3M Q1 2025 Earnings Call Transcript

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Provided by Quartr
April 22, 2025

Key Takeaways

  • First quarter adjusted EPS were $1.88, up 10% year-over-year, with 1.5% organic sales growth and a 220 basis point increase in operating margin.
  • Free cash flow was approximately $500 million, the dividend was raised by 4%, and the share repurchase authorization was increased to $2 billion for 2025.
  • New U.S.-China and other tariffs could impose up to a $0.60 EPS headwind this year (about $0.40 after mitigation), with only half of the impact expected in 2025.
  • Product innovation remains a key growth driver, with 62 new product launches in Q1 (up 60% year-over-year) and a target of 215 launches in 2025 to fuel sales from innovations launched in the past five years.
  • Management sees a softer macro outlook—GDP, industrial output and auto build forecasts have been cut—and is holding full-year guidance at $7.60–$7.90 EPS, trending toward the lower end of growth expectations.
AI Generated. May Contain Errors.
Earnings Conference Call
3M Q1 2025
00:00 / 00:00

Transcript Sections

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the three ms First Quarter Earnings Conference Call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. As a reminder, this call is being recorded Tuesday, 04/22/2025.

Operator

I would now like to turn the call over to Chinmay Trivedi, Senior Vice President of Investor Relations and Financial Planning and Analysis at three ms.

Chinmay Trivedi
Chinmay Trivedi
Senior VP - IR & Finance at 3M Company

Thank you. Good morning, everyone, and welcome to our first quarter earnings conference call. With me today are Bill Brown, three ms's Chairman and Chief Executive Officer and Anurag Maheshwari, our Chief Financial Officer. Bill and Anurag will make some formal comments, then we will take your questions. Please note that today's earnings release and slide presentation accompanying this call are posted on the homepage of our Investor Relations website @3ms.com.

Chinmay Trivedi
Chinmay Trivedi
Senior VP - IR & Finance at 3M Company

Please turn to Slide two and take a moment to read the forward looking statements. During today's conference call, we'll be making certain predictive statements that reflect our current views about three ms's future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Item 1A of our most recent Form 10 ks lists some of these most important risk factors that could cause actual results to differ from our predictions. Please note, throughout today's presentation, we'll be making references to certain non GAAP financial measures.

Chinmay Trivedi
Chinmay Trivedi
Senior VP - IR & Finance at 3M Company

Reconciliations of the non GAAP measures can be found in the attachments to today's press release. With that, please turn to Slide three, and I will hand the call off to Bill. Bill?

Bill Brown
Bill Brown
CEO at 3M Company

Thank you, Chinmay, and good morning, everyone. We had a strong start to the year with first quarter adjusted earnings per share of $1.88 up 10% versus last year and above expectations. Organic sales growth was 1.5% with all business groups posting positive growth. Operating margins increased two twenty basis points year over year through productivity and cost controls, while we continued to invest in growth initiatives. And free cash flow was solid at about $500,000,000 as we benefited from strong earnings, working capital improvements and disciplined capital expenditures.

Bill Brown
Bill Brown
CEO at 3M Company

These results were achieved during a dynamic macro environment and demonstrate the performance culture that's starting to take hold at three ms. The urgency and operating rhythm the team exhibited along with around the clock interactions with customers and suppliers drove a strong finish to the quarter and I'm really proud of the resilience and persistence of all three Emers. We're exercising a new commercial excellence muscle with a much tighter alignment across the supply chain And we're institutionalizing the March up tempo to execute at that pace in every month of the quarter and every week of the month. In this environment, it's critical for us to focus on what we control and remain deliberate in executing on the three priorities we discussed at our recent Investor Day. Driving sustained top line organic growth, improving operational performance across the enterprise and effectively deploying capital.

Bill Brown
Bill Brown
CEO at 3M Company

Central to top line growth is increasing the cadence of new product launches. In Q1, we launched 62 new products, up about 60% year on year on top of a 32% increase in 2024 and we achieved more than 70% on time launch attainment, up from 56% a year ago. Our new product pipeline health continues to improve and we're on track to launch two fifteen new products this year and 1,000 over the next three years. We've bottomed out and turned the corner on five year new product sales with Q1 up 3% and tracking well toward the target of growing sales from products launched in the past five years by more than 15% by year end. The pace of innovation is accelerating at three ms and our teams are operating with greater urgency and focus than ever before.

Bill Brown
Bill Brown
CEO at 3M Company

A few notable new products introduced in Q1 include ScotchBlue Pro Sharp painters tape with EdgeLock technology for sharper lines and less paint bleed through. A low sparkle optical film with enhanced brightness for the mainstream notebook market and a new solid state drive connector for the data center market. We're making progress on our commercial excellence objectives with standardized operating rhythms, improved target setting and performance measurement and tighter pricing governance. We tripled the number of structured sales manager and sales rep reviews in the first quarter and completed more than 100 joint business plans with our largest customers to align on growth opportunities and capture plans. One area of particular focus is cross selling.

Bill Brown
Bill Brown
CEO at 3M Company

We now have more than $40,000,000 of opportunities in our pipeline across 23 product pairs, tracking well against the $100,000,000 and 50 pair goal through 2027 that Chris described at Investor Day. And finally, we're laser focused on customer retention and reducing churn and we've begun deployment of a predictive analytics tool to flag at risk accounts to proactively address the primary drivers of customer attrition. These initiatives are foundational to building a more commercially driven customer focused company. As a result of these targeted actions, we saw solid order momentum in the quarter across all of our business groups. Our average daily order rate is up over 2% for the quarter, accelerating in March and driving company wide backlog up low teens since the beginning of the year.

Bill Brown
Bill Brown
CEO at 3M Company

And we continue to execute well on our key operational performance metrics, including leveraging our new three ms Excellence operating model. On time in full or OTIF increased 3.5 percentage points versus last year and about one point sequentially to 89%, the best quarter we've had in the past five years. Consumer and Transportation Electronics performed again above 90% and Safety and Industrial was up two points to about 82% is on a steep climb to achieve 90% by year end. Our metric for equipment utilization or OEE was up four percentage points sequentially to 58% and is now deployed on 191 key assets across our 38 largest factories, a 10x increase over this time last year and covering about 50% of production volume. Having a robust baseline on underutilized capacity will help us adjust our sourcing strategy more readily to the changing trade landscape.

