Earnings call transcript: Compass Minerals Q1 2025 earnings beat expectations

Compass Minerals International Inc. reported its first-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.63 compared to the forecasted $0.0045. The company also reported a significant revenue increase to $495 million, exceeding the anticipated $413.71 million. Following the earnings announcement, Compass Minerals’ stock surged by 23.44%, reflecting investor optimism. According to InvestingPro data, the stock’s recent performance has been particularly strong, with a 26.49% year-to-date return and trading near its 52-week high of $15.82.

Key Takeaways

• Compass Minerals’ EPS of $0.63 far exceeded the forecast of $0.0045.
• Revenue rose to $495 million, marking a 36% year-over-year increase.
• The stock price jumped by 23.44% in after-hours trading.
• The company reduced its operating loss and total debt significantly.
• Positive market sentiment driven by improved financial performance and strategic initiatives.

Company Performance

Compass Minerals demonstrated strong performance in the first quarter of 2025, driven by substantial revenue growth and strategic cost management. The company’s focus on optimizing its core businesses, particularly in the salt and plant nutrition sectors, has resulted in improved financial results. The salt business, in particular, saw a notable revenue increase to $433 million from $310 million the previous year. InvestingPro analysis shows the company maintains healthy liquidity with a current ratio of 2.37, though it operates with significant debt levels. Analysts following the stock have set price targets ranging from $14 to $20, suggesting potential upside from current levels.

Financial Highlights

• Revenue: $495 million, up 36% year-over-year.
• EPS: $0.63, significantly above the forecasted $0.0045.
• Operating loss: $3.1 million, improved from $39.3 million last year.
• Adjusted EBITDA: $84.1 million, compared to $95.7 million in the previous year.
• Salt business revenue: $433 million, up from $310 million.
• Plant nutrition revenue: $58 million, up 16% year-over-year.

Earnings vs. Forecast

Compass Minerals’ EPS of $0.63 represented a remarkable beat over the forecast of $0.0045, translating to a substantial positive surprise. This performance marks a significant improvement compared to previous quarters, showcasing the company’s effective cost management and strategic focus.

Market Reaction

Following the earnings release, Compass Minerals’ stock price surged by 23.44%, closing at $17.57, well above its previous close of $14.23. This positive market reaction reflects investor confidence in the company’s financial health and strategic direction. The stock’s movement places it closer to its 52-week high of $17.75, indicating strong market sentiment.

Outlook & Guidance

Compass Minerals has raised its adjusted EBITDA guidance to $188 million for the year, maintaining capital expenditure guidance at $75-$85 million. The company plans to continue focusing on cost control, inventory management, and enhancing free cash flow, while ramping up production to improve per-unit costs. InvestingPro forecasts suggest a 17% revenue growth for fiscal year 2025, with analysts expecting the company to return to profitability this year. For deeper insights into Compass Minerals’ financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, covering over 1,400 US stocks.

Executive Commentary

CEO Edward Dowling emphasized the company’s strategic focus, stating, "We are focused on delivering on our back to basics strategy." He also highlighted the positive market conditions, noting, "The recently completed deicing season was a good reminder that winters do in fact happen." Chief Commercial Officer Ben Nichols added, "We have some early data points on tender sizes which are ranging to slightly up to significantly up in some regions."

Risks and Challenges

• Potential supply chain disruptions could impact production schedules.
• Market saturation in the deicing segment may limit growth opportunities.
• Fluctuations in commodity prices could affect profitability.
• Macroeconomic pressures may influence consumer demand.
• Regulatory changes could impact operational costs and market access.

Q&A

During the earnings call, analysts inquired about accounts receivable levels and the impact of insurance settlements. The company also addressed potential volume and pricing dynamics for the upcoming bid season and detailed plans for improving SOP production efficiency and cost structure.

Full transcript - Compass Minerals Intl Inc (CMP) Q2 2025:

Carly, Conference Operator: Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Compass Minerals Second Quarter Fiscal twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

Thank you. I would now like to turn the call over to Mr. Brent Collins, Vice President, Treasurer and Investor Relations. Please go ahead.

Brent Collins, Vice President, Treasurer and Investor Relations, Compass Minerals: Thank you, operator. Good morning and welcome to the Compass Minerals fiscal second quarter earnings conference call. Today, will discuss our recent results and provide an update of our outlook for fiscal twenty twenty five. We will begin with prepared remarks from our President and CEO, Edward Dowling and our CFO, Peter Feldman. Joining in for the question and answer portion of the call will be Pat Marin, our Chief Operations Officer and Ben Nichols, our Chief Commercial Officer.

