Dive Brief:
- 3M saw its second quarter net sales increase 1.4% year over year to $6.3 billion, topping its expectations, according to the chemical and consumer goods manufacturer’s earnings report last week.
- By geography, China led the company’s growth with strength in industrial adhesives, films and electronics bonding products. 3M’s “strong” delivery on its commercial plan drove growth, EVP and CFO Anurag Maheshwari said during the July 18 earnings call.
- The company’s “strong operational improvement” prompted it to adjust its outlook upward, Maheshwari said. 3M upped its earnings per share guidance from $7.60 to $7.90 to between $7.75 and $8. The modified range now includes tariff impacts as well, according to a Q2 presentation.
Dive Insight:
3M previously did not factor tariffs into its guidance due to the situation’s uncertainty, Maheshwari said. But the company decided to include tariff impacts in its guidance for the second half of 2025 as conditions evolve.
Additionally, the company is more than halfway through the year, “and any changes from here, we’d only have a couple of months in the balance of the year that would impact ‘25,” Chairman and CEO William Brown said during the earnings call. “The rest would roll into 2026. So we feel we're pretty well calibrated.”
Brown noted that the tariff rates have decreased to a cumulative 30% after the United States and China agreed in May to de-escalate their trade war for 90 days. The previous rate increased to 145% and 3M initially expected to incur $850 million in tariff-related expenses this year. The Scotch tape maker began planning and adjusting its product sourcing and logistics last quarter to mitigate the tariff burden.
Still, the 30% rate may change. China and the U.S. have reached a proposed agreement under which the U.S. would impose 55% tariffs on Chinese imports, and China would impose 10% tariffs on U.S. imports. Though as of July 22, the deal has yet to be finalized.
While things have stabilized at least somewhat, 3M is keeping a close eye on the European Union’s trade negotiations, as well as any potential re-escalation and trade tensions with China, Brown said.
“From the way we see it today, I think we know enough about it in terms of the gross and net impact to roll it through into guidance, which I think is cleaner for investors,” the CEO added.
Looking ahead to the second half of 2025, 3M will continue to invest in its growth initiatives as it navigates the unpredictable economic climate, including the launch of new products, Brown said. In February, 3M announced it will spend $3.5 billion on research and development from 2025 to 2027 as part of its goal to launch 1,000 products over the next three years. The consumer product maker’s efforts include moving away from PFAS in its manufacturing processes and product development, as the company is on track to end the use of these toxic substances by 2026.
In Q2, 3M launched 64 new products, up 70% YoY, Brown said. The new products in H1 total 126, putting 3M on track to exceed its target of 215 new products this year.
The company expects to see improvements in growth from product innovation and margin, Brown said.
“But really, what we're focused on is delivering against customer expectations, beating the competition, regaining share of wallet and just getting back to that spirit of innovation at the company,” the CEO said.
While things are looking up for 3M, the manufacturing giant is working through several lawsuits that accused it of PFAS contamination over the last few decades. In May, 3M reached a proposed agreement with the New Jersey Department of Environmental Protection to pay up to $450 million to resolve all legacy PFAS-related claims in the state. The deal is awaiting a judge’s approval.
While 3M began issuing payments to public water suppliers that opt in to receive the $10.5 billion settlement, the manufacturer still faces several cases from state attorneys general, according to its securities filing. Some of the cases are associated with the multidistrict litigation involving aqueous film-forming foam.
3M, along with other chemical titans such as DuPont de Nemours and Chemours Co., are slated to have a court date on Oct. 20 for the first bellwether personal injury trial, according to the filing. The plaintiffs are accusing the companies of causing kidney cancer due to their PFAS usage. The court has directed all parties to negotiate and reach a settlement ahead of the trial.
“We’re managing as best that we can,” Brown said. “It’s important for us to make sure that we maintain the cash flexibility to handle these issues as they come, yet still invest in the growth of the company. And that's what we're trying to do.”
