3M CO Q1 FY2025 earnings call

Bill Brown noted first quarter adjusted earnings per share of $1.88, up 10% vs last year and above expectations. Organic sales growth was 1.5% with all business groups positive. Operating margins increased 220 basis points through productivity and cost controls. Free cash flow was solid at ~$0.5 billion. Launched 62 new products in Q1, up ~60% y/y, with plans to launch 215 new products in 2025 and 1,000 over next three years. Made progress on commercial excellence with standardized operating rhythms, improved target setting, and tighter pricing governance. OTIF increased 3.5 percentage points y/y to 89%, OEE up 4 percentage points sequentially to 58%. Refinanced $1.1 billion in debt, returned $1.7 billion to shareholders, raised dividend by 4%, and board approved $7.5 billion share repurchase authorization with repurchases expected to be ~$2 billion.

Safety and Industrial (SIBG) organic sales grew 2.5% in the first quarter, with five out of seven divisions posting positive growth, driven by strong demand for cable accessories, industrial and electronics bonding solutions, and personal safety. Transportation and Electronics (TEBG) adjusted sales were up 1.1% organically, with aerospace delivering double-digit growth but electronics business growing low single digits softer than expected and auto OEM business down mid-single digits. Consumer Business (CBG) was up 0.3% organically, driven by growth investments and new product innovation in filter eat filters, respiratory products, pain protection, and Maguire's Auto Care, partially offset by soft consumer spending.

Full-year adjusted earnings per share guidance remains $7.60 to $7.90. Not flowing through Q1 results to full-year outlook due to uncertain macro environment. Tariffs are a headwind but impact held outside of guidance. Identifying ideas to adjust product sourcing and logistics flows to mitigate tariff impact, with some no-regret moves regardless of trade policy settlement.

Macro environment softening, including softer GDP, IPI, and global auto build. Tariff impact, with potential annualized impact of ~$850 million before mitigation. Trade policy uncertainty affecting portfolio shaping efforts.

Q: Jeff Sprague asked about March activity and pre-buy actions.

A: Bill Brown said ~$10 million moved from Q2 to Q1 in China, Q1 order rates up >2%, ended backlog up low teens, industrial business had momentum in April.

Q: Jeff Sprague asked about tariff mitigation levers.

A: Bill Brown said three buckets: sourcing and logistics actions like adjusting trade flows, leveraging bonded facilities; discretionary cost actions; selected surgical price actions.

Q: Scott Davis asked about anti-American purchasing behaviors.

A: Bill Brown said not seen yet.

Q: Julian Mitchell asked about organic sales outlook and tariff impact phasing.

A: Anurag Maheshwari said organic growth trending towards lower end of 2% - 3% range, tariff impact mainly in second half.

Q: Amit Mehrotra asked about EPS cadence.

A: Anurag Maheshwari said EPS growth year over year ~$0.05 - $0.10, sequentially ~$0.10 - $0.15.

Q: Steven Tusa asked about forex and China sales.

A: Anurag Maheshwari said forex headwind ~$0.05, Bill Brown said no option to walk from China sales, can shift sourcing.

Q: Nigel Coe asked about cash flow and 50-50 EPS comment.

A: Anurag Maheshwari said cash flow well managed, 50-50 based on $7.75 midpoint.

Q: Andrew Oben asked about tariffs and buybacks.

A: Anurag Maheshwari said option exercise timing issue, Bill Brown said $7.5 billion authorization with optionality to be more aggressive.

Q: Nicole DeBlase asked about G&A and growth investments.

A: Anurag Maheshwari said G&A efficiency seen in Q1, growth investments maintained.

Q: Andy Kaplowitz asked about TEGG margin and industrial outlook.

A: Anurag Maheshwari said TEGG margin expected to expand, industrial business holding up reasonably through early April.

Q: Joe O'Dea asked about imports from China and corporate items.

A: Anurag Maheshwari said not pausing orders, corporate items trending better than initial expectation