Higher sulfate of potash prices in the fourth quarter and year ending Dec. 31, 2011, helped Compass Minerals offset lower volumes. Fourth-quarter prices were up 19 percent, while volumes were off 21 percent. The addition of Big Quill Resources in January 2011 also helped the Compass specialty fertilizer segment post a 9 percent increase for the fourth quarter, to $19.6 million on sales of $53.6 million, compared to the year-ago $17.9 million on sales of $56.6 million.
Fourth-quarter volumes were 85,000 st with an average price of $631/st, compared to the year-ago 107,000 st and $530/st, respectively.
For the year, fertilizer earnings were $77 million on sales of $209.6 million, up from the prior year’s $61.4 million and $187.5 million, respectively. Volumes fell to 344,000 st at an average price of $610/st from the year-ago 362,000 st and $518/st, respectively.
Going forward, Compass expects to sell 375,000 st of SOP in 2012, with 90,000 st of that in the first quarter. It expects prices to remain strong, within the $630/st average for the last two quarters. Fourth-quarter per-ton costs were put at $330/st, up from the fourth quarter’s $292/st. The company expects production costs to be higher by about $100/st in the second through fourth quarters of 2012 when compared to 2011 due to inefficiencies caused by low solar-evaporation harvest in the summer of 2011 and costs associated with purchases of mineral feedstock for SOP production.
Compass hopes production costs will improve by the end of 2012, due to a more typical evaporation season as well as the completion of Phase 1 and the initial pond-yield benefits of Phase II of its multi-phased expansion program. Due to these upgrades, it expects production costs to eventually drop to $225/st. The completion of Phase I has been delayed until the third quarter to avoid shutting down the plant for the final tie-in. In 2012, it expects to spend some $110 million on the expansion plans, with another $40 million to be spent to restore the Goderich, Ont., salt operations to pre-tornado capabilities. Goderich is currently operating at 85 percent capacity. Most of the latter will be covered by insurance. However, it estimates that the effects of the tornado will linger into first quarter 2012, impacting salt earnings by $20 million.
Company-wide, Compass was impacted by its salt business, which suffered due to the tornado that damaged its Goderich facility as well as a weak winter salt season, which cut fourth-quarter salt deicing volumes by 17 percent, with salt prices down slightly for the quarter. Company-wide, Compass reported fourth-quarter net earnings of $43.9 million ($1.31 per share) on sales of $306.1 million, down from the year-ago $61.1 million ($1.83 per share) on sales of $356.3 million. Net earnings excluding special items were $55.3 million ($1.65 per share), versus the year-ago $56.8 million ($1.70 per share).
For the year, Compass reported net income of $149 million ($4.45 per share) on sales of $1.1 billion, down slightly from the year-ago $150.6 million ($4.51 per share) on sales of $1.07 billion. Despite its weather woes, Compass said 2011 sales were the second highest in company history. Net earnings excluding special items were $160.4 million ($4.79 per share), versus the year-ago $146.3 million ($4.38 per share).
Going forward, should the winter not improve, Compass expects a soft environment for salt volumes and prices for next winter, with volumes being down and prices flat.