Before we get started, I will remind everyone that the remarks we make today reflect financial and operational outlooks as of today’s date, 05/08/2025. These outlooks entail assumptions and expectations that involve risks and uncertainties that could cause the company’s actual results to differ materially. A discussion of these risks can be found in our SEC filings located online at investors.compassminerals.com. Our remarks today also include certain non GAAP financial measures. You can find reconciliations of these items in our earnings release or in our presentation, both of which are also available online.

I will now turn the call over to

Edward Dowling, President and CEO, Compass Minerals: Thank you, Brent. Good morning, everyone, and thank you for joining us on our call today. After a disappointing first quarter, the second quarter was much better in terms of winter weather. This, in turn, has unlocked the benefits of the strategy we embarked upon a year ago. Last year, the company made the strategic pivot to refocus its efforts on the core business.

Our goal is to improve the cash flow generating capability of our business by optimizing business practices and structures, lowering capital intensity of our assets and improving the efficiency of our operations. Because of the nature of our seasonal business, the steps we take to achieve these goals sometimes take quarters to play out. I’m pleased to share that we continue to make progress on our back to basic strategy. Almost exactly a year ago, we shared our plan on how we intended to rationalize the North American highway deicing inventory levels that have grown too large after consecutive mild winters. The primary goal of this initiative was to free up cash that was hung up on working capital and use that cash to reduce debt.

Additionally, we knew that salt inventories across the broader system were high, which is impact from the supply demand balance in the market. We didn’t want to further exacerbate that dynamic. We decided to curtail production at Goderich Mine and to a lesser extent at Cote Blanche with the view that with some help from winter, we’d see a meaningful drawdown in our salt inventories and realize significant working capital release out of inventory. As a result of that curtailment, we knew that we’d experienced some short term margin compression due to higher fixed cost absorption, but it was the right business decision for the long term success to move our business to lower inventory levels. Fast forward a year, you can see that we executed well on the plan.

A few points to help that bear that out. North American highway deicing inventory values are down 47% year over year. North American highway deicing inventory volumes are down 59% year over year. Across our depot network, we saw a number of depots being fully depleted by the end of the highway deicing season and throughout the season, there are multiple media reports about shortages of salt in some of the markets which suggest there’s some tightness in the market during the winter. The successful execution of our plan allowed us to realize approximately $145,000,000 working capital release out of inventory alone, which in turn helped us reduce our total debt in the quarter by more than $170,000,000 The drawdown in inventory across our network was significant this season.

We also believe that competitors and customers saw similar drawdowns in their respective networks. Against this backdrop of a low system wide inventories, the company is well positioned to optimize production inventory levels as we approach the twenty five-twenty six North American highway deicing bid season. During the second quarter, there’s obviously a lot of noise around tariffs and we needed to see where these things landed before firming up our production plans for the coming year. The salt and fertilizer products that we produce in Canada are qualified under USMCA trade agreement. As a result, they’re currently exempt from any tariffs that have been implemented or proposed.

With that huge question mark seemingly addressed, the company is in the process of ramping up production, which should have a favorable impact on our per unit cost, all things being equal. From a pricing perspective, the setup is constructive as we enter North American bid season. There’s a psychological component to the highway deicing business. It worked against us when we had mild winters for a couple of winters and customers could look in their sheds and see that they were full of salt. The recently completed deicing season was a good reminder that winters do in fact happen.

It’s not unreasonable to think that the pendulum could sweep back in our favor this bid season and allow for some stronger pricing. We could see positive impact on volume commitments in the coming season as well. Our efforts over a year ago are bearing fruit and position us well to maximize value of our highway deicing business in the coming year. We will continue to maintain flexibility in our operations and capital plans so that we can appropriately respond to the market conditions. I’ll now move to actions we took during the second quarter that are expected to have benefits in future periods.

In March, we announced that we’re eliminating over 10% of our corporate workforce. This is an extension of our efforts to align our cost structure with our current business needs. We We are working on advancing additional cost improvement projects as we continue to focus on driving down costs across the platform. We also announced that we’d begin to wind down Fortress North American business. These actions simplify our business, allow the company to generate additional cash flow and accelerate deleveraging.

