Maplewood-based 3M dodges major tariff hit, now expects profits to improve this year

The tariff picture looked pretty bleak for 3M this spring, with $850 million in additional costs expected to eat into profits if the heaviest import taxes on China remained in place.

Now the Maplewood-based manufacturer seems to be climbing out of the trade war bunker unscathed, possibly even poised to grow profits.

“Things have stabilized, at least a little bit,” 3M CEO Bill Brown told analysts Friday morning. “We have to watch for any re-escalation in trade tensions with China.”

With a softer tariff outlook, better sales across the company and what Brown called the “operating rigor and rhythm” of its “performance culture,” 3M appears finally able to seize control of its future.

This spring saw 3M’s biggest year-over-year sales boost since the pandemic, which new product launches and the best on-time delivery rate in six years helped along.

Brown’s fixation on making 3M innovate more has resulted in a 70% boost in new-product launches in the second quarter.

“We’re investing more in R&D, we’re shifting dollars, we’re shifting resources into new product development,” he said. “We’re leaning in on making growth investments where we think there’s a prudent payback in the near to medium term.”

Still, investors want more and worry billions of dollars in remaining “forever chemical” liabilities from PFAS contamination will muzzle growth potential. 3M’s stock price was down 3.6% Friday to close at $153.23, though it remains up 18% since the start of the year.

“3M continues to display improving operational performance against an uneven economic environment,” wrote Edward Jones analyst Faisal Hersi. “Regardless of the improvements, however, we are concerned that 3M’s legal risk is concentrated in the smaller company following the spinoff of its health care business.”

CFRA analyst Jonathan Sakraida was more optimistic.

“We believe 3M’s revamped product development approach and accelerated new product launches are critical factors in the recovering growth trajectory,” he wrote, adding he expects “organic growth acceleration” through the remainder of the year.

The company’s sales rose 1.4% to $6.3 billion for the second quarter. Profits dropped 37% to $723 million, mainly because of litigation settlement payouts.