that we call them. We've had a couple of divestitures, some acquisitions. We've also invested in building out some capabilities. And so the puts and takes altogether, we end up at 51 technology platforms. And those are just, when you look at the spread of those, it's materials and things like films would be an example of materials. It's process technologies like surface modification. We can do things on a nanoscale to modify surfaces in wide web, high-speed production kinds of environments. It's around capabilities we bring, analytical science capabilities, which it sounds like, yes, everybody does that in science, but it's the capabilities that are unique to what we do with our technologies. And then it's around things like digital coming in, an example of adding depth, computer vision. We have built out some leading capabilities around computer vision, some depth for us that really help us differentiate what we do, and we apply it to those film technology. Surface modification helps us on films. And then we have application areas that we've built domain, depth of domain expertise, so light management. And so all of that, the ones I've highlighted, you can bring that together to bring new display technologies for electric vehicles. And that's how we can bring it across. And the strength of that is, it's accessible and utilized to create differentiated value across the enterprise. And we connect it to growth that way. There's a pull on it. There's a drive at the center. Part of what drives us is innovating to solve difficult challenges, make a difference in the world but solve difficult challenges for customers, create value. There's a lot of pride in creating value in businesses and driving growth. And so there's an organic driver of that. Then it's how do we, as leaders in the company, how do we put our model together so that we can prioritize where we can have the greatest impact and make sure that we are really investing in those areas and overweighting those. If you look at R&D as a percent of sales across the company, it's not one number. We have areas that we are investing more than average and less than average, same with growth capital that can leverage some of those technologies. And so it's, you really take advantage of really understanding where the trends are, where the market opportunities are, where innovation in your customers is happening, where you can create differentiated value. So it's looking back at those technologies and how do you best leverage those, where could you add to them? It's part of what drove us into new areas. Advanced robotics is a new area that we've built out a lot of depth in. It's changing some of the applications of our materials in the world and also in our process technology. So it really is to continue to build out the capabilities and then it's about how do you really prioritize and strategically think about where do you go in the marketplace and with your commercial investments to take full advantage of it.

Now I wanted to ask you a related question, Mike, because you really have emphasized priority growth platforms, right? But if I look at them, they're still a pretty small part of 3M, right? And you're selling food safety or you're doing an RMT and you're getting great value, obviously, out of that. But at the same time, why haven't you come in and just like, let's double the size of priority growth? Why isn't priority growth not 15% of the portfolio?

Well, the priority growth plan, yes, the priority growth platforms are an important focus for us in the company. They've put us in a position to build out some new capabilities with some depth and breadth, not unlike technology, but building in platforms that can be stronger, broader growth. We've talked more as we've gone through the last year those trends that we're seeing, those opportunities to invest. We've talked more about some of the commercial platforms we have that actually leverage the priority growth platform. So large commercial platforms from home improvement to automotive, which has also started as a priority growth platform, to health care. Where do we take our innovation into more attractive markets and electronics. You've got these commercial platforms. Home improvement is a great example. It's got strong growth that we've been able to drive with our innovation over the last 2 years, a double-digit growth in '21, double-digit growth in '20. Really at the heart of it are a couple of $0.5 billion-plus revenue commercial platforms, one in Command damage-free hanging, another one in Filtrete home filtration products. They leverage some of those priority growth platforms. Filtrete, in particular, is used leveraging the air quality priority growth platform to help advance our innovation and our opportunities in that home filtration market. Automotive electrification is now a $400 million business and growing strongly in areas leveraging that, what started out as a priority growth platform. It's actually getting to be a sizable commercial platform. So we continue to invest in some of these priority growth platforms, but also recognizing that what we really want to make sure we're leveraging is these large commercial platforms to take them and have sizable, significant higher growth market opportunities and make sure we're prioritizing back to R&D, CapEx, commercial investments to be able to leverage those foundational product platforms that we've been working on. So I think it's, the focus more on those commercial platforms that really, I think, helps to see the impact that things like priority growth platforms can have, not only in the marketplace, but on 3M Company, the performance of 3M Company.

So Mike, what I noticed last week is health care was the only one of your segments where you talked about portfolio optimization as its most important priority, which is just interesting, right, because you've talked about that as a very important priority for 3M. So maybe you could sort of talk about, in general, why you decided to sort of talk about health care like that. Because if I look at the businesses, obviously, you bought Acelity and M*Modal, oral care. One of your primary competitors spun off that business. So Monish talked about it as back to pre-pandemic levels, but it has been slower growing at times. So why did you sort of highlight that? Is it because there's more focus there on portfolio op?

