Compass Minerals reported its fourth-quarter 2024 earnings, missing Wall Street expectations with an EPS of -0.77 against a forecast of -0.44. Revenue reached $209 million, falling short of the projected $232.77 million. Despite the disappointing results, the stock saw a modest increase of 0.56% in after-hours trading.
Key Takeaways
- Compass Minerals reported a significant earnings miss with an EPS of -0.77.
- Revenue decreased by 11% year-over-year to $209 million.
- The stock price increased slightly by 0.56% despite the earnings miss.
- The company is focusing on core businesses and operational efficiency.
- Compass Minerals anticipates growth in salt and plant nutrition volumes in 2025.
Company Performance
Compass Minerals faced challenges in the fourth quarter of 2024, with a consolidated revenue of $209 million, an 11% decline from the previous year. The company reported a net loss of $206 million, highlighting difficulties in its core operations. However, the Plant Nutrition segment showed resilience, with volumes rising by 25% year-over-year.
Financial Highlights
- Revenue: $209 million, down 11% year-over-year.
- Full-Year Revenue: $1.1 billion, down 7% year-over-year.
- Salt Segment Revenue: $908 million, a 10% decrease year-over-year.
- Adjusted EBITDA: $206 million for the full year.
Earnings vs. Forecast
Compass Minerals posted an EPS of -0.77, missing the forecast of -0.44 by 0.33. The revenue of $209 million also fell short of the expected $232.77 million. This earnings miss suggests underlying operational challenges and market conditions impacting performance.
Market Reaction
Despite the earnings miss, Compass Minerals' stock saw a slight increase of 0.56% in after-hours trading. This muted reaction may reflect investor confidence in the company's strategic initiatives and future growth prospects, as well as market conditions that have already priced in some of the negative news.
Company Outlook
Looking forward, Compass Minerals expects a 9% increase in salt sales volumes and an 8% rise in Plant Nutrition segment volumes for fiscal 2025. The company plans to generate free cash flow and aims to refinance its debt with more flexible covenants, indicating a strategic focus on financial health and operational efficiency.
Executive Commentary
"Our goal is to gear the company such that it generates free cash flow even in mild winters," stated Edward Dowling, CEO. This highlights the company's focus on resilience and adaptability. Geoffrey Kaffee, CFO, added, "We believe we will be able to move into a structure that provides more flexibility around covenants," emphasizing financial strategy adjustments.
Q&A
During the earnings call, analysts inquired about the potential normalization of winter volumes and margin improvements despite lower volumes. Executives addressed these concerns, noting ongoing negotiations with the U.S. Forest Service for a fire retardant contract as a growth opportunity.
Risks and Challenges
- Supply chain disruptions could impact production and distribution.
- Market saturation in core segments might limit growth.
- Macroeconomic pressures and currency fluctuations pose financial risks.
- Environmental regulations could increase operational costs.
- Competitive pressures from larger industry players may affect market share.
Full transcript - Compass Minerals Intl Inc (NYSE:CMP) Q4 2024:
Regina, Conference Operator: and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Compass Minerals' Fiscal 4th Quarter and Full Year 2024 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.
Session. I would now like to turn the conference over to 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 4th quarter and full year 2024 earnings conference call. Today, we will discuss our recent results and provide our outlook for fiscal 2025. We will begin with prepared remarks from our President and CEO, Edward Dowling and our CFO, Geoffrey Kaffee. Joining in for the question and answer portion of the call will be Ben Nichols, our Chief Sales Officer and Jenny Hood, Chief Supply Chain 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, December 17, 2024. 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. I'll now turn the call over to Ed.
Edward Dowling, President and CEO, Compass Minerals: Thank you, Brent. Good morning, everyone, and thank you for joining us on our call today. It's good to be speaking to you again after we've had to take a pause as we work through our restatements. I want to begin my remarks today by providing a brief recap of the year. To say fiscal 2024 was an eventful and transitional year for the company would be a major understatement.
The transition began in November 23 when we announced the suspension of our lithium project in Utah, which was formally terminated a few months later in February. This was a significant pivot for the company that aligned with the renewed strategy commitment to focus efforts on improving performance on our core Salt and Plant Nutrition businesses. We all know that different jobs require different skill sets and it's only amplified when it involves a shift in strategy. As the company reoriented towards the back to basic strategy, changes were made in our senior leadership team, including my appointment in January as President and CEO and across the organization to ensure they had the right team in place to execute effectively. In the midst of these changes in directions and leadership, we experienced within our served markets, one of the weakest North American highway de icing seasons of the last quarter century.
