3M at J.P. Morgan Industrials: Navigating Challenges and Opportunities

On Tuesday, 11 March 2025, 3M Company (NYSE: MMM) presented at the J.P. Morgan Industrials Conference 2025. The discussion, led by CEO Bill Brown and CFO Anurag Mahaswari, highlighted the company’s strategic focus on performance and operational execution amid market uncertainties. While 3M is optimistic about its future growth, challenges such as tariff impacts and litigation risks were also addressed.

Key Takeaways

• 3M aims for EPS growth of 4% to 8% in 2025, with acceleration in 2026-2027.
• Organic sales growth for Q1 2025 is revised down to 1% to 1.5%.
• The company plans to launch 1,000 new products over the next three years.
• 3M is focused on mitigating tariff impacts through pricing and cost controls.
• $10 billion is set to be returned to shareholders through dividends and repurchases.

Financial Results

• 2025 EPS growth is targeted between 4% and 8%, with high single-digit growth expected in 2026-2027.
• Organic sales growth for Q1 2025 is projected at 1% to 1.5%, below the previous 2% to 3% guidance.
• 3M plans $1 billion in cost reductions through supply chain productivity.
• The company will return $10 billion to shareholders over the next three years, split evenly between dividends and repurchases.

Operational Updates

• 3M’s "Journey to Zero" program focuses on achieving zero injuries, spills, and incidents.
• The company plans to introduce 1,000 new products in the next three years.
• Supply chain initiatives aim for $1 billion in savings.
• 3M is working on improving manufacturing capacity utilization, with a target to increase OEE from the low 50s to the high 50s this year.

Future Outlook

• 3M maintains its 2025 organic sales growth target of 2% to 3%.
• Strategic plans include driving top-line growth through innovation and commercial excellence.
• The company is investing in new product introductions and capability building to enhance customer loyalty.
• Challenges include macroeconomic uncertainties, tariff impacts, and ongoing litigation risks.

Q&A Highlights

• 3M is adopting a flexible approach to tariffs, using cost control and pricing strategies.
• The company is optimizing its manufacturing footprint to improve efficiency.
• Incremental margins are currently around 35%, with a goal to increase to 40% or higher.

For more details, readers are invited to refer to the full conference call transcript below.

Full transcript - J.P. Morgan Industrials Conference 2025:

Steve, Moderator: All right. Moving along here, we have three ms CFO Anurag Mahaswari as well as CEO Bill Brown. I’ll kick it over to you guys to open it up with a bit of a State of the Union and we’ll go from there. Thanks for coming.

Bill Brown, CEO, 3M: Great. Well, good morning, everybody, and thanks, Steve. So we’re coming off of, I think, a very good productive Investor Day a couple of weeks ago. So we took the opportunity to give investors a sense of what our outlook is over the next several years. I spent quite a bit of time talking about what I call sort of the new three ms, a three ms with a little bit more of an edge, a little more focus on performance, a little more focus on operational execution.

Talked about our new culture in the organization, starts with a big focus on the customer, of course, the expectations of all of our team and building talent, holding people to their objectives, etcetera, with a core of focusing on safety, ethics and compliance. And that’s always very important to us. Safety has been sort of top of my list within the company. Our performance and safety has not been, you know, where we should be, you know, and we’re really focused on that. We have a journey to zero program across the company where our focus is around zero injuries, zero spills, zero incidents in the company.

So it’s been a big focus and we’re starting to make some progress there. I laid out our, you know, in our performance culture expectations of our leadership team about being accountable, being ambitious, being involved, driving, challenging the status quo. We’ve got a lot of set of good leaders at three ms have been in the company for quite some time. And part of what I’m challenging people to do is not treat today like yesterday or tomorrow like today, and the environment outside really forces us to really push on that on that dimension. So, we’re on we’re on the verge of of breaking out here in terms of what’s happening with the people in the organization and we brought in some new folks in the team as well.

So, it’s been a pretty good start. I described a little bit more detail our priorities. They remain the same from when I started at three ms in the very first Investor Day I had. It’s a focus on top line growth around innovation and what we’re doing to reinvigorate top line through driving more products out of our R and D, commercial excellence. We talked about driving operational performance across the enterprise and our new operating system, which we call three ms excellence.

