Compass Minerals Endures Weather-related Setbacks in 2011, Maintains Strong Sales

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Researched by Industrial Info Resources (Sugar Land, Texas)--Compass Minerals International Incorporated (NYSE:CMP) (Overland Park, Kansas), a leading North American producer of specialty fertilizers and deicing salt, endured weather-related setbacks in fourth-quarter and full-year 2011 from both harsh and mild conditions. After a tornado in Canada devastated one of the company's major facilities, unusually mild North American winter weather weakened earnings in the Salt segment. Net earnings for the quarter were reported to be $43.9 million, a 28.15% decrease from fourth-quarter 2010, and $149 million for the year, a 1.06% decrease from 2010.

Compass executives noted that results are different when excluding income tax and interest expenses, depreciation, depletion and amortization, as well as interest income and foreign exchange gains and losses. Using this measurement, which is called "adjusted EBITDA," earnings stood at $75.9 million for the quarter, a 22.87% decrease from the same period in 2010, and $280 million for the year, a 0.54% increase.

Total sales were reported to be $306.1 million for the quarter, a 14.09% decrease from fourth-quarter 2010, and $1.11 billion for the year, a 3.44% increase from 2010. The most influential single factor during the quarter was an August tornado that struck the company's salt mine and salt evaporation plant in Goderich, Ontario, depleting earnings by about $11.4 million. The Salt segment also was negatively affected by mild winter weather that reduced sales volumes for highway deicing salt in the U.S. and Canada by 17%. However, pricing improved in both of the major operating segments during the full year, and salt sales were strong in the first three quarters.

Industrial Info is tracking more than $268 million in active Compass projects, including $35 million in upgrades at a minerals recovery plant in Ogden, Utah. The project involves upgrading and replacing equipment throughout the plant to maintain the operational reliability of the major production units. This is part of an ongoing, multi-year effort to refurbish the existing plant and its equipment to accommodate higher demand. The plant is owned by Compass subsidiary Great Salt Lake Minerals Corporation (Ogden).

"Despite a very low snowfall in the fourth quarter, a devastating tornado that temporarily shut down our Goderich operations, and much-too-cool rainy weather at the Great Salt Lake [facility] this past summer, which prevented us from reaching normal [sulfate-of-potash specialty fertilizer] solar evaporation production levels, our 2011 results are still our second-best in our company's history when the weather and the other external factors are considered," said Angelo Brisimitzakis, the president and chief executive officer of Compass, in a conference call. He added that 2011 sales were just 5% below the record set in 2008.

Both of the company's major segments reported lower sales for the quarter but higher sales for the year, while the Specialty Fertilizer segment fared better in operating earnings:

• The Salt segment reported sales of $250.1 million for the quarter, a 15.76% decrease from fourth-quarter 2010, and $885.3 million for the year, a 1.72% increase from 2010. Operating earnings were $53.4 million for the quarter, a 30.01% decrease from the same period in 2010, and $184.7 million for the year, a 10.34% decrease from 2010.
• The Specialty Fertilizer segment reported sales of $53.6 million for the quarter, a 5.3% decrease from fourth-quarter 2010, and $209.6 million for the year, an 11.79% increase from 2010. Operating earnings were $19.6 million for the quarter, a 9.5% increase from the same period in 2010, and $77 million for the year, a 25.41% increase from 2010.

In the first quarter of 2012, winter weather continues to be milder than average in the company's major service regions, and Compass executives expect to see about $20 million less in operating earnings due to additional losses from the Goderich tornado. But executives also expect the Goderich facility to approach normal operating levels by the end of the quarter. Specialty fertilizer product costs are forecast to be more expensive by $100 per ton in the last three quarters of the year. The company is expected to spend about $150 million on capital projects in 2012, about $40 million of which will be spent on restoring the Goderich facility.

"We expect most of the damaged production assets to be repaired, replaced or worked around by the end of the second quarter," Brisimitzakis said in the conference call. "Our salt production capabilities and product costs should return to normal at that point. We believe business interruption insurance will cover the estimated profits we lost, but we can't be sure all the losses will be recovered, or when we will receive reimbursements."

For more information, visit Industrial Info's North American Metals and Minerals Project Database.

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