Earnings call transcript: Compass Minerals Q3 2025 sees major EPS miss, stock drops

Compass Minerals International Inc. (CMP) reported a significant earnings miss for the third quarter of 2025, with an EPS of -$0.39 against a forecast of -$0.01. This unexpected result led to a sharp decline in the company’s stock price, which fell 10.4% after the earnings announcement and continued to drop in aftermarket trading. According to InvestingPro data, the stock has taken a significant hit, dropping 12.59% over the past week, though it maintains an impressive 66.58% gain year-to-date.

Key Takeaways

• Compass Minerals reported a substantial EPS miss, shocking investors.
• Revenue exceeded expectations, coming in at $215 million compared to a forecast of $207.61 million.
• The stock price fell by 12.6% from pre-earnings levels, reflecting investor concerns.
• The Plant Nutrition segment showed strong growth, with a 15% increase in revenue.
• Market sentiment remains negative due to profitability concerns and high debt levels.

Company Performance

Compass Minerals showed mixed performance in Q3 2025. While the company managed to increase its revenue by 6% year-over-year to $215 million, profitability remains a concern with a net loss of $17 million. The Plant Nutrition business was a bright spot, demonstrating significant growth and improved production efficiency. However, the Salt business faced challenges with pricing declines, despite a 4% increase in volumes.

Financial Highlights

• Revenue: $215 million, up 6% year-over-year
• Earnings per share: -$0.39, a significant miss compared to the forecast of -$0.01
• Operating income: $15.9 million, up from $5.9 million last year
• Adjusted EBITDA: $41 million, a 25% increase from $32.8 million

- Total net debt: $746 million, down 13% year-over-year

• Current ratio of 2.15, indicating strong liquidity with assets well covering short-term obligations

  Earnings vs. Forecast

  Compass Minerals reported an EPS of -$0.39, far below the forecast of -$0.01, resulting in a negative surprise of 3800%. Despite revenue exceeding expectations by 3.37%, the substantial EPS miss overshadowed this positive aspect.

  Market Reaction

  Following the earnings announcement, Compass Minerals’ stock fell 10.4% from $21.44 to $19.21. In aftermarket trading, the stock continued to decline, reaching $18.74. This movement indicates strong negative sentiment among investors, likely driven by the unexpected EPS miss and concerns over profitability. However, InvestingPro analysis suggests the stock is currently undervalued, with a strong free cash flow yield of 15%. For investors seeking deeper insights, InvestingPro offers comprehensive analysis with 10 additional key tips and a detailed Pro Research Report, available among 1,400+ top stocks covered by the platform.

  Outlook & Guidance

  The company increased its adjusted EBITDA guidance to $193 million at the midpoint but left capital expenditure guidance unchanged at $75-$85 million. Compass Minerals aims to achieve an investment-grade balance sheet with a debt-to-EBITDA ratio of 2.5 and plans to use cash flow to reduce debt.

  Executive Commentary

  CEO Ed Dowling highlighted the company’s focus on a "value over volume" strategy, aiming to maintain disciplined inventory management. Dowling also emphasized the goal of achieving an investment-grade balance sheet, reflecting the company’s commitment to financial stability.

  Risks and Challenges

  • The significant EPS miss raises concerns about the company’s profitability.
  • High net debt levels, despite a reduction, remain a financial burden.
  • Pricing challenges in the Salt business could impact future earnings.
  • Macroeconomic pressures and input cost fluctuations may affect performance.

  Q&A

  During the earnings call, analysts focused on the deicing market dynamics and inventory management strategies. The company addressed improvements in the Plant Nutrition segment and discussed input cost considerations, particularly for potassium chloride (KCL). Despite current challenges, InvestingPro data shows the company maintains a FAIR financial health score, with analysts projecting a return to profitability this fiscal year. Access the complete Pro Research Report for detailed analysis of CMP’s financial health metrics and growth prospects.

  Full transcript - Compass Minerals Intl Inc (CMP) Q3 2025:

  Tina, Conference Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Compass Minerals Third 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.

  It is now my pleasure to turn the call over to Brent Collins, Treasurer. You may begin.

  Brent Collins, Treasurer, Compass Minerals: Thank you, operator. Good morning, and welcome to the Compass Minerals fiscal third quarter earnings conference call. Today, we will discuss our most recent quarterly 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 Barron, 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, 08/12/2025. 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 available online.

  And with that, I will now turn the call over to Ed.

  Ed Dowling, President and CEO, Compass Minerals: Thank you, Brent. Good morning, everyone, and thank you for joining us today. I’m pleased to report that we had a solid third quarter. I’ll begin by commenting on the Plant Nutrition business. We talked in the past about needing to improve the cost structure at Ogden and a plan to do so.