The core of that is around KPIs, you know, rigorously tracked, data focused, relentless CI, all of their various things that drive sort of an OpEx system. I’ve done it before. I know what they can do, and I think it’ll be an important part of our three ms future here. So that was quite important. It led into a discussion on our medium term targets, of course, in 2025.

We see earnings per share up 4% to 8%. There’s no change at 7.6% to 7.9%. It’s on an adjusted EPS basis. You can assume everything I talk about is going to be adjusted, but that’s kind of where we’re at this year. That earnings per share growth accelerates to high single digits in ’twenty six and ’twenty seven.

And I laid out some markers, some important steps for investors to track our progress, including 1,000 new product introductions over the next three years. You’ll recall last year, we did 169, which was a positive surprise for us in some ways, up 32% from the prior year. You know, we see it coming up again this year to around two fifteen, run the math as 27%, growing another forty, forty five, 50 percent next year and then the following year. And so far in Q1, we’re actually tracking pretty well in NPI. So I’m pleased to say that, we’ll say more about this at your earnings release, but we’re out of the gauge pretty quickly here on driving NPI.

We talked about a billion dollars of cost out in that productivity in our supply chain. That’s an important marker to put down $1,000,000,000 of sales above the macro through the initiatives around innovation and commercial excellence. It’s going to be key pieces of that. And then $10,000,000,000 of cash return to shareholders through dividends and repurchases over the next three years cumulative, roughly half repos and half dividends. And I made a point at the meeting to link it to our long term incentive program, which I think is quite important.

And I won’t go through the metrics again, but you’ll hear more about that when you see the proxy come out. But it’s very consistent with what I laid out for investors just a couple of weeks ago. So overall, I think it was a very successful Investor Day and we got some good feedback. But again, those are great forcing mechanisms for the team to put our thoughts together and put it on paper about what we’re trying to do and what we’re trying to do on the behalf of shareholders. So again, that was a few weeks ago, a lot of discussion on sort of the medium term outlook, if you will.

Coming back here to 2025, just to re ground you, we said we will grow this year 2% to 3% organic, again 4% to 8% on earnings per share. In our commentary at the Q1 earnings release, we said Q1 would likely to be similar to Q4 in terms of organic sales growth, so we’d have a two handle on it. And we said the earnings per share in Q1 will be similar to prior year. You recall last year, our stock comp expense was in Q2, it got moved forward this year to Q1. So it puts a little bit more pressure on us this year in Q1.

So we said it will be similar. So as we went through February, we saw good order trends continue right up until the February. In fact, the February month was up year over year in terms of orders really across the businesses. Our backlog from January from the beginning of the year and through February continues to build. Our backlog from the beginning of the year is up mid single digit.

So we’re seeing good order patterns, but what we’re seeing now is a bit of more of a elongation in the sellout. So a lot of yours are coming in and more for sales into the second quarter. The good news is we actually started the year anticipating some challenges. We put in really tight cost controls. So while we’re seeing our sales be a little bit light in the quarter, our earnings per share should be slightly better than what you previously expected.

So it’s because of the efforts of the team to really tighten down on spend. So So again, it means earnings per share a little bit better this year in Q1 than we had anticipated. Margins will be a little bit better, of course, with revenue being a little bit lighter than we expected, probably more in the 1% to 1.5% organic as opposed to the two handle that we talked about, which would have been similar to last year in Q4. So in a nutshell, how we stack up the environment as you all are seeing is pretty uncertain, and we just manage through it by managing the things that we can. It’s our spend, our cost, our productivity, all the things we’re trying to do, including setting ourselves up for growth through new product introductions and commercial excellence.

So in a nutshell, that’s kind of where we stand. And Steve, I’ll turn it back to you.

Steve, Moderator: Lots to chew on there. So about a 75 basis point difference by segments, which are the ones that you’re seeing this process play out

Bill Brown, CEO, 3M: the most in? So we saw first really in the consumer side and really again through most of February, we were tracking pretty well until the last couple of days and then last week, we saw just the order start to stretch out a little bit and that’s kind of what we’re seeing. So a little bit in the consumer side, auto as we knew was going to be a little bit challenging come to the year, we continue to see that, but it’s really across the board. So when I look at one point to point and a half organic in the quarter, all three businesses are really in that range. The consumer side, probably at the bottom end of that range.

The industrial businesses, so SIBG, TEBG, more towards the higher end of that range, but all in that 1% to 1.5% is our estimate right now for the quarter.

