Compass Minerals posted a net loss of $48 million, compared to year-ago loss of $21.6 million for the second quarter ending March 31, 2024.
“Our results this quarter, as well as our full-year outlook, were directly and meaningfully impacted by one of the mildest winters experienced in over 25 years and by obstacles to the advancement of our fire-retardant business (GM March 29, p. 29),” said President and CEO Edward C. Dowling Jr.
Dowling said Compass was announcing “a series of new and ongoing actions to address these challenges,” including the indefinite suspension of dividend payments, adoption of operational changes to enhance flexibility and right-size the company’s highway deicing inventory and production profile, and the advancement of SG&A cost saving measures, including a recent reduction in the company’s corporate workforce.
“These actions are in line with our previously announced focus on improving cash flow generation and returns on capital in the Salt and Plant Nutrition businesses, and accelerating debt reduction,” Dowling said. “While difficult decisions to make, each action was carefully considered and determined to be the best path forward to unlock the intrinsic value of our company amid a difficult landscape.”
The Board of Directors has decided not to declare dividends for the foreseeable future, which will free up about $25 million annually. The company will immediately begin to curb salt production levels at its Goderich mine, including the recent temporary layoff of approximately 22% of the mine’s represented workforce. The headcount at the company’s Overland Park headquarters has also recently been reduced.
Dowling told analysts that Goderich would run at a lower rate probably through much of next winter, but he held out hope that if it is a good winter for salt demand, some of the employees could return to work. He reiterated that the company does not have any plans right now to make it a permanent layoff.
Compass had a second-quarter operating loss of $45.8 million on revenue of $364 million, compared to year-ago operating earnings of $47.9 million and $411.1 million, respectively. Adjusted EBITDA was up 13%, to $87.3 million from the year-ago $77.4 million.
Compass recognized a quarterly loss on impairments of $106.6 million related primarily to writedowns of goodwill and intangible assets related to its Fortress North America fire retardant business ($55.6 million) and a goodwill impairment in the Plant Nutrition segment ($51 million). However, it recognized a non-cash gain of $24.3 million within other operating income related to the decline in the valuation of the contingent consideration liability associated with the Fortress acquisition.
Second-quarter sales volumes and revenues were up for the Plant Nutrition segment, though the $51 million impairment helped pull operating losses to $53.4 million, down from the year-ago loss of $700,000. Adjusted EBITDA was $6.9 million with sales of $50.1 million for the segment, compared to the year-ago $7.8 million and $47.7 million, respectively.
Plant Nutrition sales volumes were up 23%, to 74,000 st from 60,000 st as demand normalized in the company’s core West Coast markets following extraordinary prior-year weather events. Compass said the average segment sales price was down 15% year-over-year, to $680.24/st from $795.87/st, reflecting a rebalancing of global supply and demand for potassium-based fertilizers. Dowling told analysts that second-quarter fertilizer prices, however, increased 3% on a sequential basis after five quarters of price decreases.
Salt operating earnings were down at $66.4 million on sales of $310.4 million from the year-ago $73.1 million and $360.5 million, respectively. The average price was up at $89.55/st on volumes of 3.5 million st, compared with the year-ago $81.87/st and 4.4 million st, respectively.
Compass posted a six-month net loss of $123.1 million on revenue of $705.7 million, down from the year-ago loss of $21.9 million and $763.5 million, respectively. The operating loss was $101.1 million, compared to year-ago earnings of $75.8 million. Adjusted EBITDA was up at $146.7 million from $139.2 million.
Plant Nutrition reported a six-month operating loss of $55.7 million on sales of $99.8 million, down from the year-ago earnings of $10.3 million and $89.3 million, respectively. Adjusted EBITDA was $13 million, down from $27.1 million. Sales volumes were up 44% at 149,000 st from 105,000 st, while average prices declined to $670.22/st from $850.84/st.
Six-month Salt operating income was $116.9 million on sales of $584.7 million, down from the year-ago $120.2 million and $668.6 million, respectively. Adjusted EBITDA was almost level at $148.7 million versus the year-ago $149.9 million. The average price for the period was $92.50/st on volumes of 6.32 million st, up from the year-ago $84.37/st on 7.92 million st, respectively.
Going forward, Compass gave 2024 adjusted EBITDA guidance of $160-$191 million, down from $180-$245 million. Plant Nutrition adjusted EBITDA guidance was $15-$30 million, reflecting a $5 million cut to the top end. Year-to-date, the company said it has managed to maintain strong product pricing to alternative products, with sales volumes tracking toward the lower part of the provided range of 280,000-310,000 st. Revenue is seen as $170-$205 million.
Salt adjusted EBITDA guidance is $200-$210 million, down from $230-$270 million, with revenue of $900-$920 million, down from $1.03-$1.11 billion. Total salt volumes are now seen as 9.2-9.4 million st, down from the earlier 11.3-12.15 million st.