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Compass Minerals International (CMP)

Participants
Theresa Womble Director, IR
Fran Malecha CEO
Jamie Standen CFO
Graeme Welds Credit Suisse
Vincent Anderson Stifel
Fahad Tariq BMO Capital Markets
Gavin Parsons Goldman Sachs
David Begleiter Deutsche Bank
Call transcript
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Operator

Good day, and welcome to the Compass Minerals Third Quarter Earnings Conference. Today's conference is being recorded. At this time, I'd like to turn the conference over to Theresa Womble. Please go ahead.

Theresa Womble

Thank you, Ashley. Malecha; quarter CFO, the results the Fran review Standen remainder CEO, year. third our and our and Jamie our will of Today, outlook for

could and you to turn company's caused company's within statements expectations today materially. on a date, XXXX. events. of Litigation those the today's that let XX-Q. The call undertakes obligation differences These most number including The I Securities meaning differ uncertainties results discussion to October over as and Private and Act Before no Minerals' to me contain cause of actual factors, the Form reflect the Compass involve could by remind XX, the identified made update Reform to future XX-K that the company forward-looking statements statements recent today's any may based risks them, be in XXXX, of forward-looking of are

also a may remarks include are disclosures, of which operating and understanding Our businesses full to conditions. financial provide non-GAAP important our

can of or of available at in the both presentation, Investor measures any which on of compassminerals.com. these reconciliations our earnings release Relations in earnings site our You find are

turn over call I'll Fran. to Now the

Fran Malecha

Good today. morning you Thank you, our call thank Theresa. joining for and

plant our Produquimica operating Our revenue the by to business. pressure consecutive total business our expected significantly, expectations from some On of quarter mild in our slightly a a increased which basis, business. and winter given results nutrition our weakness this offset on largely below on addition in our sales second were consolidated the our salt earnings salt and results, driven delays

control to focus on can to better drive performance. continue We the things also we

savings savings salt cost generated have already impacting business as plant our X.X our nutrition million year-to-date, in fact expenses. well as initiatives our corporate savings and In with

issues demand in with has mine. pressured related we have deicing the results, team addressed production report also salt at there Goderich our glad is I'm progress collapsed fully the roof the with line that running current and capital our and all our segment mine projects to While the to made lower operational plans.

that and solid conclusion result highway pricing season. important shapes portion business. assume of the process average of volumes our American deicing salt weather which the This expectations other for deicing third The is sales reported bid we the the winter quarter North highway our in

declined As this as did price we average awarded bid our bid approximately expected, awarded our year volumes. X%

how US, has on pressure mild these was market-wide salt downward the with it limited team I'm and Given how results. season responded winter in last our of much to pleased challenges

business with operating solid due headwinds in near-term North in nutrition posted late delayed the the southeast segment earnings this slowdown faced In in the for US, related Brazil, plant while results we in increased. quarter, hurricane the America planting Our modestly to to volumes season. quarter from activity sales dropping a

we believe from selling demand compressed our season plant can underlying challenge remain innovative the a logistics Although perspective. for strong, a nutrition be products

expected a sales not some these of As result, materialize. may

make strategic progress important that As quarterly results, continue fact these significant the on we our objectives. to as

are value. we of these company these executing on areas our improving touch executing consistent nutrition growth improving terms plant will and strengthening achieve efficiency what mean of salt company growth our increasing on we discussed sustainable shareholder a and us based company, our in margin Day, between foundation balance at in designed we the like organic our Investor how the through the delivering businesses innovation to and strategy performance As recent to the improvements of I'd and Today areas quarter opportunities. and for throughout in progress our

Goderich investment of efficiency program, major the focused and of at key are nearing capital we company, our Ogden. end our longevity, our of capabilities on assets foundation the strengthening is in which First, the ensuring and

and track on expected partial on The realigning it's even collapse Goderich track Our is of the roof be with mining continues completed experienced to mine at installation we also systems XXXX. in September. Goderich the continuous shaft project in