Steve, Moderator: So is it a you’re saying from your sales perspective and that’s kind of a POS commentary? Like is there some destocking customers are just pulling back a little bit? Like how do you in your diagnosis, what do you think? Obviously, there’s a lot of uncertainty. Just curious as to the mechanics of how that’s translating.

Bill Brown, CEO, 3M: The POS looks okay. The channel inventory looks okay from what we can tell so far. So my commentary really is sell in and sell out to the wholesaler, sell out to our distributors. As you know in SIBG, we go mostly to the market through distribution. And we’re seeing again orders remaining pretty resilient, but the delivery time requested is shifting out longer than what we typically would expect.

Typically at this point in the year, in this point in the quarter, we’d start to see more book and ship activity, certainly in the shorter cycle parts of our business. Some of those deliveries are just being pushed out into April. We’re working with our distributors, work with the end customers, trying to understand what is it that they’re seeing and why out in April. They’re still confident enough to place orders, but looking for delivery out into April and into May. And we’re trying to understand that part.

But from all we can tell, the inventory in the channel still looks pretty good. Certainly on the industrial side, it looks pretty reasonable.

Steve, Moderator: Do you think that stem getting out in front of any kind of like price increase related to tariffs?

Bill Brown, CEO, 3M: It could be that for sure. We’ve signaled that. We’ve talked to people that as tariffs start to take hold. And of course, we know that China is in place 20%. We know that tomorrow we get some aluminum and steel tariffs that actually happens as I expect it would.

That should go into place tomorrow. Mexico and Canada was early February than it was early March. Now it might be early April. There’s other things coming in early April. So there’s a lot of concern on the horizon about tariffs and people like us are talking about what we’re going to do in terms of pricing, and we signal that to distributors.

So there could be some pre buy that’s happening. I’m not sure that’s the primary driver. I do believe it’s just general caution across our consumer base in placing orders given what might be happening in the macro.

Steve, Moderator: What is the sorry, you gave us the near term update, so I’m just going to I talk for more on this. We’re all trying to figure it out. We’re like stumbling in the dark here a little bit. What’s the most interesting thing that’s happened and which part of the business is that? Like, what’s the one that you look at?

It’s obviously maybe immaterial to you guys, but what’s kind of the most interesting thing you’ve seen then you get the report and you’re like, that’s interesting, which micro business is maybe the most interesting? Or are they all kind of trending in this direction?

Bill Brown, CEO, 3M: No. I mean, there’s some businesses that remain pretty resilient. In our SIBG business. We still see pretty good trends in our electrical markets business where it’s bigger and chunkier. We’re seeing good performance there.

In our adhesives and tapes business, we sell quite a bit into China in that market. Interestingly enough, China for us is remaining pretty resilient. It’s still in the mid single digit growth and that’s been pretty healthy for us. The parts that go into the manufacturing channel like abrasives have been a bit softer. Our auto aftermarket, which is for auto repair has been a bit softer.

That’s really across the industrial business, SIBG. In the transportation business, we’re seeing consumer electronics remain okay, sort of like in the low to mid single digits in that range. Aerospace has been an important business for us. We see continued good growth in the Aerospace business, not like last year, it was much higher. So far this year, it’s good, but not quite like last year.

In that business, it’s really auto. You can watch the IHS builds. And I think in the February, some of the macro data I think is a bit dated at the moment. But in auto builds, it actually it became a little less negative in February from January, still down, but not as negative. We are not seeing an improvement in auto build trends for us.

We are more biased, I’d say, to Europe and U. S. Manufacturers than China. So auto has been more of a concern for us. And on the consumer side, we’re seeing sort of low single digit growth across parts of the portfolio.

But in the office channel, which is really our packaging expression business, which is Post Its, it’s Scotch Tape, things like that, that business continues to be a bit weak. It was weak last year. We see that continuing here into the first quarter. So there’s pockets of that are going okay, but there’s certain pieces of each of the portfolios that are a bit weaker.

Steve, Moderator: Sorry, I’m going to go here, but roofing granules, what are you guys seeing on the resi side in roofing granules?

Bill Brown, CEO, 3M: It’s still in that mid single digit growth range. It’s been reasonably resilient. Again, a lot of that’s for replacement and that there’s a replacement cycle. So that’s still been pretty resilient. Sometimes you run an issue with our own queries.