Bill Brown
Bill Brown
CEO at 3M Company

And finally, safety performance continue to trend in the right direction with our incident rate down 25% in the quarter following a similar improvement last year as we continue on our journey to an injury free workplace. During the first quarter, we refinanced $1,100,000,000 in debt, returned $1,700,000,000 to shareholders and raised our dividend by 4%. In Q1, the Board approved the share repurchase authorization of $7,500,000,000 and we now expect repurchases to be about $2,000,000,000 up from our prior expectation of $1,500,000,000 We continue to advance our portfolio shaping efforts with one small divestiture recently signed and others progressing more slowly in view of trade policy uncertainty. Our guidance for the year remains $7.6 to $7.9 adjusted earnings per share before the impact of tariffs and offsetting cost, sourcing and price actions. We are not flowing through the upside in our Q1 results to our full year outlook given the uncertain macro environment with recent data reflecting some softening in GDP, IPI and global auto build. Tariffs are going to be a headwind this year, but we thought it would be prudent to hold the impact outside of our full year guidance while we digest the new policies and fully develop and qualify mitigation plans. With the significant footprint we have in The U. S. And the flexibility of our global network, we're identifying a number of ideas to adjust product sourcing and logistics flows to mitigate at least a part of the impact, some of which are no regret moves regardless of where trade policies eventually settle. Overall, we have a solid game plan.

Bill Brown
Bill Brown
CEO at 3M Company

We're executing well against our strategic priorities and we're focused on long term value creation for shareholders. And with that, I'll hand it over to Anurag to talk through the details. Anurag?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Thank you, Bill. Turning to Slide four, we had a strong start to the year performing ahead of expectations on margins, earnings and cash. On sales, we delivered a second consecutive quarter of positive organic growth across all three business groups performing at the high end of the 1% to 1.5% range we provided in March. We saw strength in several of our key end markets and divisions, including electrical markets and industrial adhesives and tapes in SIBG, aerospace in TEBG and consumer safety and well-being in CVG. And we continue to see softer trends in auto, abrasives and packaging and expression.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Geographically, all regions grew year on year with the exception of Europe. China was up mid single digits with strength in the industrial business and electronic bonding solutions, driven by share gains with key accounts and increased orders ahead of tariff actions. The U. S. Was up low single digits despite the challenging macro backdrop with continued high demand for cable accessories and strength in aerospace, partially offset by weakness in auto.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

And Europe was down low single digits due to the continued weak environment, including a high single digit decline in auto bills. On orders, we saw good momentum through the quarter and our daily order rate grew by over 2% resulting in a robust ending backlog that provides close to 25% of coverage as we enter the second quarter. Adjusted operating margins were 23.5%, up two twenty basis points year on year. The operating income growth of $150,000,000 at constant currency was driven by benefits from growth, lower restructuring cost, productivity and TSA cost reimbursement, which was partially offset by our continued growth investments, timing of equity based comp and stranded cost. SIBG and CBG margin rates were up year on year, while TEBG was down as expected due to a challenging prior year comparison and inclusion of incremental stranded costs from the exit of PFAS manufacturing.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

The strong operational performance contributed $0.23 to earnings, which was partially offset by $06 of non operational headwinds, including FX, resulting in adjusted EPS up $0.17 or 10% versus last year to $1.88 Relative to our initial expectation of flat earnings growth in Q1, this $0.17 outperformance was driven by $0.10 of G and A efficiency while maintaining our growth investments and $07 of timing benefits related to spin and cost containment actions in the current quarter. We expect this $07 of timing items to be earnings neutral for the first half of the year. Free cash flow of approximately $500,000,000 came in stronger than expected on the back of better earnings and disciplined CapEx spending. And we continue to have a balanced capital deployment including returning $400,000,000 to shareholders via dividends and $1,300,000,000 in gross share buybacks, partially offset by higher than expected stock option exercise. I will provide a quick overview of our growth performance for each business group on Slide five.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Safety and Industrial organic sales grew 2.5% in the first quarter. This growth was broad based with five out of seven divisions posting positive growth. We saw particularly strong demand for cable accessories driven by construction of data centers and renewable energy projects. We also saw strength in industrial and electronics bonding solutions driven by continued share gains in structural adhesives from improved service and our focus on pipeline management driving higher closed won. We also saw good momentum in personal safety as they continue to win key government contracts in The U.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

S. And Europe. Auto aftermarket was down low single digits on the back of a market where collision repair claim rates are down high single digits year to date. Transportation and Electronics adjusted sales were up 1.1% organically in the first quarter. Aerospace delivered another quarter of double digit growth from commercial aircraft and defense related business with our strong value proposition in portfolios like films and bonding and joining, and Advanced Materials grew high single digits driven by key project wins.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

The Electronics business grew low single digits, softer than expected, driven by lower device demand. Our auto OEM business was down mid single digits, reflecting continued weakness in auto builds, particularly in Europe and The U. S, which were each down high single digits year on year. Finally, the consumer business was up 0.3% organically in Q1. Growth investments and new product innovation drove strength for Filterite filters, respiratory products, pain protection and Maguire's Auto Care partially offset by soft consumer spending principally in Command and Packaging expression.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

I will now share an update on our 25 outlook trends on Slide six. Starting with the macro environment, we see a softer outlook than the start of the year. Market forecasts have been lowered, reflecting weaker consumer spending and lower demand in industries such as auto and electronics. The blended GDP IPI 2025 growth was estimated to be 2.1% and has since come down to 1.8% for the year. We continue to believe we can grow above macro due to progress on all our commercial excellence initiatives and focus on new product introductions.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

