3M CO Q4 FY2025 earnings call

• Delivered solid Q4 results with organic growth of 2.2%, operating margin 21.1%, EPS $1.83, and free cash flow conversion over 130%. - Strong year with organic sales growth exceeding 2%, outperforming macro environment. - Significant margin expansion with full-year adjusted operating margin 23.4%, up 200 basis points. - Implemented commercial excellence pillars: improved sales effectiveness, stronger channel collaboration, increased customer loyalty. - Launched 284 new products in 2025, up 68% vs 2024, with 350 expected in 2026. - Operational excellence metrics: OTIF ended above 90%, OEE at ~63%, cost of poor quality at 6% of COGS. - Deployed capital effectively, returning $4.8B to shareholders in 2025.

Safety and Industrial (SIBG): Fourth-quarter organic sales increased 3.8%, full-year growth was 3.2% with acceleration in the second half. Transportation and Electronics (TEBG): Fourth-quarter organic sales increased 2.4%, full-year growth was 2% with second-half growth of 3%. Consumer (CBG): Fourth-quarter organic sales down 2.2%, full-year down 0.3% due to weaker consumer sentiment.

• Expect organic sales growth of approximately 3%. - Anticipate adjusted operating margin expansion of 70 to 80 basis points. - Project earnings per share of $8.5 to $8.7. - Expect free cash flow conversion greater than 100%. - Plan for sales growth acceleration across business groups, with Consumer expected to return to growth in 2026. - Expect margin expansion over $450 million or 100 basis points, partially offset by headwinds from PFAS, stranded costs, tariffs, and increased investments.

• Macroeconomic uncertainties impacting market conditions. - Litigation docket and associated risks. - Tariff impacts and stranded costs affecting margins. - Weakness in consumer market and auto aftermarket.

Q: Jeff Sprague asked about the pivot to priority verticals and how much of revenue is in priority buckets.

A: Bill Brown responded that ~80% of R&D spend is aligned to NPI in priority verticals, and about 10% of the company is in commodity-like businesses, with pivot towards priority verticals both organically and inorganically.

Q: Scott Davis asked about customer inventory levels and pricing strategy.

A: Bill Brown said industrial inventory is normalized, consumer inventory is normalizing. Pricing strategy includes covering material inflation, tightening pricing governance, and opportunity in new product pricing.

Q: Julian Mitchell asked about EPS growth cadence and interplay of macro and self-help.

A: Anurag Maheshwari said EPS growth expected to be equal between first and second half, with revenue over 3% in Q1, and outperformance vs macro due to commercial excellence and NPI.

Q: Joe O'Dea asked about footprint optimization and consumer segment.

A: Bill Brown said footprint optimization is part of transformation, starting with some facility sales, and consumer market was soft in Q4 but trending okay in January. Electronics segment is growing mid-single digits with NPI in mainstream market.

Q: Steve Tusa asked about electronics organic growth and margin impact of mainstream expansion.

A: Bill Brown said electronics organic growth was mid-single digits excluding PFAS, and no margin dilution seen yet from mainstream expansion.

Q: Amit Mehrotra asked about incremental margins and NPI accountability.

A: Anurag Maheshwari discussed volume and productivity contributions to margins, and Bill Brown talked about holding R&D accountable through design-to-cost business cases.

Q: Nicole DeBlase asked about China growth and tariff impacts.

A: Bill Brown said China growth was mid-single digits, and tariff impacts from Europe not in current guidance but could be ~$30-40M impact.

Q: Chris Snyder asked about consumer December performance and US IPI assumption.

A: Bill Brown said December consumer growth was due to promotional efforts, and US IPI is expected to soften but 3M's industrial businesses to outperform.

Q: Andy Kaplowitz asked about NPI growth and consumer margin.

A: Bill Brown said NPI growth will contribute to outperformance, and consumer margin is expected to hold up in 2026 with strategy execution.