With that, I’ll turn the call over to Peter for a review of our quarterly results.

Peter Feldman, CFO, Compass Minerals: Thanks, Ed. I’ll comment briefly on the financial results for the quarter before turning the call over for Q and A. For the second quarter, consolidated revenue was $495,000,000 up 36% year over year. Operating loss for the quarter was $3,100,000 which was an improvement from the operating loss of $39,300,000 last year. Consolidated net loss was $32,000,000 compared to a net loss of $38,900,000 in the prior period.

These results include impairments taken on Fortress in both periods as well as the impairment in the Plant Nutrition business last year. Adjusted EBITDA for the quarter was $84,100,000 which compares to $95,700,000 a year ago. As noted in our press release yesterday, the treatment of the contingent consideration liability for Fortress impacts the comparability of adjusted EBITDA between periods. When that is taken into account, modified adjusted EBITDA was $76,200,000 in the quarter compared to $71,900,000 in the second quarter of twenty twenty four. In the Salt business, revenue in the second quarter was $433,000,000 compared to $310,000,000 a year ago.

Pricing was down 5% year over year to approximately $85 per ton with volumes up 47% compared to the prior period. Net revenue per ton, which accounts for distribution costs decreased 4% to $57 On a per ton basis, operating earnings came in lower year over year at $13.1 per ton down 31% while adjusted EBITDA per ton decreased roughly 30% to $16.75 The decrease in margins primarily reflects the increase in production cost per ton due to the curtailment of the production at the Goderich mine last year and softer pricing for highway deoxing salt compared to last year. In the Plant Nutrition business, revenue for the second quarter was $58,000,000 which is up 16% year over year from $50,000,000 Sales volumes were up 26% from prior period while pricing was down 8% for the same period. Distribution cost per ton increased 13% to around $102 per ton and all in production costs per ton decreased by approximately 10% when adjusting for the impairment in the business last year. As Ed mentioned, we executed successfully on our plan to reduce North American highway deicing inventory levels, harvest cash and pay down debt.

The value of North American highway deicing inventory declined 47% year over year and the volumes associated with that were down almost 60%. This allowed for a sequential decrease in total net debt of $171,000,000 and an $81,000,000 decline from last year’s second quarter. At quarter end, we had liquidity of $329,000,000 comprised of $51,000,000 of cash and revolver capacity of around $279,000,000 From a guidance perspective, we increased our adjusted EBITDA guidance for the year. At the midpoint, we are now showing $188,000,000 for the year, which is an increase from a midpoint of $173,000,000 coming out of Q1 twenty twenty five. The $188,000,000 includes the gain related to the write off of the fortress contingent consideration liability of approximately $8,000,000 Even adjusting for that item, we’re showing improvements in guidance for SALT and corporate.

I would also point out that our guidance for capital expenditures was unchanged at a range of 75,000,000 to $85,000,000 As we continue executing on our back to basic strategies, we will focus on controlling costs, managing inventory working capital and enhancing free cash flow. I’ll now open the floor for questions. Operator?

Carly, Conference Operator: Your first question comes from David Silver with CL King.

David Silver, Analyst, CL King: Yes. Hi, good morning. Not used to being called first. Okay. Thank you very much.

I do have a couple of questions regarding kind of the balance sheet and the cash flow statement in particular. And I understand there’s a number of relatively different events kind of puts and takes. Can I just ask you, unlike most March quarters, the accounts receivable level actually rose from December to March? And overall, I mean, think it’s at a very high level relative to your sales or historical season ending levels. Is there something going on there?

Or why shouldn’t I think that this would be a significant source of incremental further incremental cash going forward. Just some comment on kind of the March March month end level of accounts receivable, please?

Edward Dowling, President and CEO, Compass Minerals: Hi, David. This is Ed. Sometimes it’s good to be first, but the anyway, to hear your voice. Let me pass this off to Peter Feldman to address your question about the balance sheet.

Peter Feldman, CFO, Compass Minerals: Sure. This is Peter. There are a couple of insurance settlement matters within the AR and both the AEP balances. And so you’ll see site gross up to both for the accounting as well as we continue to have a good quarter and we see those AR balances will continue to come down slightly related to just the natural flow of the inventory sell

Edward Dowling, President and CEO, Compass Minerals: through.