However, to the softer market, we are trending to the lower end of a 2% to 3% range. On operating margins, due to the Q1 performance, we see upside to the midpoint of our margin and earnings guidance range. In terms of non operational drivers, FX has been more favorable than expected. However, it is offset by share option exercise and a higher net interest. We expect the operational cadence of sales and EPS to be split equally between the first and second half, in line with historical performance.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

On cash, we continue to expect approximately 100% adjusted free cash flow conversion. Additionally, to offset higher than expected share option exercise, we are increasing our gross share repurchases in $25,000,000,000 to $2,000,000,000 versus the $1,500,000,000 discussed previously. As Bill pointed out, we have Board authorization for $7,500,000,000 of repurchases and we are prepared to be opportunistic in response to market conditions. As you know, we are dealing with tariffs and I will provide a quantification of the tariff sensitivity on Slide seven. Looking from left to right on the slide, our January guidance was for earnings of $7.6 to $7.9 As I earlier mentioned, given the Q1 strength, we are trending about $0.10 better operationally, while our non operational is balanced between FX and below the line items.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Our intention is to continue to drive our results, but we are early in the year and given the current environment, we are taking a $10 contingency and maintaining our 7.6 to $7.9 EPS guidance. On the right, I have provided a tariff sensitivity. I wanted to quantify the impact as we see it right now and outline our mitigation plan. As we have mentioned before, we import $1,600,000,000 into The U. S.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

And export $4,100,000,000 from The U. S. China is approximately 10% of the imports and slightly more on exports for a total trade flow of approximately $600,000,000 between The US and China. These flows at the current tariff rates of 125% imports into China from U. S.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

And 145% from China into U. S. Will equate to approximately $675,000,000 of potential annualized tariff impact after anticipated exemptions. In addition, tariffs on products not qualified under USMCA along with aluminum steel and other reciprocal actions had approximately $175,000,000 impact for a total annualized impact of approximately $850,000,000 before any mitigation actions. Given that most of the tariffs were enacted recently and we typically carry ninety days of inventory, we expect only half of this impact this year, which is approximately $400,000,000 or approximately $0.60 of EPS before any offsets.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

The team has responded quickly and is working on a number of mitigation plans, including cost and productivity initiatives, optimizing production and logistics, including leveraging our U. S. Footprint and selective price increases where feasible. And we believe we can partially offset the headwind for an estimated 2025 net impact of 02/00 to $0.40 We will keep you updated as the situation evolves. In the meantime, we are controlling what we can and focus on growth acceleration, strong margin expansion and delivering strong shareholder returns in 2025.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

I want to take a moment to thank the three ms team for remaining resilient through this environment. With that, let's open the call for questions.

Operator

Session.

Operator

We will go first to Jeff Sprague at Vertical Research Partners.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Thank you. Good morning, everyone. Thanks for all that color. Maybe we could start, again, maybe a little bit on the macro side. Interesting commentary about the March exit rate, but obviously kind of post Liberation Day, all eyes are on what happened in April.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

I assume that's encompassed in how you've guided here this morning, but maybe give us some color if you could on how things progressed as you moved out of the quarter into Q2 and whether that March activity you saw maybe felt or looked like some pre buy sort of actions by your customers?

Bill Brown
Bill Brown
CEO at 3M Company

Good morning, Jeff. It's Bill. I mean, first on the pre buy, we saw maybe $10,000,000 move from Q2 into Q1 primarily in China. So it was fairly minimal from our assessment on that part of the question. On just the trends, as we mentioned in the prepared comments, our Q1 order rates were up a little more than 2%.

Bill Brown
Bill Brown
CEO at 3M Company

We ended backlog at the March up low teens. As Anurag mentioned, we have about 25% of our revenue in Q2 covered. As we turn the corner into April, we are seeing continue, again it's early, only half of the month, but we are seeing continued momentum in our industrial business in SIBG. Order rates pretty similar to where they were in March, which is a bit higher than they were for the overall quarter. So they had ended March pretty good and it continued into April.

Bill Brown
Bill Brown
CEO at 3M Company

A little bit softer on TEBG, again, it's a little bit early in the quarter, but maybe a little bit softer. Consumer, it typically starts a little bit weak. It's the start of a quarter, the retailers closed the books at the April. So it's typically a slower month for us. But generally speaking, in line with March, just a tad softer in the other two businesses.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Great. And then just back to the tariffs, I appreciate that kind of build up to what the gross impact was. That's some great color. Just when we think about Bill, the levers you're going to pull here on the mitigation side, maybe just a little bit more color there, how much might be price, the ability for the market to actually take price? And I wonder if you could just elaborate a little bit more on some of the moves you are making and some of the things you kind of characterize as no regrets sort of moves.

Bill Brown
Bill Brown
CEO at 3M Company

Yes. So yes, there several things. I would put it in maybe three buckets. One is, and we referenced this at kind of high level in the call here. The first is around sourcing and logistics actions.

Bill Brown
Bill Brown
CEO at 3M Company

As you know, have got 110 factories, 88 distribution centers. And in my comments, I talked about being a 58% utilization. So I guess the positive side of that is we have a lot of flexibility to move those assets up and down and move things across our network. So within sourcing logistics, we can change our source of supply fairly quickly. And we are looking at those kinds of things.

Bill Brown
Bill Brown
CEO at 3M Company

Are adjusting our trade flows, logistics flows, leveraging more bonded facilities, free trade zones, a little bit more point to point shipments on our logistics that we might have done before in terms of hub and spoke. We are optimizing where value add occurs across our network. So where we might have been shipping a finished goods, we may now ship a semi finished goods and do finishing in a different market, different country. And we are looking at alternative production sites with different countries of origin to try to optimize the network and minimize the tariff impact on our business. So there is a bunch of things from a sourcing perspective that we are looking at.

Bill Brown
Bill Brown
CEO at 3M Company

There are certain things we can do relatively quickly within the first couple of months. Some of the things actually are in flight today or have been enacted. There is others that won't take investment, but just take a little bit of time to qualify something. There is others that might take a little bit of investment, a little bit more time. That is likely to be more a 26 help for us if we go forward with that.