There were very clearly financial and operations ramifications that arose from that, which led us to discontinue our dividend, curtail production at Goderich Mine and other mines and to take a hard look at and take actions to improve our cost structure. There was also a pause that we had to take in the development of Fortress, our fire retardants business, as well as financial reporting restatement issue we had to work our way through in the recent months. Clearly, we had our fair share of challenges in fiscal 2024 and it's a year we'll be happy to have behind us. However, I'm reminded of saying, it's darkest before the dawn. And I think it's applicable here at Compass Minerals.
The fact remains unchanged that we have the privilege of operating high quality, advantaged soft plant nutrition assets with long standing established markets. Certain of those assets are quite frankly irreplaceable and could not be replicated today. For example, in Goderich, Ontario, we operate the world's largest underground salt line located 1800 feet below Lake Huron. The geological attributes of this mine and the fact that it has access to a deepwater port positions Goderich to be a low cost producer for much of the Great Lakes region. In Ogden, Utah, we operate the largest sulfate potash facility of its kind in the Western Hemisphere.
When done correctly, our use of naturally occurring processes to extract essential minerals from the Great Salt Lake allows us to produce SOP at a lower cost and more environmentally friendly manner than other production processes. The location of our Ogden facility is also beneficial given its relative close proximity to major producing areas on the West Coast of high value chloride sensitive crops such as fruits and nuts. Our back to the basic strategy is focused on maximizing the potential of these and our other assets. Through this renewed focus, I'm confident that we can do a better job managing these assets to improve operations of Vicinity and reduce capital intensity. These efforts are already underway.
As an example, at the Goderich mine, the East Mains project, which is part of our mill relocation effort, will allow for a reconfiguration of the mine's operations we expect to provide a number of benefits over time. Those benefits will include improved access to development areas, improved ventilation, abandonment of higher ground cost control areas of the mine and added flexibility in the production of operations. All of those have potential to improve the profitability of the mine, all things being equal. These and several efforts across the platform should ultimately lower the cost structure of the company and improve the profitability of our operations, resulting in higher levels of cash generation for the company that can be used to reduce the absolute levels of debt of the company. Despite the challenging year, there are also some positives we should not lose sight of.
First, we continue to build on and reinforce our culture of 0 harm across the operations. Safety is a top priority for us because it's the right thing to do for our people and it's the right thing to do for our business. Safety is also a leading indicator of operational performance. The past 3 years have been the safest in Compass Minerals' history. We've seen a significant reduction in high potential incidents.
Geoffrey Kaffee, CFO, Compass Minerals: We have
Edward Dowling, President and CEO, Compass Minerals: a number of complex operating environments here at Complex Minerals, and I'm incredibly proud of our people for the focus and care they give to work every day. The fact that we've been able to drive our reportable and lost time accidents to these levels demonstrates the commitment of our employees to safety. In early September, the company also executed a binding voluntary agreement with the state of Utah that outlines water and conservation commitments we are making to benefit the sustainability of the Great Salt Lake. We work collaboratively with the state to arrive at an agreement that meaningful supports efforts by policymakers and other diverse stakeholders in Utah to ensure the long term health of the lake. In that environment, this agreement is also important step towards the company and that provides better predictability of our future water use allotment at Ogden and enables the avoidance of increased tax burden on mineral extraction enacted by the recent legislation in the state.
Moving to our plans in fiscal 2025, I'll make a few comments on priorities for the year. In the salt business consistent with prior comments we've made, our goal will be to reduce inventory levels and harvest cash that is hung up in working capital following the last year's weak winter. As I mentioned earlier, last year, we curtailed production at Goderich mine to address this inventory overhang. We'll revisit production levels for the mine in the coming months after we've had a chance to gauge the highway de icing activity. In Plant Nutrition business, our effort will be focused on advancing restoration of the pond complex at Ogden.
This has been discussed in the past. This is a multi year process that we've engaged with for a couple of years. The team in Ogden is working on developing and implementing processes to improve consistent grade of SOP raw materials going into plant. This should allow for more efficient, less costly operations. Our plan to supplement our produced tons with purchased potash or KCL this year will provide a couple of benefits.