It could be something with freight or with a customer. So it’s pretty concentrated with a couple of end customers, but that business has been pretty resilient again mid single digits.

Steve, Moderator: Okay.

Anurag Mahaswari, CFO, 3M: Sorry. Steve, as I was just saying, as Bill is saying, it’s the revenue is getting elongated from the orders. But if you look at the order flow, it’s actually got across the board, across all the three businesses. It’s just more some of the revenue is flowing through to the second quarter.

Steve, Moderator: And is the order growth in that 2% range or is it a little better than that?

Anurag Mahaswari, CFO, 3M: In February, it’s probably a little bit better than that.

Steve, Moderator: Okay. Got it. Okay. On the other topic of tariffs, you guys, I believe, are a net exporter, but there’s a lot going on. You guys have a decent amount of European exposure.

Maybe we’ll touch on that just geographically in a second, but maybe just check the box on tariffs and any further detail you’d want to disclose here on any exposures that you may have and anything you learned in the last couple of weeks?

Bill Brown, CEO, 3M: So we are, as you just mentioned, we are a net exporter. We import we export about $4,000,000,000 we import about $1,600,000,000 Roughly of the $1,600,000,000 thereabouts, about half is Mexico and Canada. So that we’ll see what happens as we turn into April. And whether it’s if their USMCA product is exempt or not from the tariffs, I think that’s sort of been in some dynamic with coming out of the White House. We have about 10% is coming from China.

Right now it’s a 20% tariff, so we’re seeing that hit. That’s on the order of $30,000,000.35000000 dollars for us, and that’s on a gross basis that’s in our numbers, but we’re taking actions against that. I mentioned pricing a couple of minutes ago. So we’re capturing some of that back through pricing, some of that through cost control. So when you think about $30,000,000 30 5 million dollars it’s sort of $0.04

Steve, Moderator: or $0.05

Bill Brown, CEO, 3M: but it’s for us it’s going to be negligible this year because we’re taking actions against that. Tomorrow we see steel and aluminum going into effect unless something changes the next twenty four hours And that have maybe a $30,000,000 impact on us gross before any actions. Again, the steps that we’re taking and pricing we’re putting in place, $0.04 that we could absorb that, we can offset that through cost and price action. So all of the things we’ve seen so far really don’t take us off track for the year. And as I mentioned, even into the first quarter, we’re actually looking a little bit better than last year.

As we get into April and we see what happens in Mexico and Canada, you’ll have more to say at the next earnings release, but obviously that’s a much bigger piece of what we’re actually importing into The U. S.

Steve, Moderator: How are you approaching all of this uncertainty? You guys are already like on the horse when it comes to all these productivity initiatives and you’re actioning a decent amount of what would be kind of a lower volume environment playbook. Is there anything incremental you’re doing? And you know, what’s the how are you and your how are you and your board talking through what’s going on here? Well, if we

Bill Brown, CEO, 3M: have a board meeting every day to talk about tariffs, we had something new to say every single day. But look, we’re a good sized company, so we have a lot of levers that are controlled in terms of the cost side. So look, even though we are driving productivity over the long term, as we talk quite extensively at the Investor Day, we are making investments in the business, investments in commercial excellence, investments in new product introductions, investments in building capability across the company to drive a long term productivity agenda. So those investments can be metered. We talked about on just on the productivity side, $250,000,000 investment over three years, it’s $80,000,000 per year.

Well, we sort of can throttle that and change that and adjust that. So I think we’re being pretty nimble making sure that we’re pacing how we invest in the external environment. But the other side of this is how we’re really thinking about pricing. We start to push on this quite a bit in the middle of last year. I think we have a much better understanding of where we can price, how we can price, how we can govern price differently.

And every business unit across the company is taking a slightly different approach to how they price, a little bit harder to push out price in consumer all day they are. In TEBG, it’s more of a spec in business, so a little bit harder to push out price, little bit different in SIBG. There’s an opportunity to adjust our pricing and we are going forward with doing that. Sometimes it’s in the price itself, sometimes it’s a surcharge, and every business taking a slightly different approach. But, you know, we’re being, you know, on our front foot around time, what we’re trying to do on pricing, so we protect our earnings.

The big question is making sure that as we get further into the year, it doesn’t affect volume, so that a price increase actually works against us. So we’re trying to be smart about how we do this. That’s why we’re pulling the cost lever pretty aggressively right now.

