FILE PHOTO: The company logo and trading information for 3M is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 29, 2022. REUTERS/Brendan McDermid/File Photo

By Aishwarya Jain

(Reuters) -Industrial conglomerate 3M on Tuesday raised annual profit forecast for the second time this year, bolstered by a shift toward higher-margin products and tighter cost controls, sending its shares up nearly 4%.

The Scotch-tape and Post-it maker expects 2025 operating margin to grow 1.8 to 2 percentage points, compared with its previous projection for a rise of 1.5 to 2 percentage points.

3M has leaned on product innovation under CEO Bill Brown, who took the helm in 2024, when the company was grappling with slowing sales and the fallout from several lawsuits.

Brown's strategy centers on cross-selling new high-margin products to existing customers, improving delivery times to avoid penalties and trimming general and administrative costs.

The Saint Paul, Minnesota-based company launched 70 new products in the third quarter. It expects to reach 250 product launches by the end of this year, exceeding its initial target of 215.

3M's selling, general and administrative expenses dropped 22.8% during the quarter, while research and development expenses rose 10.4%.

Brown, in a post-earnings call, said the company was using automation to replace visual inspection and streamlining its design process to cut manufacturing waste.

Morgan Stanley analyst Chris Snyder said new management initiatives might be taking hold, noting that third-quarter organic sales grew 3.2% despite a challenging consumer market.

3M expects 2025 adjusted profit to be between $7.95 and $8.05 per share, compared with its previous forecast of $7.75 to $8 per share.

The company also announced the sale of its precision grinding and finishing business, a part of its abrasives division, recording a pre-tax charge of about $160 million related to the deal. It did not disclose more details.

Brown said the company would keep an eye out for additional divestitures.

3M posted third-quarter adjusted profit of $2.19 per share, beating analysts' estimate of $2.08, according to data compiled by LSEG.

Total quarterly adjusted revenue came in at $6.32 billion, while analysts estimated $6.25 billion.

(Reporting by Aishwarya Jain in Bengaluru; Editing by Shilpi Majumdar)