David Silver, Analyst, CL King: Okay. Very good. And then maybe a business question, but I’m sure your team this has to do with the upcoming bid season, and I’m sure your team is very proficient at kind of reading the tea leaves, I guess. But what can you say or what can you divulge divine, I guess, from the early requests for bids? In other words, have the volume commitments that the customers are seeking, have they noticeably increased versus the past year or two?

Are the delivery points indicating areas of maybe the depot depletion, Ed, that maybe you cited in your remarks? Just, I know it’s early, but, the bidding does start pretty early or at least the bid process starts pretty early. What can you divine from what’s available to you at this point?

Edward Dowling, President and CEO, Compass Minerals: David, I’ll make some general comments upfront and then pass it off to Ben here. Is very early in the bidding season. We do think that the market based on the difference between a year ago and now in terms of inventories and the winter that we served last year is much more constructive than we’ve seen over the past several years. So that by itself gives an indication of potential price increases and potential volume increases. But recognize that not all areas are the same, that some areas experience more snow than others.

So those sort of things will be different depending on the sort of current situation in the different locales. It’s a setup that we understand reasonably well. So pass that off to Ben Nichols here to see what else you might want to add.

Ben Nichols, Chief Commercial Officer, Compass Minerals: Yeah. Good morning, David. This is Ben. I think what Ed alluded to the regional nature of that is important to understand. I would also say we have some early data points on tender sizes which is the municipal and state level indications of what they see their needs for the upcoming season.

And I would tell you that those are ranging to slightly up to significantly up in some regions. So all things being equal, we think the dynamic is going to be positive year over year moving forward. And I would tell you our team is very excited about that opportunity.

David Silver, Analyst, CL King: Okay. Great. And I’m just going to sneak in one more. But this would be related to your SOP business. And just as a note, I mean, to me that business is still has a lot of potential to kind of improve the margins there, especially given the pretty two consecutive quarters I think of pretty high shipment levels.

Ed, you’ve I understand the Salt segment and particularly the icing inventories was job one here. But what do you see over the next few quarters or next year or so in terms of restoring kind of that cash cost or cash production cost performance level to, I don’t know, more historical levels and maybe driving some incremental cash flow from that part of your business?

Edward Dowling, President and CEO, Compass Minerals: Yes. It’s an important objective for us, David. We outlined efforts that we were initiating a year ago and it’s a multiyear effort. And it really starts with the brine chemistries and controlling the brine chemistries better as we go into our evaporation ponds to sort of repair and restore these ponds back towards sort of historical levels. And we talked about sales to harvest ratios and harvest to production ratios, excuse me, and other things.

The early indications are very good in that regard. And you see that through the increased volumes that we’re now producing in Utah. That’s really just the first step. That will continue for some period of time, but it really is just the first step. The other big end of this is sort of the back end of the SOP production, which is related to what we call the dryer plant or the compaction plant, which requires a capital project and modification.

That engineering work is well advanced. We want to make sure that we’re really spot on and able to manage this really well. But between those different efforts, we believe that we will be able to materially reduce the cost of our SOP production. I’ll hand this off to Pat Barron a little bit to see if he’d like to add some additional comments there.

Pat Marin, Chief Operations Officer, Compass Minerals: Thanks, Ed. Hi, David. This is Pat. I’ve had a chance to get to Ogden a couple of times now. And certainly, we have a fantastic team there and a very unique asset.

And on top of the projects that Ed has talked about, we certainly see some opportunities for us to drive improvements in how we run the business. But that’s going to be incremental over time. But the two big projects that Ed has spoken about, the restoration of the ponds and the capital projects will give us a step function going forward while we continue to drive improvements in the business.

David Silver, Analyst, CL King: Okay. Thanks very much. I’m going to get back in queue. Appreciate it.

Edward Dowling, President and CEO, Compass Minerals: Okay. Thank you, David.

Carly, Conference Operator: There are no further questions at this time. I’ll now turn the call back over to Edward Dowling, President and CEO.

Edward Dowling, President and CEO, Compass Minerals: Thank you, Carly, for the moderation here. I appreciate that. And thank you all again for your interest in Compass Minerals. We are focused on delivering on our back to basics strategy. We’re making good progress in that regard, and I’m excited about the steps the company is making.

Please don’t hesitate to reach out to Brent if you have any follow-up questions. We look forward to speaking to you in the next quarter.

Carly, Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.