  We’re making good progress on that front. An added benefit of the work we’ve been doing in Utah is we’re seeing a more consistent and higher productivity at the plant, allowing us to confidently serve businesses beyond our core market in the Western U. S. These efforts have resulted in strong sales volumes, complemented by lower production costs this quarter that more than offset lower pricing and higher per unit distribution costs. The net result is we saw improvements in the per unit operating earnings and adjusted EBITDA for the quarter.

  In the salt business, on a per ton basis, we saw distribution costs hold flat and production costs decreased by 2%. This allowed us to realize improvements in both segment operating earnings and adjusted EBITDA on a per ton basis. Bid season is a big focus for the Salt business in the third quarter. Presently, approximately 70% of the company’s North American highway deicing bid process has been completed. We expect contracted selling price for the coming season to be up 2% to 4% year over year and committed bid volumes to be up 3% to 5%.

  As a reminder, volumes establish service levels for certain customers and sales volumes will ultimately be driven by winter weather. Coming out of this year’s deicing season, we expected to see increases in both price and commitments, so things are playing out generally how we thought they would. An important step we completed in the third quarter was the refinancing that we’ve discussed over the last couple of quarters. That exercise improves our financial flexibility, enhances our liquidity, extends our maturity profile, all of which helps strengthen our ability to continue executing on our back to basic strategy. Our financial position was further augmented in the quarter with the sale of a majority of fortress assets and intellectual property for net proceeds of approximately $20,000,000 It’s worth reiterating what we’re fundamentally working to achieve with our back to basic strategy.

  Our focus is to improve cash flow generating capability of the company by optimizing business practices and structures, lowering capital intensity of our assets and improving the efficiency of our operations. I’m pleased with the progress we are making. With disciplined execution, we’ll continue to unlock intrinsic value of the company. With that, I’ll turn the call over to Peter for a review of our third quarter results.

  Peter Feldman, CFO, Compass Minerals: Thanks, Ed. I’ll make a few comments about the quarter and then we’ll turn the call over to Q and A. For the third quarter, consolidated revenue was $215,000,000 up approximately 6% year over year. Operating income for the quarter was $15,900,000 which is an improvement from operating income of $5,900,000 last year. Consolidated net loss was $17,000,000 compared to a net loss of $43,600,000 in the prior year period.

  Adjusted EBITDA for the quarter increased by 25% to $41,000,000 which compares to $32,800,000 a year ago. In the Salt business, revenue in the third quarter was $166,000,000 compared to $160,600,000 a year ago. Pricing was down 1% year over year to approximately $108 per ton with volumes up 4% compared to the prior year period. Net revenue per ton, which accounts for distribution costs, decreased 1% to $75 On a per ton basis, operating earnings came in 4% higher year over year at $18.2 per ton, while adjusted EBITDA per ton increased by 6% to $29.66 The increase in per ton margins reflects the decrease in production costs compared to last year as price and distribution costs were more or less flat year over year. In the Plant Nutrition business, revenue for the third quarter was $45,000,000 which is up 15% year over year from $39,000,000 Sales volume increased 1% from prior year period, while pricing was down 5% for the same period.

  Distribution cost per ton increased 10% to around $98 per ton and all in production costs per ton decreased approximately 23%. Turning to the balance sheet, I’ll comment on inventory and our financial position briefly. North American highway deicing inventory value and volumes increased sequentially by percent 27% respectively. This is a normal seasonal build as we prepare for the coming deicing season. We remain mindful of past challenges with excess inventory and are committed to avoiding similar issues.

  As of the June, North American highway deicing inventory levels are approximately 50% lower than last year. We are taking a disciplined approach to production planning and inventory management and will continue to refine our strategy as we complete the bid season. Regarding our financial position, at quarter end, we had liquidity of $388,000,000 comprised of $79,000,000 of cash and revolver capacity of around three zero nine million dollars These amounts reflect the cash from the fortress asset sale and the refinancing activity that Ed referred to in his remarks. The amendment to our credit facility that occurred contemporaneously with the new note issuance had two important changes. First, it locked in the commitment level of the facility at $325,000,000 through the life of the facility and eliminated the step downs that were scheduled in the prior agreement.

  Second, it moved the leverage covenant from a total net debt calculation to a net first lien debt measure. These changes enhance our liquidity and provide additional financial flexibility. Total net debt as of 06/30/2025 was $746,000,000 which is down $116,000,000 or 13% year over year. Reducing leverage is a key component to our back to basics strategy and we’re making solid progress towards that goal. It was a strong quarter for the company from a financial perspective.