Steve, Moderator: When you look across your businesses, I think one thing that we heard at dinners last night is just this is everybody’s got this pricing muscle, so they’re all going to react very quickly. But not everybody has uniform manufacturing footprints. And so when you look at your kind of competitive set, are you advantagedisadvantaged when it comes to like where your footprint is? I mean, you’re already like you said, you’re a net exporter, so you’ve got a pretty good footprint already. Are there any opportunities versus your competition where they’re kind of stuck with offshore manufacturing.

This is stuff that’s pretty easy to import, I’m sure, a lot of it. So anywhere you’re kind of you think you’re advantaged?

Bill Brown, CEO, 3M: So it’s a good question because we have about 45 factories in The U. S. We have, as you know, 110 factories globally, about 45, and then the bigger ones are in The U. S. So we have a very substantial footprint in The U.

S. Just for perspective, we have three factories in Mexico, mostly for consumer products. Those can flex up or down, move back and forth to U. S. We, as you know, we talked about this at the Investor Day, we talked about effectively our utilization, we call it OEE, operating equipment efficiency.

It’s been running in the low 50s, so we have an opportunity across The U. S. To drive more volume across these assets. So we have an opportunity if we need to bring more back to The U. S.

It depends in some parts of our business. We manufacture in Mexico and we compete against people who actually manufacture in The U. S. So those are going to be a little bit more challenged. But net net, generally speaking, I think we’re advantage with the factories we have in the footprint we have here in The U.

S. It’s not just the factories, the supply chain is where we invest in technology, all of those pieces. But the company can be pretty nimble. It’s not just bringing things back to our own factory, it’s also using contract manufacturers. We have quite a few contract manufacturers we use globally and we can flex them up or down to move volume around as we need to.

Anurag Mahaswari, CFO, 3M: Exactly. So as Bill spoke about the price volume trade off. So when the tariffs come in effect, we obviously have deployed different playbooks depending upon the businesses. Some is price increases, some are price charges. But the other aspect we’re looking at is the volume that we can gain because of the competitive advantage that we have in some of these sectors.

Steve, Moderator: I guess that’s the advantage of having 50% equipment utilization. There’s an upside to that. Yes, plenty of capacity when tariffs come in good position. From a top line perspective, it’s always hard with three ms to since the LCD LCD craze went away to pinpoint what the kind of two or three really interesting growth drivers are. I’m sure that’s still the case, but anything stand out to you that’s of size out of that kind of billion dollars of outgrowth that we should be watching that’s interesting?

Bill Brown, CEO, 3M: So look, in a billion dollars above the macro, it’s roughly split between half coming out of new product introductions. We went into a lot of depth here, so I don’t want to repeat all the story we talked about at the Investor Day. But at one point in time, we launched 1,000 products or more at three ms. Back in 2023, we launched 128. It came down quite a bit.

We still spend $1,000,000,000 1 billion dollars was shifted around a little bit more to PFAS, a little more to supply chain resiliency, but we were launching fewer products. I think I’ve said one of the worst jobs in three ms right now is a salesperson, because the salesperson is out there trying to chase sales with an older portfolio, when trying to drive price with material inflation coming up. So it’s a tough position to be. And by the way, we weren’t delivering on time in full. So when you that’s a tough position to be in.

So we are really focused on turning around what comes out of our new product pipeline. Last year, 01/1969, it was quite positive, not anywhere near where we could or should be, but it’s a step up. First time we’ve seen a step up of that magnitude in the last decade at three ms. Again, this year, we’re targeting two fifteen. The first quarter looks to be up 40%, fifty % on new product introductions.

So we’re really off to a good start. It’s really the team is really pushing on this quite hard. So as you look at the next several years, that’s an important driver. So the billion over macro, about half is going to come from new product introductions. We launch most of what we’re going to do 75% to 80% are what we call Class three products, Class three, Class four.

So they’re more for replacement or to keep ourselves relevant in a marketplace, maintain our share, but critically important to provide the salesperson some opportunity to go out and sell more into a customer. About 20% are going to be what we call Class four, Class five, Class six products, which are new to the world. That can drive incremental growth. So it really is across the portfolio. We have a great set of things in the pipeline across industrial, across transportation.

