Intrepid Potash Inc. on Jan. 14 announced a number of cost-savings initiatives, including the elimination of approximately 7 percent of its workforce, to “better align its cost structure” due to declining potash prices since mid-2013 and the conclusion of major capital projects.
Denver-based Intrepid announced other cost-saving measures as well, including decreases in executive compensation, a reduction in the use of outside professionals, and cutbacks in other general and administrative expenses. The company said the workforce reduction includes support staff related to its various capital projects, which are nearly complete.
“These are difficult, but necessary decisions. The changes we have made better position Intrepid in today’s market environment and enhance our long-term competitiveness,” said Dave Honeyfield, Intrepid’s president and Chief Financial Officer. “We have taken a thoughtful approach to ensure that we are balancing the current market environment with what we see as a healthy long-term business model with a continued commitment to safe operations. We are treating those impacted by these changes with the respect and fairness they deserve, while creating value for our shareholders by running Intrepid as efficiently as possible.”
Intrepid gave no specifics on the number of employees affected by the decision. It said the workforce reduction is expected to result in a first-quarter 2014 pre-tax charge of approximately $1.5-$2.0 million. Intrepid estimates saving approximately $15 million annually from these initiatives, with the majority being in general and administrative expense and the remainder being cost of goods sold.
Intrepid’s announcement follows a similarly one by PotashCorp of Saskatchewan Inc. in early December (GM Dec. 9, 2013), when PotashCorp announced that it was slashing its workforce by approximately 18 percent, closing several facilities in its potash and phosphate businesses, and scaling back production at others due to sluggish demand and a “challenging market environment.”
Several analysts at the time said they expected other potash producers to follow PotashCorp’s lead, citing the drop in potash demand and prices that followed this summer’s decision by Russian producer OAO Uralkali to withdraw from Belarusian Potash Co. (BPC) and pursue a volumes-over-price global marketing strategy (GM Aug. 5, 2013).
Intrepid is the largest producer of potash in the U.S., with six active production facilities in New Mexico and Utah that produce approximately 870,000 tons of potash and 200,000 tons of langbeinite annually. In addition to potash, Intrepid also produces and markets Trio®, a specialty fertilizer that combines potassium, magnesium, and sulfur in a single particle.
Intrepid’s major capital projects include the newly commission HB Solar Solution mine 20 miles northeast of Carlsbad, N.M.; a new compaction plant at its North Plant in Utah; additional solution mining opportunities at its Moab, Utah, facility; and a Langbeinite Recovery Improvement Project to add granulation capacity to its Trio production stream.