Bill Brown
Bill Brown
CEO at 3M Company

But several things we can do, some of which are being actioned today. The second big block is around discretionary cost actions we can take and there is a number of things that we are doing like we did in Q1, but still protecting the growth investments we are trying to make in the business. And then the third is selected surgical price actions that could be in the form of surcharges depending upon the customer, could be list price changes that might come in effect. They are going to be a bit more limited. But when I put those three pieces together, we talk about our $0.20 to $0.4 offsetting mitigating actions.

Bill Brown
Bill Brown
CEO at 3M Company

At the high end of that range, it's probably about fifty-fifty between cost sourcing and pricing. At the low end, it assumes some of the pricing doesn't stick. But we are continuing to work on that. Those are all the things I think we are doing if you will from a defensive perspective, but I would remind you there is some offensive opportunities here as well. We have got a very, very large U.

Bill Brown
Bill Brown
CEO at 3M Company

S. Footprint. We can bring more things into The U. S. There are certain products that we compete against that come in from other regions around the world and perhaps there is an offensive opportunity to take some share here and we are looking very carefully at that as well, Jeff.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Great, thanks for all that color.

Bill Brown
Bill Brown
CEO at 3M Company

Sure.

Operator

Thank you. We go next now to Scott Davis of Melius Research.

Scott Davis
CEO & Chairman at Melius Research LLC

Hey, good morning, guys.

Bill Brown
Bill Brown
CEO at 3M Company

Good morning, Scott.

Scott Davis
CEO & Chairman at Melius Research LLC

I guess another way to kind of follow on to Jeff's question, I think there'll be lots of questions related is just, do you feel like you're more or less exposed than your kind of average competitor to the tariff risk and perhaps that informs the ability to maybe get price or if everybody is in the same boat and similarly exposed and maybe it's a little bit easier to get price versus the alternative. But do you have any feel for that generally? I know it's I know you sell a lot of SKUs in a lot of different markets and a lot of different competitors, but is there a general way you think about that?

Bill Brown
Bill Brown
CEO at 3M Company

No, it's a good question, Scott. Look, we compete against different competitor, different companies across all of our business groups and across all of our divisions within business groups. So it's going to be fairly mixed. Obviously we do export $4,000,000,000 as Anurag mentioned, a piece of that goes into China. That's mainly for the electronics chain, but it's also for some domestic consumption as well.

Bill Brown
Bill Brown
CEO at 3M Company

I would not say it is any better or worse than where our competitors happen to be, but there are certain things that we can do with the flexibility of our network that we can take advantage of cost and sourcing actions and then move strategically on what we try to do on pricing. We do see some of our competitors, some things have moved on the consumer side outside of The U. S, primarily China sourced. We walked away from some of that business, some of that might be private label today and there might be some opportunities to pull back on this. But to push pricing is going to be different in every business that we are in.

Bill Brown
Bill Brown
CEO at 3M Company

We have to make an assessment of the competitive nature of the business, how differentiated our product happens to be. And we are working very, very closely with all of our partners. This is a we, not us versus them, but we are working together on what do we do to mitigate the impact that is hitting all of the companies. So a bit of a mixed bag, Scott, but I think in general I think we are probably a little bit better positioned than a lot of our competitors.

Scott Davis
CEO & Chairman at Melius Research LLC

Okay. And then as a natural follow-up, I mean, three ms is a global company, but it's a very American brand, at least that's the perception. Have you seen any kind of anti American behaviors, purchasing behaviors from your customers and biases to perhaps go in a different direction in certain areas or is that just something that we read about in the papers, it's not a real thing yet?

Bill Brown
Bill Brown
CEO at 3M Company

Well, Scott, we haven't seen it yet. I mean, it's still early days, but we've not seen that. I'm not sure we were necessarily anticipating that. We do have very strong brands, very global brands. Know, as you mentioned, a very strong position in The U.

Bill Brown
Bill Brown
CEO at 3M Company

S. We've got 50 factories here and a big chunk of our supply base and we do a lot of R and D here, but we've not seen so far any sort of any risk coming on us because of us being a U. S.-based manufacturer, U. S.-based brands.

Scott Davis
CEO & Chairman at Melius Research LLC

Okay, helpful. Best of luck this year guys.

Bill Brown
Bill Brown
CEO at 3M Company

Thank you.

Scott Davis
CEO & Chairman at Melius Research LLC

Good luck.

Operator

Thank you. We go next now to Julian Mitchell of Barclays.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

Hi, good morning. Maybe I just wanted to follow-up on the organic sales outlook first off. So I think you mentioned early on that maybe you're looking at around sort of 2% organic growth for the year in the current guide. Just wondered sort of when we're thinking about the balance of the year, are you assuming kind of steady organic growth around that sort of 1.52% range each quarter through the rest of the year? Or do you think we see sort of a dip this quarter and then some improvement in the back half?

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

Any color on that and by the sort of segments would be interesting.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Okay. Thanks, Julian. Anurag here. So just to start off with, what we said is we are trending towards the lower end of the range right now. But if you look at it through the course of the year, I think it's going to be pretty stable.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

So let me first probably just talk about the first half and then we can talk about sequentially. So as I said in my prepared comments, we expect the operating cadence to be split equally between the first and second half. So on the sales side, this would actually imply that Q2 would be at or slightly better than Q1. And we move into the second half, we should see a little bit of take. So I think it's pretty balanced between the two.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

As Bill mentioned, on the industrial side, we are seeing good growth momentum. We saw that in Q1 and that should continue through the rest of the year. On the electronics, there are couple of pockets of weaknesses around the macro side on electronics and auto. We saw that in the first quarter. So that could be a little bit lower than what we thought at the beginning of the year.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

And consumer is Q1 was kind of 0.3% of flattish growth, but we expect that to pick up through the course of the year. So to answer your question, not seeing a dip in the second quarter, on the back of the backlog coverage, we have the autos and industrial side, we should kind of see this momentum continue through the course of the year.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

That's very helpful. Thank you. And then just my second question around the tariff impact. So I think it's sort of in the in year framework, it's sort of €0.60 gross headwind, $0.03 0 net headwind potentially at the midpoint of that framework you gave. Any more details you could give us if it is around that middle of the middle type number?