One of the things that Wendy spent some time laying out is how we’re pushing hard to really develop better top to top innovation strategic partnerships with some of our larger OEMs. We have a very important one with a very large consumer electronics device manufacturer. We got to do a lot better on that, not just on one or two, but more like a hundred. And we’re pushing very, very hard on that. So I think a lot of the things we’re doing on films, micro application, you know, for different types of devices that are coming onto the market, not just consumer devices, but all the electrification and displays in cars that has tremendous relevance across all of those different portfolios.

So there’s a lot, it’s interesting there. The other half of this billion dollars above the macro is going to come from just being better at the customer interface, you know, and we went through a couple of levers here. They’re relatively simple and basic, but when you put them together, they will be meaningful for three ms. You know, it starts with the salesperson, you know, making sure we have the right coverage. We’re going to add salespeople over the next three years.

It’s better management of the salesperson, tighter control, if you will, over how we set quotas, how we measure other progress over the course of the year, how we train those salespeople. It’s also with our channel partners and customers. We talk quite a bit about cross selling. Cross selling is going to be a very important opportunity for us. We’re making very good progress on this.

Despite it being a pretty simple step, we’ve not pushed on that in the past. For SIBG, that’s going to be meaningful. We now are close to 50 product pairs that we’re pushing out to the channels. We have about 60 channel partners signed up. I think Chris, the other day talked about 15 or 20, that we had at the end of fourth quarter.

So we were pushing that pretty aggressively. And of course, the big dimension here is we call it customer loyalty, but it really starts with making sure that we deliver product on time in full to customers. Again, sounds very, very basic, but it is fundamental. We ended last year 88%. We were up three points from the beginning of the year, about eight points from couple of years before, making further progress as we get into the first quarter here.

But all of those dimensions together, I think are important to reinvigorating the top line. Those things will pay back over time. We’re seeing a little bit of a pressure here into the quarter just because of some of the environment environmental noise. But over time, these are gonna be important revenue drivers for the company.

Steve, Moderator: And I guess on the margin side, just stepping back, what how are you managing to deliver a bit better margins this quarter? Is that just some a bit of a hedge in the numbers? Is it a mix dynamic? What’s the how are you able to beat the EPS with the sales miss?

Bill Brown, CEO, 3M: It’s not so much mix. It’s mostly just tight control of spending. We had come into the quarter, into the plans, into the guidance thinking, okay, things could be okay and we’re going to continue to make some investments into the business and we throttle back on that. And that’s an important dimension for it. We’re driving our productivity agenda pretty heavily.

So there was I mean, I’d say a good finance person we’re going to be a good finance person with a little bit of a hedge. And so there’s a little bit in that as well, but I think it mostly comes from spending.

Anurag Mahaswari, CFO, 3M: Yes. I would say it’s a combination of really good progress on the productivity, some spending control, a little bit, which is more permanent and some which we are deferring to the future quarters because we had for the guidance for the year about $225,000,000 as investments. And we always said we were going to meter the investments depending upon how the situation plays out. And so I guess it’s a combination of both productivity and the way we’re metering our investments.

Steve, Moderator: I think a former multi industry legend, you say a hedge for bad things to happen.

Unidentified speaker: Yes, right.

Steve, Moderator: Remember that pretty clearly as a just starting out as an analyst in the late ’90s. I think

Bill Brown, CEO, 3M: you said bad stuff, but maybe I’m wrong.

Steve, Moderator: And as far as pricecost is concerned, anything moving around there on the year?

Anurag Mahaswari, CFO, 3M: No, it’s typically the same as what it’s been for the past couple of years. Just to ground everyone, material inflation is about 2%. It’s about on $6,000,000,000 and the price that we take out in the market is to cover the material inflation, which is about forty, fifty basis points. So pretty consistent to what we’ve been doing over the past few years.

Steve, Moderator: Can we just step back and talk about PFAS? Sure. Seemingly kind of fading a bit from investor focus. And any changes in the landscape with the new administration and haven’t seen too many tweets on it, but anything there?

Bill Brown, CEO, 3M: No, it’s still an important topic for us even though the administration has changed. A lot of the activity that’s happened, it’s happening, it’s either because law is in place or it’s happening at the state level. So just to reground you, because it’s all written very, very clearly and carefully by lawyers in our Qs and Ks. We just put our K out about a month ago. So that there’s there’s several things that are on the horizon.