We expect compaction this complete final At XXXX completed facility are quarter. we've should equipment commissioning fourth which round. working completed the by mining final currently be to of Ogden, continuous in system and commissioning through and the are other year commissioning

markets Once While strategic priority of I projects additional these to investment underpin balance we in better discussing salt our some very these and our assets will projects, these and time, efficient order that been address be businesses. plant serve been strategies us for and creating has well our and both know to weather and approximately positioned variability. between plant years keep diversify and salt nutrition we've come for in our stream for improve earnings and these million demand production deliver our nutrition many mind of an in for XXX improvement to projects represent growth. to winter next ability safe to business The more complete

about time the year-to-date earnings a benefits is only over addition XX% company the improve believe what Produquimica. seasonality our this combined of by will year. the to lower helps total XXXX due this earnings diversification This stability for nutrition increase a potential. a this nutrition positive an in us percent of plant revenues quarter our We XX%, that demonstrate typically point in revenue segment. specialty of increase where plant and in of our it innovative in quarter The investment growth the On drove salt total as earnings and in was basis, sales was

to things a third The focus There improvement is I'd and couple for driving margin of this area us are area. like in discuss growth. organic

effort is track. improve in is savings and million eliminate of efficiency. to July operational performance costs increase XX overarching plan This plan in in to initiated this XXXX our ongoing part Our cost on

quarter generated mining cost savings expect investment a reductions at mentioned I already in X to to While million we've and to addition we the achieve XX in from continuous million recorded of XXXX are Goderich. million plan related savings. we our this charge this earlier, X.X almost as These in in

improving here driver key commercialization of from capabilities Another Trax. and to innovation growth and capture is Wolf the acquisitions Produquimica our

successes mention here. of We have to couple a

in North of in Wolf our were America get XXXX is traction third that US. and starting sign sales particularly the Trax's quarter. First, more what This marketing double to in they sales teams a were good the micronutrients are

so we entirely far Brazil. North fertilizer Second, on introduced in This liquid and in XXXX, specialty an between line total have up Brazil new the includes of based products from products America technology brought in we XX US. new

to out we especially a delivering hemisphere. the plant goal Compass nutrients in our Minerals portfolio it's of and contribution any the sales these to increasing relevancy statements western we innovation full say will that building increase we market throughout too the While can earnings, are early about or believe make agricultural products of of

taper achieve as to progress Even from begin leverage significant making key returning in in three current we're With is our levels. capital to areas, in improve confident increases deliver Compass I'm trough expect to term Minerals we near markets our off, that XXXX cash well anticipate positioned recover the in targeted flow these expenditures we and and as our free ratio our growth to XXXX. the

in the key believe over call will financial progress for on will end these in Jamie normalization significant our growth. and the we With to more strategic markets benefit near-term made having from our drive which details. goals position With I'll mind, us turn earnings to year factors we that

Jamie Standen

morning Thanks Fran, and good everyone.

of the results, our quarter. like the restructuring into this Before getting financial charge to details I'd briefly explain

a we've We As plan savings recorded annual in $X.X July, beginning we million savings this to related in XXXX. life expected achieved instituted we cost already about in announced and charge in to quarter generate X.X plan a is savings. which XX the million million

SG&A in segment, $X charge our a We have been plant $X.X our our salt North segment expense. charge our and in a press the our have presentation $X.X million noted charge charges They recorded. nutrition in America release million include and million where in corporate

will I were be talk results, I these through charges As excluding applicable. our

We a a America allowances segment. quarter. plant was for special quarter this to our benefit in nutrition related tax This million also release $XX South the valuation reported of item the

and refinements also third was our due overall our Excluding this tax and rate than to depressed to expect full-year rate normal to we income lower tax our other be assumptions. benefit, lower quarter

results our of you segment presentation. at let's which X turn our on for found looking be those to Slide can Now salt

and to winter. a of decline the time be this the versus quarter declined overall over quarter for But quarter segment prior sales many typically also sales stock XXXX purchasing this retailers inventories product selling lower are sales from as holding industrial winter. of mix of still would begin left total result primarily when to created Our price. negative last products. deicing This consumer deicing a supplies in this on average packaged our This up customers

about sold customers net basis, to more up Excluding industrial in On geographic which US increased highway sales, sales was deicing highway for mix, year. products a this however note average X% mix. the but average average important prior X%. deicing price, and costs. deicing increased price sales each for to price It's and logistics that also dropped driven primarily sales were from consumer by We highway improvement prices selling West

higher offset of and earnings revenues Production consumer slightly Our in increased shift highway industrial sales but costs business, a depreciation from operating and decline higher our the our results. was in were and lower costs expense. products the tons for reported as deicing primarily highway in toward well as deicing of impact the logistics away result

impact America on Slide XX excluding late which that North dropped our operating the mixed but slightly improved southeastern Sales costs. earnings a results and reflecting volumes our US, the below nutrition were activity plant revenues the restructuring year, prior Our in bit disrupted were in sales X% quarter. hurricane of the