  Despite increasing inventory levels, we were free cash flow positive and that is before including the proceeds from the Fortress divestiture. From a guidance perspective, we’ve increased our adjusted EBITDA guidance slightly for the year. At the midpoint, we are now showing $193,000,000 for the year, which is an increase from a midpoint of $188,000,000 coming out of 2Q twenty twenty five. The increase is being driven by Plant Nutrition business, where the stronger sales and effective cost management Ed referred to are translating to better financial performance. We also had a slight uptick in our projection for SALT EBITDA.

  Our guidance for capital expenditures remains unchanged at a range of 75,000,000 to $85,000,000 I’ll now open the floor for questions. Operator?

  Tina, Conference Operator: Our first question comes from the line of Joel Jackson with BMO Capital Markets. Please go ahead.

  Joel Jackson, Analyst, BMO Capital Markets: Hi, good morning everyone. I’m going ask a few questions, maybe one by one if that’s okay. Can you help us understand if you get 2% to 4%, a few percentage points of higher hybridizing pricing, gross pricing and when you factor in inflation, does that suggest your netbacks for next winter, this upcoming winter are going to be the same higher or lower on this results out of bid season?

  Ed Dowling, President and CEO, Compass Minerals: Yes. Good morning, Joel. This is Ed. How are you? Look, appreciate the question.

  Our focus on the sales side for the upcoming season is really consistent with our back to basic strategy where it’s value over volume. What you’re really asking is, does the net margin of this plan result in better or worse financial results? And as you know, we’re in the middle of our budgeting season working hard to see that our costs are coming down. I think that’s an important thing. But we’re we do guidance once our budgets are done and through our Board and do that guidance generally on November call.

  Joel Jackson, Analyst, BMO Capital Markets: Okay. And then maybe following up on that, I think there were a lot of, you know, people out there that thought that this could be a very strong bid season. Results came in two to 4%, which as you probably appreciate, pretty average historical results of those never an average bid season or winter, but pretty average two to 4%. Can you talk about, as the bid season has played out, what what happened versus maybe what you might have thought? Might you have thought you’d get higher prices?

  Did you think you might win more share from Cargill or American Rocksall because of issues they have? It seems like there wasn’t that much volume shift between the major players. Can you talk about, how the markets are playing out in de icing, pricing, how it played out? Thanks.

  Ed Dowling, President and CEO, Compass Minerals: Well, the volumes are up across the board. The pricing, as you know, is transparent and so all these bids are public documents. So you can take a look at that. Our back to basic strategy is value over volume and competing where we can drive value into the business. You can take a look at what some of the competitors are doing, but that’s really not our business, that’s their business in terms of what they’re setting out to accomplish.

  But generally, coming into a season like this, it generally takes, when you go back and look at history, two years to really clear the market to really see sort of the full impacts of a year like we had last year. Ben, do want to add anything to that?

  Ben Nichols, Chief Commercial Officer, Compass Minerals: Sure, Ed. Good morning, Joel. I think what Ed is alluding to as well as the last season, while stronger than the prior two, which were quite light, was really just a return to more average weather. And so to the degree that that impacted the overall supply and demand picture maybe wasn’t as great as people had hoped moving into the bid season. And that may have played out a bit in the dynamics with the competition.

  But again, we we stayed focused to our strategy. I was proud of the way the team moved through a a very dynamic situation, and I think we’re we’re delivering the type of value we committed to.

  Joel Jackson, Analyst, BMO Capital Markets: Okay. Final question. It looks like your plan interest rate and cost on a per ton basis were very good. In q three, you had, you know, some decent volumes. Looks like maybe your best per quarter, excuse me, per ton quarter per ton cost in years.

  When I look at your guidance, though, it looks like then costs go back in q four to kind of where they’ve been, maybe even higher than the first half of the year. So were there some unique thing and then volumes are similar in q three versus q four. Were there some unique things going on in q three and or q four? How should we think about it for client attrition?

  Ed Dowling, President and CEO, Compass Minerals: No. Not really. The Joel, look, Plant Nutrition, you know, we’ve been talking about this for a year or so. It’s a multiyear recovery plan starting with the ponds and ultimately working our way through improvements in the dry plant. The good news here is that our recovery on the ponds is ahead of where we thought it would be.

  There’s a number of things that are contributing to that. One is management of solutions and two, really having hot and dry weather out in Utah, we’ve been able to deposit more. Achieving our production and really at the right grade, remember we talked about the harvest production ratio has worked out really quite well for us and we’re trying to take advantage of that sort of going forward. We’re doing some things in the wet plant to improve overall recovery. We’ll talk about that at some point in the future and ultimately the capital project in the dry plant.

  I think the outlook is really just we had a good quarter. I think we would expect to see something similar in the fourth quarter. We’re the plant’s down right now, so the volume of that’s planned and scheduled. What you’re probably seeing a little bit is compression on that. I’ll turn maybe Pat would have some comments on that as well.