As you all know, the personal injury cases in the MDL, you know, are tracking for a trial date sometime in October. You know, there’s a a number of disease states that the judge is working on. We’re coordinating with the plaintiff’s counsel in this. There’s four it’s gonna be a bellwether case. There’s four, disease states that they’re investigating today.

Then they’ll choose one. The judge will choose one for trial in in October. So there’s just a lot of work that’s happening in the background on that, but that that’s certainly on the horizon. You know, we have, most of the AG cases are in the MDL. They’re in the MDL because they’re a triple f.

So they’re firefighting foam based, and so that that day would be in the MDL. There are some that are outside of it because they’re independent of AFFF, New Jersey being one. New Jersey is a trial date in May. As I mentioned at your Investor Day, you can see very clearly in the K and the Q, you know, we are in mediation with the state of New Jersey that is active. We’ll say more when we can say more, but again, there’s a trial date out in May.

The one behind it is Vermont. It’s another AG case outside of the MDL that’s in August. So there’s things happening in the background. We should not an investor should not read a change in administration that there’s material change in the outlook for us as a company around PFAS. There remains to be litigation risks here.

And again, we’ll talk more about this as we conclude things or as we have events that happen that are meaningful.

Steve, Moderator: How did you evaluate this risk coming in as you didn’t have to come to three ms? Yes. I would assume that if you thought that there was something that was going to come down the pipe that was pretty big, like you do all this work, you drive productivity, you get $1,000,000,000 and all of a sudden there’s a $40,000,000,000 announcement of a PFAS settlement. Like how did you evaluate that risk?

Bill Brown, CEO, 3M: So it’s obviously I spent a lot of time doing what you all as investors have done, which is look to the Ks and the Qs. And I had an opportunity to actually talk to the management team and to our general counsel and outside counsel to understand a little bit more about what’s happening there. But at the time and even today, there’s still a lot of uncertainty in what’s going to happen and when it might happen and what might happen internationally. The way I looked about this is, look, there’s a at the time, I think our stock on an adjusted basis, now it’s obviously it’s post the spin, we’re sort of like in the $80.90 dollars range. And I looked at and I thought we were as a company highly undervalued.

And I thought we had focused a lot of time and effort over the last five years, maybe even longer, focusing on litigation and not much else. And I think when I looked at that, if 62,000 people in the company, there’s probably a couple of hundred that the focus on, maybe not that many, focus on liability management and transitioning PFAS related or enabled product to something other than PFAS. But you have another 61,000 in change that ought to be focusing on making three ms great in terms of innovating, driving commercial excellence. So I looked at it and I thought, you know, we could do a much, much better job than just driving, you know, rigorous operational execution, things that I’ve done multiple times in my past. And that’s actually what I see happening and playing out.

So So I look at this and I said, if I can get this contained the PFAS liability, even what was embedded in the stock and what the market has been embedding, but then drive the upside through all these other things that I’ve done before, there’s an upside case to be made here. And that’s the end of the day was my logic. I wasn’t pulled by the minus 15 degree temperatures in Minnesota from, from Florida or 10% state state tax or the other things that are going on there. But, but I also saw it as a great opportunity to engage with this great iconic company called three m and and try to help make it great again. It’s been encouraging.

I really enjoy it. There’s going to be setbacks. Look, I know I’ve been in the steep before, so things happen. But that was my logic. I thought if we can contain the liabilities, I knew it wasn’t going to be zero, and then drive all these other parts of the agenda and energize and motivate the team to go and push that, I thought there was upside.

And I think I’ve seen it. I think actually investors have seen it as well. It’s a

Steve, Moderator: lot of Ms, maga. Make three ms great again. Yes, right. Yes. And I assume you still feel positive about the stock now that it’s even though it’s up 50% or

Bill Brown, CEO, 3M: I do. I do. Look, I’m long in the stock. And as you all know, we’re out there. We bought back a lot of stock as a company last year.

As I said before, $10,000,000,000 of repo in the next three years, half is going to be coming from buybacks. So I think we as a team and we as a board think very optimistically about the stock. But look, this is again, it’s not a short term gain, it’s a long term thing. Stocks move up and down, environments change, we get all that. But I couldn’t be clear internally and with investors about the upside and the opportunity I see ahead of us.

