Compass Minerals, Overland Park, Kan., reported a second-quarter net loss of $7.6 million ($0.23 per diluted share) on sales of $246.7 million, compared to a year-ago net loss of $6.4 million ($0.19 per diluted share) and $228 million, respectively. Operating earnings, while up for Salt, were down in both of its Plant Nutrition segments, both North and South America. Adjusted EBITDA was up, at $38.5 million from the year-ago $34.2 million.
“Our second quarter is typically our lowest earnings period, however, I am pleased that we delivered top-line growth across all our businesses. This provides a strong indicator that the fundamental market conditions for our businesses globally have continued to improve in 2018,” said Fran Malecha, president and CEO. “I believe we are now better positioned to deliver on our efficiency investments in our salt business, drive growth in our specialty plant nutrition business, and capitalize on strong grower economics in South America.”
Wall Street was expecting a better performance. Shares dropped 4.32 percent to close on Aug. 7 at $65.30.
Plant Nutrition North America operating earnings were off 45 percent, to $4.2 million on sales of $51.8 million, compared to the year-ago $7.6 million and $50.5 million, respectively. However, EBITDA was up at $17.2 million from $16.2 million. Both sales volumes and prices were up slightly – volumes to 80,000 st from 78,000 st, and average prices to $644/st from $642/st. Sulfate of potash (SOP) sales were up only 2 percent, while micronutrients climbed 39 percent. The average SOP price was $596/st.
Compass said while segments saw a significant decline in logistics costs during the second quarter, that increased production costs resulting from year-over-year step-up in depreciation expense pressured earnings and compressed operating margins. This depreciation expense was driven by the commissioning of new production assets at the Ogden, Utah, sulfate of potash plant.
Compass said it is seeing steady demand for the fall fertilizer season in North America and is modestly increasing its sales volume guidance. It is projecting second-half revenue of $115-$135 million and full-year volumes of 340,000-360,000 st.
Segment six-month operating income was also down at $9.1 million on sales of $104.7 million, compared to the year-ago $15.2 million and $99.7 million, respectively. EBITDA was up at $33.4 million from $32.7 million. While sales volumes were up at 167,000 st from 157,000 st, average prices were down at $626/st from $633/st.
Plant Nutrition South America second-quarter operating earnings slipped to $700,000 on sales of $71.1 million from the year-ago $800,000 and $66.1 million, respectively. EBITDA was up at $6.7 million from $6.4 million. Total ag volumes were up at 90,000 st from 79,000 st, with average sales prices up at $538/st from $519/st. Chemical solutions results were less favorable, with both a volume and price decline to 69,000 st ($331/st) versus the year-ago 72,000 st ($350/st). Segment-wide volumes were 159,000 st, up from 151,000 st, with an average price of $448/st, up from $439/st.
Compass said both the ag and chemical solutions businesses experienced disruptions from the May truckers strike in Brazil. However, the company expects ag growth through the rest of the year will offset much of the impact from second-quarter sales. Exchange rates also negatively impacted revenue and selling price results.
The company said grower economics in Brazil are improving, and the strong U.S. dollar is expected to drive robust demand. In particular, Compass, noting the recent U.S.-China tariff dispute, said soybeans are the largest single crop served by Compass in South America, that the harvested acreage is expanding, and that soybean prices are going up.
The company expects second-half year-over-year growth in revenue with operating margins similar to year-ago levels, though it said further weakening in the Brazilian reais may mute some of the growth when translated into dollars. The company is projecting second-half revenues of $250-$275 million, with full-year volumes of 750,000-875,000 st.
Segment six-month operating earnings saw a larger drop, to $1.5 million from $2.6 million, though sales were up at $137.4 million from $127.4 million. EBITDA edged down to $13.3 million from $13.5 million. Ag sales volumes and average prices were up at 151,000 st ($582/st) from 139,000 st ($553/st), while chemical solutions volumes were up and prices down – 148,000 st ($336/st) versus 144,000 st ($352/st). Total volumes were up at 299,000 st with an average price of $460/st, versus the year-ago 283,000 st and $451/st, respectively.
Salt second-quarter operating earnings were up at $12.5 million on sales of $121.1 million from the year-ago $10.7 million and $109 million, respectively. EBITDA was $26.6 million, up from $23.4 million. While total volumes were up at 1.6 million from 1.37 million st, the average price dipped to $75.47/st from $79.44/st.
In the Salt segment, the company said average selling prices declined due to a shift in the sales mix to highway deicing products, which have a lower average selling price than consumer and industrial product. The company does not expect an increase in salt sales due to production constraints, citing the recently ended 11-week strike at the Goderich mine, which included a seven-day full work stoppage near the end of the strike. However, Compass said the current highway deicing bid season indicates an expected average contract price uptick of 15 percent.
Compass is projecting second-half Salt revenue of $440-$470 million and full-year volumes of 11.8-12.3 million st.
Segment six-month earnings were down at $46.6 million on sales of $437 million from the year-ago $56.1 million and $383.8 million, respectively. EBITDA was down at $75.4 million from $81.7 million. Sales volumes were up at 6.4 million st from 5.4 million st, while average prices were down at $68.62/st from $71.01/st.
Compass-wide six-month net income was down at $5 million ($0.14 per share) on sales of $684.6 million from the year-ago $15.1 million ($0.44 per share) and $615.8 million, respectively. Adjusted EBITDA was off at $99.3 million from $104 million.