In This Article:
When your primary business is selling road salt to highway departments, it's natural not to expect very much during the summer months. Compass Minerals International (NYSE: CMP) has diversified into the plant nutrition industry in an effort to flatten out its annual revenue and profit cycles, but the salt business still plays a large enough role in its overall operations that the second quarter is almost always its weakest of the year.
Coming into Monday's second-quarter financial report, Compass investors had no illusions that the company would avoid the typical losses it almost always posts at this time of year. What they did want to see, though, were signs that the coming winter season would be good, and early signs are giving shareholders reason for optimism.
Image source: Compass Minerals.
Compass deals with more red ink
Compass Minerals' second-quarter results showed just how susceptible the company in the warm months. Revenue was $246.7 million, up 8% from year-ago levels, which was just about right where most investors had expected to see the business. However, losses widened to $7.6 million, or $0.23 per share, which was worse than the $0.16 per share in red ink that the consensus predicted.
Fundamentally, Compass saw some reasons to celebrate. In the salt business, segment revenue climbed 11%, with a big bounce in sales volumes offsetting more modest declines in average selling prices for Compass' products. The company said late snows in North America in August depleted stockpiles of road salt in many areas of the U.S., and that meant municipal and state governments needed to make some late purchases in the early spring in order to get through the year. In addition, U.K. buyers took advantage of the early summer timeframe to make restocking orders. Operating earnings for the salt unit were up 17%, with operating margin expanding and helping to create double-digit gains in adjusted pre-tax operating earnings.
Results didn't hold up quite so well in the plant nutrition area. In North America, segment revenue was higher by 3%, with both pricing and unit volume posting modest gains. However, increased production costs led to a nearly 20% drop in operating earnings for the segment. Meanwhile, in South America, revenue was higher by 8% due to strong pre-season demand for specialty nutrient products, but falling sales of chemicals offset those gains to some extent. Disruptions due to a truckers' strike in Brazil during the period weighed on performance, and the falling Brazilian real in U.S. dollar terms also hurt financial results. Operating earnings in South America were down 13% from year-earlier figures.