I see it I saw it two weeks ago and talked about this at the Investor Day and I see it today. That’s not changing. And what’s interesting and you won’t see it, maybe some that came to the Investor Day and saw the energy of the team the night before in the Tech Expo and the energy of the leadership team, people are very, very motivated to drive three ms to a different spot. I notice it every single day. The enthusiasm, the encouragement, the inspiration that people have to do things differently is there.

This will be a much better entity for sure. And I think the path is pretty clear to me. Any questions?

Steve, Moderator: Right here. Let’s go there first. Mike’s coming around. Right there, Justin Bakken.

Justin Bakken, Analyst: Hi. You talked about how much you import versus you export and you talked about if tariffs come in and how you can in the short run take price to offset that. But then you also talked about your underutilized manufacturing capacity. How long would it take you to go from we’re just going to put price in to cover this to doing what those tariffs hypothetically are supposed to do, which is incentivize you to put the manufacturing back in The U. S.

Bill Brown, CEO, 3M: So we have a there’s some short, medium and longer term decisions we’ve got to make on the sourcing side. It’s not going to happen overnight. We are incrementally driving our equipment utilization up. But as I mentioned before, we’re in the low 50s, 52% across all assets, 54% on the bigger ones, which we really track daily. We’re up a couple hundred basis points last year, up a little bit more this year.

This year, we expect to be in the high 50s in terms of utilization. There’s still upside of opportunity there, but we can move those assets a little bit and flex there. We also have a pretty robust network of contract manufacturer we can rely on. So those are going to be a little bit easier, but you’re talking sort of in quarters, not in days or weeks. So things could happen by the end of the year to move things around.

There’s probably a little bit of an opportunity moving out of Europe and back into The U. S, if that as whatever happens in the Europe tariffs. But it might take six months, a year, sometimes a little bit longer than that, but it’s in that time frame.

Justin Bakken, Analyst: If you step out of your own world a little bit, do you think that’s true for a lot of U. S. Industrial companies?

Bill Brown, CEO, 3M: Every company is going to be somewhat unique in terms of their own utilization or asset footprint, the robustness of their supplier network, the flexibility of their suppliers move up or product offering. Just give you an example, there’s some products we manufacture highly regulated, you know, and in order to change source of supply, even a supplier going from A to B, you’re going to have to go back to the certification program, either with the OEM you’re selling to or with the regulators. So some are longer cycle. Ours, there are and we do have products that fall into that category, but primarily, we’re more shorter cycle and can move things around a little bit more nimbly. So I think everyone’s going to be a bit different.

Justin Bakken, Analyst: Thank you.

Steve, Moderator: And and a lot of our companies have been at, you know, they’ve been the warning shot was fired in 2018. So they’ve

Justin Bakken, Analyst: Right. They’ve seen it.

Steve, Moderator: They’ve been working hard at it already to a degree. One more here.

Unidentified speaker, Analyst: You said that raw materials were up to 26% of your So as you move utilization from mid-50s, so some higher number, are there incremental margins 70 on that? And the second question is, so do we need 110 factories and just closing the factories? Yes. Is that a margin tailwind?

Bill Brown, CEO, 3M: So let me take the second one. I’ll ask Conor to talk about the first part about look, no, we don’t need 110 factories. I mean, it’s pretty clear, especially if they’re running 52% utilization or 54%. So it’s too much. I think we talked a lot about the thousand inter plant lanes we have and 88 DC.

So when I look at this over the long term, the network will be smaller and simpler is my estimation here. But there’s so much we can do, as much we have to do right now. To just lay the fan work of actually getting to that. You can’t think about asset rationalization in my mind until you really understand how your assets are performing today. So if you want to put two machines together, the capacity, you have to understand what the utilization happens to be and make sure you have enough flex capacities, demand moves up and down.

So that’s a long term opportunity for us, meaning outside of the three year window here. But near term, there’s just so much we can do in terms of just sourcing and negotiation, value engineering, quality improvement, logistics improvements. There’s just so many different levers to pull here. So it’s a longer term opportunity, but not something in the near term.

Anurag Mahaswari, CFO, 3M: Great. Yes. So raw materials is not the only variable cost we have. We also have direct labor, freight, logistics and so on. So our incrementals today are roughly about 35%.

But to answer your question, as we drive productivity in the factory and as we make our sales organization more scalable, the incremental should go up in the medium term from 35% to 40% and plus, right? So you should see that trend.

Steve, Moderator: Great. Thanks, guys. Really appreciate it. Thank you.

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