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

How do we think about the phasing of that €0.30 net headwind through the year? And also any color you could give on the impact by segment? Is it sort of better or worse in every in any division?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Yes. Joon, again, listen, as we said, the tariffs started in February with non USMCA aluminum steel, but the ones with the biggest impact started in April, particularly between U. S. And China. And as I mentioned, we typically carry about ninety days of inventory.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

So we will see this impact mainly in the second half of the year. For the second quarter, we may see a couple of pennies here and there, a small impact, but that's within the guidance range of seven sixty to seven ninety. You'll see this impact in the second half of the year. Now regarding the businesses and the segments, we'll probably give more color as we kind of go around here. What the team is more importantly, if you take a step back, is working on actions very quickly across the buckets that Bill mentioned and what we can control.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

So obviously on the cost side, you will see us control a little bit faster, price will come in and then the offensive strategy, will see more of the benefit come through towards the end of the year or next year. So you will see us mitigating this impact more as we go along through the course of the year into next year.

Scott Davis
CEO & Chairman at Melius Research LLC

Great. Thank you.

Operator

We'll go next now to Amit Mehrotra at UBS.

Amit Mehrotra
Amit Mehrotra
Managing Director at UBS Group

Thanks. Good morning. Anurag, just following up on the cadence maybe with respect to EPS as opposed to organic sales. In the last couple years, we've 10% or so sequential uplift in EPS. There's a lot of moving parts in terms of stock comp. I know there was a timing in terms of 1Q, 2Q stock comp. There's obviously timing of other costs and then tariffs, but I guess tariffs are more second half given the inventory. Could you just help us think about the cadence in light of all those moving parts as we think about EPS moving from 1Q into 2Q and the rest of the year?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Sure. Yes, absolutely, Amit. Mean, I already touched upon the sales, I'll go more on the earnings side. So first, let me do the year over year between for Q2 and then I'll come to the sequential because as you correctly said, there are lot of moving pieces there. So the EPS growth year over year should be about $0.15 to $0.20 on the operational side because of the benefits from volume, restructuring costs, productivity, the lower equity comp that you referenced to.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

But as I mentioned in my prepared comments, there were some Q1 timing events, that will be partially offset. Increase in investments, but you see a big step up in Q2 relative to last year because we only started making investments in the second half of last year and the PFAS stranded costs. But operationally, you should see it be up $0.15 to $0.20 EPS. But on the non op side, we have a total headwind of about $0.10 and large part of that is driven by net interest as the cash balance last year in second quarter was over $10,000,000,000 and now we are returning back to more normal cash levels. So we will have some impact in non op pension as well, but all of that will be offset by lower share count.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

But if you take the net interest pension offset by the lower share count, it's about a zero one zero dollars headwind year over year. So you put that together, we should grow EPS by about $05 to $0.10 year over year. Now sequentially, you are correct, seasonally revenue should be up about $300,000,000 which will come with good flow through. But as I said, there is some offsets around the timing of Q1 items. There is some step up in investments.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

So what you will see is about $05 to $0.10 again operationally, it should be good and $05 benefit from a little bit below the line. So sequentially also we should see about $0.10 to $0.15 benefit on the EPS. So overall, if you put all of that together for the first half, our EPS will grow about $0.22 to $0.27 which is actually pretty much 50% of the growth of what we expect for the full year and second half should kind of mirror that too.

Amit Mehrotra
Amit Mehrotra
Managing Director at UBS Group

Okay, very helpful. Thank you. And then I guess maybe one for Bill in terms of you obviously have a lot of efficiency actions that the company is pursuing. I wonder if what's happening now gives you an opportunity to accelerate some of those actions. If you can just talk about the opportunity that you see there, that would be helpful. Thanks.

Bill Brown
Bill Brown
CEO at 3M Company

So it is a good question, Amit. I mean, look, this is it is a challenging situation that we happen to be in. The environment is moving But the team has responded very, very well. The actions that I have talked about, I talked about it in very large buckets, but the reality is this has to be done down at an SKU by SKU level based on a customer flow, a factory to a region.

Bill Brown
Bill Brown
CEO at 3M Company

It's a very discrete analysis and it's really helping us get into the bowels if you will of how we actually run the business. So it's pointing out some good opportunity to do some things differently and better. We have been focused on driving operational performance, operational excellence across the whole enterprise including on our operation. I went through some of the metrics that we are focused on here. There is an environment that we are in.

Bill Brown
Bill Brown
CEO at 3M Company

We are trying to figure out a way to offset some of the tariff effects, but a lot of the things that we are doing are just running our game plan. It's driving on time and full up. Talked about that pretty extensively here driving OEE or operational equipment effectiveness, improving that, driving productivity, driving cost per quality down. There is all of these various initiatives. It just puts a lot more focus and attention on.

Bill Brown
Bill Brown
CEO at 3M Company

So is there more we can do? There might be simply because we are getting deeper into a deeper understanding of the trade flows and what's happening, but I think we have got a good game plan. It's executing well. You saw it in the margin improvement in Q1. It's also pointing out good opportunities to tighten down on G and A.

Bill Brown
Bill Brown
CEO at 3M Company

So look, we are trying to make the best of the situation we are in and drive performance.

Amit Mehrotra
Amit Mehrotra
Managing Director at UBS Group

Very good. Thank you very much. Appreciate

Bill Brown
Bill Brown
CEO at 3M Company

Thank you, Amit.

Operator

We go next now to Steven Tusa of JPMorgan.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

Hi, good morning.

