Increased sales on lower prices equaled flat operating income for Compass Minerals’ specialty potash business in the third quarter ending Sept. 30, 2010. Third-quarter SOP operating income was $11.6 million on sales of $36.8 million, compared to the year-ago $11.6 million on sales of $23.9 million. Third-quarter sales volumes were 73,000 st with an average sales price of $506/st, versus the year-ago 34,000 st and average sales price of $706/st.
Nine-month SOP earnings were $43.5 million on sales of $130.9 million, versus the year-ago $63.4 million on sales of $100.5 million. Volumes were up at 255,000 st with an average price of $513/st, versus the year-ago 112,000 st with an average price of $897/st.
Compass expects SOP demand to continue to rebound in the fourth quarter, and sales are expected to double the year-ago quarter. Compass introduced a $20/st price increase for all SOP tons beginning Nov. 1, 2010, and on Oct. 26 announced an additional$35/st increase for orders placed after Nov. 15 or shipments after Dec. 1, 2010, or as contracts allow. The increase will apply to both standard and granulated products shipped to all locations worldwide.
Compass President and CEO Dr. Angelo Brisimitzakis told analysts that the greatest increases in SOP sales have been coming from the international market. “This quarter, nearly 40 percent of our SOP sales were to international customers compared to 33 percent of third quarter 2009 sales. Year-to-date, our international sales have accounted for 35 percent of SOP sales compared to 26 percent by this time last year.” He cited two reasons for the change, saying international buyers were the first to stop buying in late 2008, and that they traditionally apply at lower rates than in the U.S. He also said diets are improving internationally, so there is more demand for fertilizer.
Asked why Compass did not increase SOP postings more, in light of some MOP postings going up $75/st, Brisimitzakis said the MOP market is driven by row crops such as corn and wheat, and the SOP market more so by specialty crops. As an example, he said the almond grower has not seen the kind of price inflation that the typical wheat grower has seen. “There is no doubt there is some positive pricing momentum on SOP and I’m not saying our price march is over or it’s not over, but we’re being deliberate. We are taking it in phases. We are giving our customers some notice.” And as for MOP prices, he said there seems to be a significant lag between when those price increases are announced and when they actually show up on invoices.
Company-wide, Compass results were off, due in part to lower pre-season salt sales. Compass said many customers are holding leftover inventories from last winter. Compass third-quarter net earnings were $19.3 million ($.58 per diluted share) on sales of $176 million, versus the year-ago $25.7 million ($.77 per share) on sales of $182.3 million. Nine-month earnings were $89.5 million ($2.68 per share) on sales of $712.6 million, versus the year-ago $101.4 million ($3.05 per share) on sales of $650.9 million.