Please note that today's earnings release and slide presentation accompanying this call are posted on the homepage of our Investor Relations website at 3M.com. We had another quarter of strong performance with second-quarter adjusted earnings per share of $2.16, up 12% versus last year and above expectations. Organic sales growth was 1.5%, with all three business groups reporting positive growth for the third quarter in a row. Operating margins increased 290 basis points year-on-year through productivity and cost controls, while we continued to invest in growth initiatives.
Free cash flow was solid at $1.3 billion for the quarter and 110% conversion. The pipeline remains healthy, and there's more rigor and discipline in the process with better business cases and higher launch schedule attainment. We now have 48 cross-selling pairs identified, about double since Q1, with a pipeline value of over $60 million and $10 million of new orders booked to date. SIBG was 83% for the quarter, improving more than 300 basis points year-on-year.
In the second quarter, our cost support quality was 6.1%, down 30 basis points sequentially and 90 basis points year-over-year. On the back of the progress we're making on our priorities and the strong results in the first half, we're increasing our earnings guidance to a range of $7.75-$8.00. We expect organic growth to be approximately 2% for the year, reflecting the current macro environment as we see it today. Turning to slide five, we reported another quarter of strong profitable growth and robust free cash flow generation.
| Metric | Period | Current guidance |
|---|---|---|
| Earnings per share | FY2025 | $7.75-$8.00 (now inclusive of tariffs) |
| Organic sales growth | FY2025 | Approximately 2% |
| Adjusted operating margin expansion | FY2025 | 150-200 basis points |
| Free cash flow conversion | FY2025 | Higher than 100% |
| Tariff impact | FY2025 | Gross $0.20 headwind now included in guidance |
| FX impact | FY2025 | $0.05 headwind |
| Metric | YoY | Note |
|---|---|---|
| Q2 organic sales growth | 1.5% | Momentum in electronics, general industrial and safety, offset by known softness in auto and auto aftermarket; consumer flattish. |
| Q2 adjusted operating margin | Up 290 bps to 24.5% | $300 million benefit from volume, broad-based productivity, lower restructuring and equity comp timing, partly offset by $50 million investments and $25 million tariff/stranded cost. |
| Q2 EPS | Up 12% to $2.16 | G&A efficiency, metered investments, weaker U.S. dollar and a $0.06 benefit from sale of an investment; $0.31 operational contribution offset by $0.02 FX and $0.06 non-operational. |
| SIBG Q2 organic sales | Up 2.6% (fifth consecutive quarter of growth) | Broad-based (six of seven divisions positive), led by IATD and electrical markets; abrasives turned positive. |
| TEBG Q2 organic sales | Up 1% | Commercial graphics and auto personalization (premium fleet wrap) plus electronics and aerospace/defense strength, offset by auto OEM down low single digits. |
| China growth | Up mid-single digits | Strength in industrial adhesives, films and electronics bonding solutions from strong commercial execution and share gains. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Commercial excellence rollout | Launched in SIBG U.S. late last year | Expanded to Europe and Asia and now extending enterprise-wide to TEBG; 48 cross-selling pairs (double since Q1), >$60 million pipeline, $10 million booked; trained over 400 sales managers. | — |
| Tariffs | Gross ~$0.60, net $0.20-$0.40, excluded from guidance; China ~80% of impact at 125-145% rates | Net cut to ~$0.20 gross as China rates dropped to 10/30%; now included in guidance, offset ~half by price and ~half by cost/sourcing. | — |
| PFAS litigation | Public water supplier settlement prior | May settlement with New Jersey (site-specific and statewide claims) with payments over 25 years through 2050; personal injury bellwether scheduled for October (kidney cancer); exiting PFAS manufacturing by end of 2025. | — |
| Operational excellence / footprint | Early OEE tracking | OEE ~59% highlighting capacity consolidation; example: Knoxville coater drove 12-point OEE gain enabling retirement of two 70-year-old coaters; ~250 coater types in network. | — |
| Investment metering | ~$175 million step-up planned | Metered in response to lower demand and tariff landscape (Q2 ~$40 million of an envisioned $85 million pickup); maintaining critical growth investments. | — |