Bill Brown
Bill Brown
CEO at 3M Company

Good morning.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

So you guys had previously said I think negative $0.20 on Forex. What specifically are you now assuming for Forex year over year?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Hey, good morning, Steve. Anurag here. So expecting $0.15 now, a $05

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

of

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

headwind, from a $0.20 headwind to a $0.5 headwind.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

On Forex?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Correct, Yes.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

What are you using for your

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

So we snapped it at the March. So that was around 108, 1 hundred 9 level, right. It has moved up since then. I guess where you're going is that with FX moving at this rate, why is there only $05 So maybe let me just kind of take a step back say when we gave the guidance in January, we said operationally we will grow $0.85 at the midpoint and we had $0.40 broken, $0.02 0 between FX and $0.20 which was non op. On the FX, as you said, we assume about $0.20 over there.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Now we rerun the forecast at the end of the quarter and now the FX headwind on the revenue from 2% has become 1.5%, which translates into $0.15 of headwind. But if the U. S. Dollar continues the way it is, this headwind should definitely reduce. But as you know, not all FX rates move in the same direction.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

And actually in some cases, we are net cost position. But if they continue to go where they are, we should see upside in the FX and that is the reason why we split the operational and the non operational, which includes FX in our earnings bridge, because we want to drive on the operational side of the business and if there is upside on FX, we will share it as we go along.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

Right. And so I guess on the non op side, the non op, non FX, then there is really not much change there because there is really not much change in the FX, just underlying FX assumption.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Is the That is the

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

There is a penny two year in each of the items, not material change. For example, on interest rates, we assumed about two cuts this year. There could be three or four cuts is what we are hearing. So we've kind of calibrated for that, which is low in interest income. On pension, there's a penny or two here on because the stock option exercise, share count is a penny or two.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

So it's not very material, but the $05 that we have assumed in the FX improving is probably mitigated by these other items. But if FX continues the way it is, there should be net upside and below the line.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

Yes, okay. And then just lastly on China, could you just say, are there sales there that you could just walk from? I know you guys export a decent amount there obviously. I just don't know how like critical those are to your customers. I mean is that like an option for the exports from The U.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

S. To China? I don't know how much a part of that 8, the $8.50 that actually is, but is there an option just walk from those sales?

Bill Brown
Bill Brown
CEO at 3M Company

Steve, this is, I don't think it's an option like walking from the sales. We have a very strong business in China. We have important domestic export customers in China. I think we do have some opportunities to shift around our network to bring product into China from other regions that don't have the same sort of tariff effect. I will give you just an example.

Bill Brown
Bill Brown
CEO at 3M Company

We today, we ship from products from The U. S. To China that we could also instead ship from Europe into China and then perhaps backfill that volume in The U. S. To where those factories in Europe were directing their products.

Bill Brown
Bill Brown
CEO at 3M Company

So there is things we can do to mitigate some these impact and preserve the relationship and the great business we have in China. Again, it's 10% of our company. It grew double digits last year. We had solid mid single digit Q1. We follow our international customers there where they manufacture and try to moving more there or moving to other different regions.

Bill Brown
Bill Brown
CEO at 3M Company

So we want to be there to support them. But there are some things we can do on our end just in terms of sourcing to try to mitigate some of that impact.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

Got it. Makes a ton of sense. Thank you.

Bill Brown
Bill Brown
CEO at 3M Company

Thank you, Steve.

Operator

We will go next now to Nigel Coe of Wolfe Research.

Nigel Coe
Managing Director at Wolfe Research, LLC

Thanks. Good morning. I hate to be bored, a few more tough questions. Are there any previous impacts as a result of these excessive China tariffs? So there's increasing concerns around supply chain sort of impact here, shipments not being made, so it will be imposed in lieu of kind of news flow.

Nigel Coe
Managing Director at Wolfe Research, LLC

Is there any risk that your supply chain could be impacted by shippers just not making their shipments because of the tariffs?

Bill Brown
Bill Brown
CEO at 3M Company

Nigel, we have not seen anything like that yet. We haven't heard any word of that. We have seen no disruption, no supplier hesitant at the moment to ship to us. We have not actually seen much push on to us in terms of pricing. These things will evolve over the balance of the year, but I read a lot about what you are suggesting. We have not yet seen that in our business.

Nigel Coe
Managing Director at Wolfe Research, LLC

Okay. That's good news. And then, Anurag, just to double confirm, the fifty-fifty comment on EPS is based on the $7.75 and then the second half would be whatever lands in terms of net tariffs. Is that right?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Yes. That is correct.

Nigel Coe
Managing Director at Wolfe Research, LLC

Okay. And then just a quick one on cash flow. Again, the tariffs, does that put more of a back end loaded on cash flow because you have to pay the tariffs on day one?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

No, not really. I mean if you look at the cash flow, we actually did quite well for the first quarter as well. Typically, it's a low quarter for us. Net income is about $1,000,000,000 We consume about $300,000,000 of working capital as we build up inventory. We enter Q2, which is seasonally a high quarter and then we have bonus payments, AIP payments of about $300,000,000 So that gets about $400 but we did better because of disciplined CapEx spending and receivables.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

What we are seeing going out is in terms of areas we are definitely focusing is on the DSO and the AP payments as well. And right now, we are not really seeing a material change in that. We're going to do manage it. So I don't expect to be a little more pressure in the second half of the year and we'll probably have a good cadence on cash flow growth as we go through the course of the year.

Nigel Coe
Managing Director at Wolfe Research, LLC

That's great. Thank you.

Operator

You. We go next now to Andrew Obin of Bank of America. Please proceed with your question.

Andrew Obin
Andrew Obin
Managing Director - Equity Research at Bank of America Merrill Lynch

Yes. Good morning. Good morning. Just another question on tariffs. Are you modeling any demand destruction related to tariffs in your core guide?

Andrew Obin
Andrew Obin
Managing Director - Equity Research at Bank of America Merrill Lynch

Are they right? Because as prices go up, as you need to substitute things that sort of drives economic model will tell you, would drive some demand destruction on the margin. Are you thinking about it? Or are just sort of modeling the volume based on your kind of economic forecast?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

And Ronen Ragh here. So the tariff impact is all about the tariff cost impact sensitivity that we have shown. Obviously, because of the tariffs, the market has been a little bit weaker. That's why we said we are trending lower on that range. But other than that, no, we have not modeled anything more.