Well, I would start, Andy, portfolio is a priority for us actively managing our broader portfolio. And it's, acquisitions is part of that managing to optimize and maximize the value from our portfolio, including divestitures that will do that for us as part of that and prioritizing where we put our organic investments, where first priority for capital allocation. Health care, as you noted, has been active in acquisitions in the last couple of years, Acelity, M*Modal, significant steps into stronger parts of those portfolios, adding through acquisition. They've also been actively prioritizing where we invest in growth, the more attractive spaces in health care. And we announced with the food safety an opportunity to unlock value. So they've really been front and center. It's been a big impact on their business in the near term and it's clearly been a priority. It is across the broader portfolio as well. You look at the same time period, each of our business group has divested businesses. Our transportation and electronics divested our ballistic protection business that we had. Our safety and industrial business divested the communication markets business. Our consumer business divested the flooring business that we had. So all of them are actively managing portfolio. It's not only health care. I think it was notable in health care due to the acquisitions and the most recent announcement around food safety, and it's been representative of what that team has done in really putting a focus on that strategy and executing against that as we came through '21 into '22. So still more work to do on the food safety effort as we move to close there.

So a couple of questions from the audience. So I just don't want to run out of time here. So the latest view on the ground about supply chain challenges, any sort of change that you guys are seeing? Any improvement at all?

I think the improvements are in statistics a little bit, but we're still seeing the challenges. As Monish said, Q1 looks a lot like Q4 right now around supply chain. And you've got inflation. The year-over-year comp is going to make inflation feel significant in Q1 because we didn't see inflation really come in hard until the end of Q1. So there's a few. And then you've got the uncertainty that's sitting out there, geopolitical added on top of everything else we've been facing. There are segments of it. I highlighted, I think, in the earnings call Q&A that we saw some of the raw material supply that had been impacted by Storm Uri and Hurricane Ida last year start to ease a little bit, still more to come. But there's some signs that there's aspects of it that we're still seeing challenges though in labor and availability of labor, cost of labor. Logistics are still challenged so. And like I said, inflation is there. So it's, we're not there yet. It's difficult to predict how it's all going to play out. We've talked about we start to see the ability of global supply chains to get better as we get into the second half of the year, but it's still challenging as we start the year, first quarter, second quarter.

And a related question, in an inflationary environment, are there things you can do differently to drive price realization more quickly?

Well, the team stepped up and did some good work on getting price in Q4 to offset the inflation headwinds. And we see that continuing as we come into 2022. We expect to continue to be able to, and I called it out. We expect price/RMs to be a tailwind for us as we go through the total year in '22. So we expect to be able to continue to leverage that pricing ability as we work through the inflationary challenges that we face in the new year.

I just want to ask you, a couple of more minutes to go. Like China is a big market for you. You seem pretty optimistic about it for '22, but obviously some crosscurrents there. So what do you think, what are you seeing on the ground as we get to the Olympics here?

Well, absent the new geopolitical challenges, the outlook has been for good macro growth, Asia, China, U.S. And so that's the backdrop that we come into the year. We've got the supply chain challenges we've been talking about, but you also see a backdrop of economic improvement. If you look at China in '21, we saw, for the total year, we saw low double-digit growth above the macro there. So we had good performance led by health care and consumer business, safety and industrial impacted by disposable respirator demand declines as we went through the year, low single digits kind of growth for that business. The one that was impacted the most was transportation, electronics, automotive, electronic semiconductor. We also saw some challenges just as COVID impacted supply chains in China and shut down some ports for a period of time. Exports were impacted as we went through the year. But we still see segments of growth opportunities for us as a company, and we see that backdrop of positive economic outlook, something that will continue to serve and support growth opportunities for us as we come into '22. So we worked through some challenges and delivered, I think, good results in China in '21, and we see an opportunity to continue to deliver growth in the priority segments that we've been investing in so.

One more audience question here. The multiple of your company has come down despite rising earnings and superior margin and cash generation. What do you see as a trigger to re-rate 3M to the deserved higher level?

Well, what we've been talking about here is an important part of it, delivering consistent performance in what we've laid out, delivering the growth above macro, improving margins, strong cash flow. That starts with what we can really control and drive. And so we're committed to that. We laid out a plan that we believe in. The momentum that we have coming in the new year, I'm confident we can execute, and we've got a strong position as a company to do that. We also have the litigation matters that are going to be part of that. And managing through those, we've got a good team inside the company working, a strong team on that. We've got partners externally. We'll continue to manage through that. We've talked about the processes that we face, that we have to step through. That's an important part of it. But back to us, the focus and the energy for us is on really driving that consistent performance and leveraging the strength of the 3M model and the momentum we built to really follow through on that.

And Mike, I think you said it's going to take 12 to 18 months to find out more about the appeals process on combat arms, right, it's like?

Yes. That's the estimate of how long it takes to play out. We're in the middle of the bellwether trials. So as you work through those, if you look at, we've completed 11 bellwether trials. We've won 5, lost 6. There's been 8 that have been voluntarily dismissed by the plaintiffs. And so that's another aspect of the bellwethers that plays out. And we've got 5 more coming. So we'll work through that. And then we've got, as we talked about, like we've got an appeals process. We're going to take full advantage of it. We believe in our position. We're going to vigorously defend ourselves as we go through this.

Awesome. Well, look, we very much appreciate the time. Thanks for joining us. Take care.

All right. Thanks, Andy. Thanks, Monish.