XX% will average the for SOP this in sold we compared and We strong price quarter. about the up regions. in to helped products are seeing when with quarter occur This the activity, X%. push fourth segment XXXX believe hurricane demand that the even of most quarter the lost micronutrient in we the However, sales the other quarter sales more

as profitable driven are segment, chemical we prices South decline million by volumes a result, margin This and earnings a incurred sales mainly leaving excluding quarter. when more was to that due segment a XX% as $X.X guidance plant full-year XX% posted sales. unchanged. mix. the sales in sales In solution improvement well improvement was declined this America charge growth nutrition better As This the sales X% our also restructuring volume

have customers chlorine our As previously, reduces ordering we but This been selling average prices. discussed increases higher volumes, products. sales have concentrated

the industry. In addition, lagging experience gas continue and sales to we in oil

Brazil below delayed agriculture the and purchases our input prior initially issue grain than US the original slightly impacted below This weaker sales expected. partially is product caused crop dollar America year and business, has BXB This to their effect on inventories longer to farmers our harvest from sales. the in hold in timing of South a as the On were side prior expectations.

through typically the here we for plant, is putting third toward the sales quarter season our Brazilian orders products sales channel. on causes a this lifecycle full nutrients full-year portfolio of The also for As includes the Because important quarter, with for trucking a delayed. delayed creating This shifts compressed strongest market challenges. being move we season, plantings business, BXC which is mix are of sales more full year our this sell the products very which farmers component. the and pressure

plant true by US declined driven sales reported SOP Operating as currency, rate depreciation America earnings prices increased more In XX% business. this our point semi with compliance stronger specialty and were lower increased selling to is revenue than marketing business Brazilian higher up in spending, exchange benefited that public X% Our XX% than mind This less from dollar year-over-year. versus primarily nutrition about keep SG&A volumes. a prior lower total improving results a is One intensive a year. the offset real local company was costs. decline South

innovation trimmed to to expectations expenses invest we as and sales, in lower marketing segment, we've adjusted we in this earnings in Brazil. Although continue

sales at and more business. critical with and and make guidance annually to growth innovation this underlying force marketing we're X,XXX our although Because efforts full-year plant largely our remains range strong than with in to is farmers nutrients be together contacts low we for driving specialty in this volumes. agronomists Our end of long-term demand the are of Brazil a our timing for customers, with likely sales the issue, Brazil believe

book the on Before process have of related trip which lives like I'd expense since briefly turning review the accounting true-up our this to depreciation purchase our I acquisition. quarter just In date. recalibrated the certain process by our Produquimica This to and increased depreciation discuss acquisition about to mentioned. is the outlook, $XXX,XXX finalization we each adjusted our true-up asset value

up book depreciation. This quarter we catch that to had

more summary. no segment, what purchase and We from this Investor accounting now will package On price last Slide salt unchanged. our outlook range South in additional America have we've month. adjustments at Produquimica our little our lowered related we XX, XXXX In deicing bid Little for and account has of contraction slightly process report presented volumes the are nutrition and our Plant included demand completed the to volumes. changed to bottom we've have to a North Day acquisition. for lower the year America

mix the at both the likely issues discussed due ranges. however today, expected prior be compared when I have given of Operating to improvements to Although lower are end to margins to the product the are year. expand

segments. we plant As both earnings result, a nutrition expect growth in

let the Before our me Q&A session, beginning the of points quarter. recap key

continued the growth have in fully South America agriculture a expect sales quarter drive margin Plant operations in the value third from restored. North been quarter, fourth segment, high our we the mine we subtle should shift which In quarter. in Goderich margin achieved in nutrition to growth and our improvement. America quarter the and help earnings third fourth expect Importantly, sequential

we we we With projects. capital can can, over that, out begin it I'll focused controlling our to wherever things operator the possible session. completing Finally, the the and costs Q&A major so picking remain turn on