Bill Brown
Bill Brown
CEO at 3M Company

Yes, I mean look, Angie, just to be clear on the pricing, we are trying to be pretty smart, strategic and surgical about this and we are not doing this without interaction with our customers. In many cases when we put out a surcharge, it's through consultation with the distributor or customer. There is some receptivity to a certain amount based upon the individual customer for a period of time. There is an understanding that that volume will deteriorate. If we start to get to a point later in the year where we feel like we ought to be pushing price out to accommodate or offset more of the tariff risk and there is a volume impact, we going to sort of take that under consideration.

Bill Brown
Bill Brown
CEO at 3M Company

But the team has been very smart and surgical about how we do this. Outside of the macro erosion, we are not expecting much demand deterioration from a volume perspective because of the way we are being smart about pricing.

Andrew Obin
Andrew Obin
Managing Director - Equity Research at Bank of America Merrill Lynch

And just a follow-up question on buybacks. It seems that the buyback is there because folks are exercising their options. Why not be more aggressive? You're doing a lot of good stuff operationally. It seems a lot of momentum that's long term underway.

Andrew Obin
Andrew Obin
Managing Director - Equity Research at Bank of America Merrill Lynch

Why not just take advantage of the stock weakness and be more aggressive on stock buyback? What's the boards and your thinking on that?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

It was and Ranirag here. It was just a little bit more on the timing side. Let me give you some color. So as we ended last year, two out of the 10 past two years out of the 10 of the past ten years options were in the money. And the twenty fifteen options which expired this year were not in the money.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

And in February they came into the money. So that was a one distinct exercise incident that happened and a couple more which came in the money. So it was more around that as opposed to we are accelerated options being exercised. It was more timing of the twenty fifteen options.

Bill Brown
Bill Brown
CEO at 3M Company

But I think to your point, Andrew, think Anurag mentioned in his remarks, we have a $7,500,000,000 authorization, went from 1,000,000,000 to 2,000,000,000 and we have the optionality to go bigger than that if we need to in the back half of the year based on the situation we happen to have in our business. So I will make the right call as we get out of the quarter into later on in the year.

Andrew Obin
Andrew Obin
Managing Director - Equity Research at Bank of America Merrill Lynch

I appreciate that. So thanks so much.

Operator

Thank you. We'll go next now to Nicole DeBlase of Deutsche Bank. Please proceed with your question.

Nicole Deblase
Nicole Deblase
Analyst at Deutsche Bank

Yes, thanks. Good morning, guys.

Bill Brown
Bill Brown
CEO at 3M Company

Good morning.

Nicole Deblase
Nicole Deblase
Analyst at Deutsche Bank

Just a couple on the outlook within the margin puts and takes. Have you guys actually shifted the G and A productivity expectation for the full year? And same question on growth investments and anything major to highlight on the timing of those if they've shifted at all between quarters?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Yes. So first thing on the growth investments, I think we are keeping track. We said we are going to increase by $225,000,000 The first quarter was around $15,000,000 and this is a big step up in the second quarter and we are maintaining that cadence as we go along. And you can see that actually in the R and D numbers for the first quarter as a percentage of revenue last year was 4.2%, this year it's 4.8%. So you see a step up of 60 basis points and all the other initiatives that Bill was talking about on commercial excellence, we are funding that.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

On the G and A side, listen, if you roll through our Q1 performance, which we said $0.17 more than what we expected, zero one zero was more on G and A efficiency and FX, zero seven of that was G and A and the remaining part was timing. That was more structural and permanent, right? In the Investor Day, we spoke about we have $2,000,000,000 of G and A. Outside that, we also have indirect expense. Late last year, what we started doing a lot of these external services, for example, were done locally.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

We pulled it centrally, try to see if they align with the strategic priorities. If yes, if not, we don't spend. If they do align, then how can we leverage our global buy to kind of get a better rate. We saw some benefits of that in the first quarter and we kind of expect that to move to probably increase as we move through the course of the year. So we have taken a little bit of a hedge in our guide as you can see the Q1 as upside, we have taken a $10 hedge.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

If we were not to have the $0.10 hedge, then I would say that you should see at least a $50,000,000 of G and A improvement in Q1 flow through the rest of the year.

Nicole Deblase
Nicole Deblase
Analyst at Deutsche Bank

Okay, got it. Thanks, Anja. That's clear. And just a follow-up on a couple of your market expectations because there's a lot of movement in these two in particular. What are you guys thinking for auto builds and electronics for 2025?

Bill Brown
Bill Brown
CEO at 3M Company

So right now auto builds, it came down very recently in recent IHS data. It's down I think 1.8% global auto I think it's down about 9% in The U. S. So pretty big erosion for that from the March.

Bill Brown
Bill Brown
CEO at 3M Company

I think March was like 4.5%, it's down 9% now in the latest estimate for the year. Europe is down around 4% or 5% for the year. I think China is up modestly. That's for the full year. I think from what I heard recently about 1,500,000 units came out of the full year auto build forecast and that's what's reflected in our numbers.

Bill Brown
Bill Brown
CEO at 3M Company

We expect our auto OE business to be down mid single digits both in the quarter and for the year. So that's already modeled into our expectations. Consumer electronics, we think it's probably going to be up low single digits. That's kind of where we were at in Q1. We think it's about that flat to up low single digits for the year.

Bill Brown
Bill Brown
CEO at 3M Company

There might have been a little bit of stockpiling in channel in Q1, but the reality is we see that to be kind of modest growth, flattish to modest growth for us for this year.

Nicole Deblase
Nicole Deblase
Analyst at Deutsche Bank

Thanks, Bill. Will pass it on.

Operator

We will go next now to Andy Kapowicz at Citi. Please proceed with your question.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Hey, good morning everyone.