  Pat Barron, Chief Operations Officer, Compass Minerals: Hi, Joel. It’s Pat. One other thing to keep in mind is KCL is a big input factor for us. And so our costs are driven by the cost of KCL in the open market. So that also can impact what our overall costs are going forward.

  So we’re projecting into that as opposed to what we’ve seen in the past.

  Joel Jackson, Analyst, BMO Capital Markets: Could I be greedy and just sneak in a question on that? Does that mean that maybe in Q3, your mix was more straight harvest? In Q4 the mix shifts a little more towards augmented with purchase KCL?

  Pat Barron, Chief Operations Officer, Compass Minerals: No. I wouldn’t say that. As Ed spoke about the improvement in health of the ponds, which then improves the input into the plant over time allows us to use less KCL, so there’s going to be some impact of that. But the long term trend, some of the cost is just what we have to purchase KCL at. And so I think we see leading into next year higher KCL prices based on what the market is telling us they expect those prices to be.

  Joel Jackson, Analyst, BMO Capital Markets: Thank you.

  Tina, Conference Operator: Your next question comes from the line of Patrick Goff with JPMorgan.

  Patrick Goff, Analyst, JPMorgan: Hi guys. Thanks for taking the question. I missed part of the prepared remarks and I had a question or a clarification question on your comment regarding North American highway deicing inventories down 50% relative to last year. I assume that’s your inventory levels or that’s industry inventory levels?

  Ed Dowling, President and CEO, Compass Minerals: Patrick, good morning, John. This is Ed. I mean, that’s our inventory levels. Peter, you want to add more to that?

  Peter Feldman, CFO, Compass Minerals: No. Again, back to basics. Just managing those through.

  Ed Dowling, President and CEO, Compass Minerals: Yeah. We’ll be managing that working capital very carefully going forward. Flex up and down depending on what happens at any given year. We’ll manage the business flexibly as we’ve talked about in the past, but we’re not going to find ourselves in a circumstance like we did a year ago, where we’re just way too much inventory coming into a season and just produce to make earnings look good, but basically putting cash in the inventory. We’re not going do that anymore.

  Joel Jackson, Analyst, BMO Capital Markets: That makes sense. Can

  Patrick Goff, Analyst, JPMorgan: I follow on a couple of quick ones?

  Peter Feldman, CFO, Compass Minerals: Do have a

  Patrick Goff, Analyst, JPMorgan: sense, I guess I’ll put them both in there. Do you have a sense as to where broader industry inventory levels are? And then I guess the other question would be just when you think about your balance sheet, where are you trying to get to with regard leverage on maybe a normalized EBITDA basis going forward?

  Ed Dowling, President and CEO, Compass Minerals: Yes, Patrick, I’ll have Ben address the first thing in terms of industry wide inventories and I’ll address sort of balance sheet targets.

  Ben Nichols, Chief Commercial Officer, Compass Minerals: Good morning Patrick, this is Ben. It would be a bit of speculation. I think it’s prudent to say that industry inventories would be down year over year being that going into last season we were coming off at two very light winners and I think it was widely known that inventories were pretty heavy. To the degree that they’re down with our competitors I would be speculating. So I won’t speak to that.

  Ed Dowling, President and CEO, Compass Minerals: In terms of our balance sheet Patrick, ultimately we’d like to work ourselves to be investment grade, which implies a debt to equity ratio or EBITDA ratio of between two and three, kind of roughly 2.5. I’ve talked about that in the past. How we manage cash and working our way down and pleased that our debt is coming down, that’s the plan is make cash and retire debt. As we move our way through there, we’ll start thinking more and more about potential capital returns and things like that in the future, but no decision at this point. We need to get our debt down a bit more before we start thinking about that.

  Patrick Goff, Analyst, JPMorgan: And then sorry, one last one. So would the thought with the stub of the 27s be to pay that down with cash flow or to refi that?

  Ed Dowling, President and CEO, Compass Minerals: As a 100%, our we’ve announced our intention is to use cash flow to pay down the stub leftover on the 27 bonds.

  Patrick Goff, Analyst, JPMorgan: Got it. Thank you so much. I appreciate it.

  Ed Dowling, President and CEO, Compass Minerals: You bet. Thanks Patrick.

  Tina, Conference Operator: And with no further questions in queue, I will now hand the call back over to Ed Dowling for closing remarks.

  Ed Dowling, President and CEO, Compass Minerals: Okay. Thank you, operator. Really appreciate it. And thanks everybody for joining the call today. We’ve got some events coming up here over the next sort of two months and look forward to seeing you then.

  Tina, Conference Operator: Thank you again for joining us today. This does conclude today’s conference call. You may now disconnect.

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