Operator

first [Operator Instructions] question from Christopher to our We'll go Credit Suisse. Parkinson from

Graeme Welds

quick Chris. with North is America. plant question on wanted kick nutrition a for I off This Graeme Welds to in

on how of kind was mix this You and the if is see and that of of demand could a the what through quarter up of seeing little into talked same ground driving sales in guys out versus what's that the from walk to how of you're year. the go you forward? year more I micronutrient wondering seeing details terms playing the that expecting kind about you're about forward of us you substantially better how you're and last quarter micronutrient some success going

Fran Malecha

to I America, we're build our it's America, these to products through primarily in with on North just and South we're distribution a in customers sales and with that in continuing make think is North This and the these mind direct combination, marketing to continue Fran. there out in our effort Keep growers. America. going sales but progress distribution

making are there. So progress we

the this I our that think the our build by farmers. is demand to traditionally quarter and is They biggest like really quarter on fourth being continue just and pulled for business. we products the

of that's talked I think outlook we that So why kind about going forward.

Graeme Welds

switching guys some are XQ just in forward. and business couple out curious I the actually think really portion you a to that expecting catch the of kind of how the And know South then to I'm quickly, think on American kind from the the - try that of you to missed just the of I up beyond about agricultural XQ. sales the as sense side business, to chemical next get of want better of moving of you quarters,

chlorine still forward. to gas the how are moving purchasing chemical I'm should mentioned of we that in section be there shifts and in lagging of patterns oil business. kind about wondering think some seems You that that

Fran Malecha

in combination mean earnings of the I with a chlorine has chlor-alkali I growing. is good bulk the of good a been It - chemical think that Sure. there the solid margins. it's it's it's business, business and business business, business a the

expect continue. We that to

of third part driving and it's results business but why side. it's we used on the still ag only and it our of really about to this business So the when talk that in about the reason the acquired a growth business, is really we the overall

that pricing expect that growth well, of the really kind it's not business perform to Brazil. our caustic of continue focus soda with We in improved will globally, but the

Operator

from Stifel. next And our we question move from Vincent will Anderson to

Vincent Anderson

nutrition we go what quarter salt plant North of to costs wanted quarter some earnings. and cash light considering pretty in volumes the in in related the volumes strong, around means fourth just the noise really segments, both America I in salt. unit On to operating through and that for saw come the both

could a some like on whether SG&A, it's of we're feel whether looks Can just conservative. you us a walk get on for transportation it so side, through reconciling earnings And quarter the maybe asset operating just on whether fourth trying it's to maybe commissioning, the things bit be it's seeing, that.

Jamie Standen

Jamie. Sure, Vince. is This

quarter I from lower C&I sales. we the far goes, impact saw the a there as as really think mix

So the cost side we costly the impacts talked also the it price side. but about products it of impacting are more produce. business, C&I to

So as from quarter more toward mix benefit of mix side in cost shift. on shifted highway, kind the the the we got a that

quarter highway away and let's get would then move expect So we And coming. close into fourth and would go winter a some that benefit mix, say, isn't that back like operating We conservative. cost as margin we if see that between to mix increase which more why a would normalizes, of the to as normal you the average go to feel start we you necessarily bit. just that's mix, C&I, guidance would

Vincent Anderson

variance SG&A North in in a up you were the you looks earnings. step of I about then have operating comparable like your And XX% in I XQ it's given America, kind quarter I volume know 'XX, talk XQ you, where expected costs but margins year-over-year unit 'XX. in It there? would did considering for heavy Can the to close guidance, -

Jamie Standen

you America plant are to talking nutrition? over - Are you North about

Vincent Anderson

Yes.

Jamie Standen

Yes.

mix. quarter side and there fourth the look improvement getting benefit. mostly 'XX, quarter price the we When we're the what verses the on is So at is fourth 'XX improved price

North XX% America So we in for operating comfortable quarter. our fourth with to XX% feel pretty margin guidance

Operator

to next Jackson go we from question Joel [Operator Markets. Instructions] Capital our And will from BMO

Fahad Tariq

for is This on Fahad Joel.

possible it QX, that time are was, to for but X% a the for guidance. the down is volume well prices as guidance having tough deicing the we're had or or offset pricing my salt I reconcile Is anything an up question QX year that would multi-year First price sales question. trying is down. as end making contracts That's highway highway like there flat the year from in pricing, that deicing prices that possible UK over versus deicing highway it