Bill Brown
Bill Brown
CEO at 3M Company

Hey, good morning.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

I just wanted to ask you about TBG margin. In Q1, it still looked like it was under still a bit of pressure as it was in Q4. I know you said that that's a segment that's absorbing PFAS stranded costs, but you also said you expect to grow margin, I think, in all three segments, at least before the tariff impact. So maybe you can give some more color into what's happening in that segment. Was the issue just the lower electronics volume or something else?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Yes. Thanks for the question. So we do expect all three business groups to expand their margins for 2025. In the first quarter, we did expect TEBG to be lower. You got the drivers correct.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

The biggest one is the PFAS stranded costs and higher investments that we made, but also it was mix. If you look at Q1 last year, electronic sales, which is a higher margin business, was quite good in TEBG for the first quarter of last year and that obviously mix has shifted. So it was a little bit of a mix impact more in the quarter, but as we go through the year, we do expect all three business groups margins to expand like we looked at this quarter for example, SIBG and very healthy margin expansion, so did CBG and that should continue.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

It's helpful. I think that we are all trying to figure out sort of what's going on in the macro and you mentioned your industrial businesses are holding up reasonably well in terms of order growth through April so far kind of in line with March. So as you know some of the recent regional manufacturing services have started to look a little weaker. It doesn't seem like you're seeing it. Just trying to your thoughts, talking to customers, you still expect things to hold up even with these surveys starting to look a little weaker?

Bill Brown
Bill Brown
CEO at 3M Company

So it's still very early in the quarter. And all of the conversations our teams are having with their customers, distributor, channel partners, things to be reasonably solid at least through the April. It's continued for where we were in the month of March. We are watching a lot of these regional indicators like you are and clearly things are softening. But it's interesting when we talk to our channel partners about inventory in the channel, generally speaking, it's fairly normalized.

Bill Brown
Bill Brown
CEO at 3M Company

We have not seen anything kind of moving from Q2 into Q1 in terms of adding to inventory, adding to stocks. It's fairly normal. So we don't think there is a correction that is happening. Sort of the elongation of orders that we had articulated about a month ago, we see that continuing here in the month of April. So what might have been a forty five or fifty day sort of cycle time now stretching out a little bit longer.

Bill Brown
Bill Brown
CEO at 3M Company

That is one of the things that impacted us in Q1. We saw in February orders that were just pushing out into Q2. We still see a bit of that activity but the indicators, the macro indicators that we are seeing still look okay for the industrial business but again we are watching it very carefully.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Very helpful. Thank you.

Operator

We'll go next now to Joe O'Dea with Wells Fargo. Please proceed with your question.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

Hi, good morning. Good morning, Joe. Can you just talk about kind of tactically how you approach imports from China and when you think about that $160,000,000 or so, I think that you're talking about, Just the timing of that, you have got some inventory that you are sitting on, are you sort of pausing orders right now kind of waiting for better information just given the fluid nature of what we are seeing on the tariff headline front?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Joe, Anurag here. We are not pausing any orders or any shipments right now. We have ninety days of inventory, so which will bleed through by the June and then you will start seeing the impact of the tariff on the imports after that. So we are not slowing down anything on the business side. What we are looking at is, as Bill earlier mentioned around sourcing, logistics, discretionary cost as well as pricing.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

So that's the way we are tactically approaching it right now. And pricing, for example, in some cases you can put a surcharge, in some cases you need to come up with a new list price. So we're working depending upon the situation, keeping in mind that we still the business is going on as it was.

Bill Brown
Bill Brown
CEO at 3M Company

Yeah. A lot of it lots coming in from China for consumer that that passes through the channel to some pretty large retailers and we're having lots of conversations with them on that, but, we're not, you know, at the moment pausing or stopping any imports from China and actually don't anticipate doing that.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

Just your comment there to make sure I understood it correctly, there would be kind of a higher weighting of exposure on those imports from China to the consumer side of the business.

Bill Brown
Bill Brown
CEO at 3M Company

On element of the tariff impact that Arun articulated, yes, it would be more on the consumer business, correct.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

And then just one on the guidance side of the corporate and unallocated and other items for operating profit. I think corporate and unallocated initially 25,000,000 to $50,000,000 loss, other 50,000,000 to $100,000,000 income. The quarter I think looked a little better than we anticipated on the corporate side, but any updates or any changes to that initial expectation on those items?

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Yes, it's probably trending more towards the higher end and because corporate just to take a step back, contains obviously the enterprise governance related costs. So there's G and A costs. There's also the solventum transition agreements that are sitting in there. So on the G and A side, clearly, there were some areas that we did in the first quarter. So that helps it to go towards the higher end of the range.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

But on the spin related items, it's mainly timing between Q1 and Q2.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

Got it. Thank you.

Anurag Maheshwari
Anurag Maheshwari
CFO & Executive VP at 3M

Okay. Thank you.

Operator

This concludes the question and answer portion of our conference call.

Operator

I will now turn the call back over to Bill Brown for some closing comments.

Bill Brown
Bill Brown
CEO at 3M Company

Well, you everybody for for joining us joining us today. I want to thank again all the three mers for their continued hard work and their dedication delivering value for our customers and our shareholders. I know we covered a lot of moving parts today, but we're focused on executing against our key priorities and we're going to update you on our progress at the next earnings release in July. So thank you very much and have a good day.

Operator

Ladies and gentlemen, that does conclude today's conference call. We thank you for your participation and ask that you please disconnect your line at this time.

Executives
    • Chinmay Trivedi
      Chinmay Trivedi
      Senior VP - IR & Finance
    • Bill Brown
      Bill Brown
      CEO
    • Anurag Maheshwari
      Anurag Maheshwari
      CFO & Executive VP
Analysts
    • Jeffrey Sprague
      Founder and Managing Partner at Vertical Research Partners
    • Scott Davis
      CEO & Chairman at Melius Research LLC
    • Julian Mitchell
      Equity Research Analyst at Barclays Investment Bank
    • Amit Mehrotra
      Managing Director at UBS Group
    • Steve Tusa
      Managing Director at JP Morgan
    • Nigel Coe
      Managing Director at Wolfe Research, LLC
    • Andrew Obin
      Managing Director - Equity Research at Bank of America Merrill Lynch
    • Nicole Deblase
      Analyst at Deutsche Bank
    • Andrew Kaplowitz
      Managing Director at Citi
    • Joseph O'Dea
      Managing Director at Wells Fargo
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