Solventum, facing tariffs of up to $100 million, raises sales guidance

Minnesota health products company Solventum is raising its sales guidance due to strong first quarter financial results as it prepares to take on tariffs that executives estimate will cost $80 million to $100 million this year.

The company’s inventory turns over quickly in a 90-day period, said Chief Financial Officer Wayde McMillan. Executives plan to optimize inventory, refine pricing strategies and work with trade associations to advocate for tariff exemptions to blunt the effect.

In a call with investors Thursday afternoon, CEO Bryan Hanson called the first quarter “one of the more eventful starts to a new year.”

“While we are managing this turbulent environment aggressively,” Hanson said, “we are also ensuring that our primary focus remains very clear. No. 1, and obviously, delivering for our customers worldwide so patients continue to receive the care they need. And No. 2, and very importantly, staying committed to investing in the key areas that will support continued and sustainable improvement in our growth.”

Solventum spun out of 3M in 2024 and will move its headquarters from Maplewood to Eagan in the coming years. It makes health care products like dental materials and wound care supplies as well as hospital software.

Overall, Solventum reported adjusted net profits of $234 million on about $2.1 billion in sales for the quarter that ended March 31. Adjusted profits fell by roughly $125 million compared with the same period a year ago, while sales rose on an organic basis by 4.3%.

The company’s profit and sales both beat Wall Street estimates.

The 3M health care spinoff now expects 2025 organic sales growth of 1.5% to 2.5%, up from a range of 1% to 2%. Its profit estimates for the year remain the same.

McMillan said the impact of tariffs implemented in the second quarter “will be fully realized” in the third quarter.

“While this will be an ongoing process of assessment and mitigation, we’ve already taken steps and are executing several action plans to mitigate the headwind,” McMillan said.

The company is additionally working across regions to secure additional tariff exemptions and leveraging sourcing options across the supply chain, McMillan said. He said the costs of tariffs translates to an earnings per share impact of 35 cents to 45 cents.

Even with expected exemptions, U.S. exports to China represents roughly half of the cost of tariffs on the company, McMillan said.

The tariffs come as Solventum is continuing to establish itself as a large publicly traded company. CEO Hanson said the company is reversing course after years of negative sales volume growth before the spinoff.

Net sales for the company’s largest business — MedSurg, which encompasses wound care, infection prevention and surgical products — rose to roughly $1.2 billion, an increase of 6% on an organic basis.

The division continues to focus on adoption of its recently launched V.A.C. Peel and Place Dressing speeding up dressing application and making removal less painful for negative pressure wound therapy.

“This product provides value in three areas: It simplifies the procedure, it reduces procedure time and, importantly, reduces the number of dressing changes per week, all of which are meaningful advances for both patients and providers,” Hanson said. “And the team has done a really good job of ramping capacity to meet the very strong demand.”

Hanson also said executives are pleased with traction in IV site management products.

“Given our momentum here and to further support the needs of this business, we have invested hundreds of millions of dollars for capacity expansion in the U.S., specifically in South Dakota with strong support of the then-Gov. Kristi Noem.”

The company’s financial results are impressive, Hanson said, given the company’s historical performance.

“Stopping that decline and reversing the trend are direct results of the foundational enhancements we’ve made across three primary areas,” he said. “The first being our mission and culture, the second, our talent and capabilities, and third, our efforts to stabilize the business across commercial productivity, our innovation process, and our strategic focus and alignment.”