Jamie Standen

some we example terms placing tons. We the think in about US talked we quarter. third mentioned I mix for in were West So of where

reasonable would to fourth highway flat it in So, highway, better that quarter, pricing. the deicing be could in year-over-year, see you assume or

Of cost. on would that an through that to distribution course, offset come there's

Fahad Tariq

quick then follow-up. just a And

that For in are happened the QX? part in can sales QX, that or lower C&I loss those be recovered in sales

Jamie Standen

C&I the there So disappointed in although is difficult. year, the predicting every very the with third - we're market missing in is pre-fill quarter, deicing

trying what they has trying our year. themselves, have they're in how what bag customers we're out inventories, last need, customers, and box much, Smith weather to John You big - their a talking are the salt find large own to to watching garage of predict us themselves, trying ordering his our evaluating companies from

the of a factors that the specifically fourth sales C&I there the So of in be But quarter the at quarter forward, to winter activity. weather - will deicing are sales question, point difficult. fourth your lot going function a fully this third make

So take through the continue and expect we would sales. up, to customers that even this pick as alone to weather drive to point October early at starts fill,

Operator

Koort our Robert go question Goldman Sachs. will to we from next And from

Gavin Parsons

market, of This could that is Gavin you on the wondering premium seeing baking the months? currently the are are for you Bob. MOP I guys in the you quickly over if and in asset then was to XX expectations your kind real what through next run guys just

Jamie Standen

Yes.

the quarters. continue the rest price reason to that and last several range, year seeing price to prices $XXX in and seen We're this expect and don't think in would SOP at that MOP at strong believe over any would XXXX. level of We when that demand quarter this the currently through into about the have change. we've SOP only So XXX you stability

Gavin Parsons

anything you I'm you just that saw of Great. through XX% effective just walk out? this kind through function to to kind XX%. we then outlook your how And us tax follow-up, call a of if can else down dropped in year curious kind or particular quarter full of from guys as is a of there what flow Is

Jamie Standen

was are to There Investor and we're at that XX%. it XX% about - would Day, down were talking always I say as now, we

XX occur. benefit tax a discrete excluding are things that So the number there million, of of

that our as drops. effective structures current We've of rate related tax releases income benefit to are some in have fixed the the drops, So other that lower valuations we as income tax had place period. some

those tax drivers, So the other main benefit then lower releases some structure period. income, from items fixed some are in two reserve and the

Operator

from go Begleiter we next And Instructions] David Bank. [Operator our to from question will Deutsche

David Begleiter

weather, I year. Fran, pricing, year, highway mentioned I about confidence is deicing you of talk next confidence minus to, you or a were, highway what we can in highway Can guess, winter possibly lower structural surprised pricing. you winter think, this little that year you third the deicing why deicing What back this the next and that with in gives get normal the the is on positive row you bit for that a pricing assuming X% not gives the season? and some in

Fran Malecha

surprised. Sure. I wouldn't say were we

it And think expectations that with and in weighting mind have. price Canada, our in below line did - saw and to price was where average than the US this have we pricing I in is averageish winter where US saw Canada. we we increases declines described weather the we were given we that, greater the keep season, we much how in

season of a season little the plays bit, standpoint. a We that we're but a of west the overall, had bid flavor kind X%. So numbers that into out from kind of stronger and down the that's

would so I see is And expect and weather if if to average price normal of, three we pricing. lower in more Canada. increases the we're get to years I saw the it We coming and back think year, row drive think throughout price as milder off on of in to a we about increases winter weather, there market,

market back would the season with expect ahead. the spring normal So I would

David Begleiter

rate, And for additional next tax color XXXX the on Jamie, year? any just

Jamie Standen

Yes.

approximately - - the in So we normalizing I XXXX anywhere XX%. would high-XXs, would around envision

Operator

the for I Theresa over turn time, like would Womble this back to to At remarks. any additional conference closing or

Theresa Womble

any contact and and a Department your happy may with have Compass Halloween. safe appreciate the questions Once Please feel Investor Ashley. in follow-up Thanks, free have we to interest again, you Great. Relations Minerals.

Operator

That you your for conference. concludes today's participation. Thank

disconnect. now may You