First, it will ease the harvest demands on our ponds to provide them more time to recover and regenerate. Our early efforts in implementing this are going well. 2nd, it will improve the quality of the feedstock for the plant. We have several efficiency initiatives underway that we think will allow us to see all in product cost decline this year. At Fortress, our plan is to finalize discussions with the U.
S. Forest Service regarding the potential for a 2025 contract for our non magnesium chloride based aerial fire retardant product. Regarding our capital allocation process, after environmental health and safety, dollars will be directed to the highest ranked projects. We've organized capital plan to flex up and down like our operations depending on how the highway de icing season progresses. This process was implemented last year and has proven helpful.
Other new improvement initiatives are underway. We'll increasingly highlight them as they progress. With respect to the balance sheet, we expect to refinance the debt stack this year with the intention of structuring in a way that better aligns with our current strategy. We believe that we will be able to move into a structure that provides more flexibility around covenants. Jeff will comment on this more in detail in a moment.
Back to our Q2 call, I shared my vision for the company over the coming years. My goal, which is shared by our Board and the senior leadership team, is to gear the company such that it generates free cash flow even in mild winters, strong free cash flow in normal winters and outstanding free cash flow in strong winters. That vision has not changed and we're aggressively taking steps to achieve that goal. With that, I'll turn the call over to Jeff.
Geoffrey Kaffee, CFO, Compass Minerals: Thanks, Ed. I'll begin my remarks by discussing our quarter year end financial performance before providing perspective around our outlook for 2025. For the Q4, consolidated revenue was $209,000,000 down 11% year over year. The weak winter we experienced in our served markets led to a decrease in pre fill activity compared to what we would typically see in the Q4 after average winter activity. Additionally, when making a comparison to our prior year results, it's important to remember that the fiscal 2023 Q4 included a contribution from Fortress from the U.
S. Forest Service contract. As a result of these and other factors, we posted a consolidated operating loss of $30,000,000 which includes a non cash impairment of approximately $18,000,000 related to the write down of certain water rights in our Plant Nutrition segment. Consolidated net loss was $48,000,000 and adjusted EBITDA was approximately $16,000,000 for the quarter. For the full fiscal year, consolidated revenue was $1,100,000,000 which was down 7% year over year.
Again, the extremely mild winter that we experienced this past year clearly had an impact on the top line. Reported operating loss of $117,000,000 includes $191,000,000 of non cash impairments in our lithium, fire retardant and plant nutrition businesses. We posted a net loss of $206,000,000 which included the impairments I just referred to as well as the non cash gain related to the Fortress contingent consideration liability and adjusted EBITDA for the year was 206,000,000 dollars Drilling down into the segment results, in the Salt business, revenue in the Q4 was $163,000,000 compared to $187,000,000 a year ago. Pricing was up 10% year over year to $107.66 per tonne. However, volumes were down 21% compared to the prior year period.
Lower highway deicing volumes related directly to the muted pre fill program that I referred to a moment ago. Net revenue per tonne, which accounts for distribution costs, increased 9% to a little over $78 per tonne. On a per tonne basis, operating earnings came in lower year over year at $13.90 per tonne, down 7%, while adjusted EBITDA per tonne increased 9% to $25.22 It's worth noting that because our company records depreciation on a straight line basis without regard to sales volumes, the trends in low sales volumes quarters for adjusted EBITDA can look a bit odd because of the significant DD and A per ton add back that you get in those quarters. For the full fiscal year, revenue totaled $908,000,000 down 10% year over year. As Ed and I both referenced, this past fiscal year we experienced one of the mildest winters that we've seen in our served markets over the last 25 years, which had a meaningful impact on the segment's results.
Highway deicing volumes were down 20% year over year to 7,500,000 tons and C and I volumes, which includes consumer deicing products, were down 7% over the same period to 1,900,000 tons. Total (EPA:TTEF) salt segment volumes were down 18% year over year. We did achieve positive pricing dynamics year over year with highway deicing and C and I prices both increasing by approximately 6% in 2024. Despite the significant volume declines that we navigated this past year, absolute operating earnings and adjusted EBITDA were only down 4% and 1% respectively. Operating earnings for the year were $164,000,000 and adjusted EBITDA was $228,000,000 Both of those measures saw margin expansion in 2024 with operating margin increasing to 18% and adjusted EBITDA margin increasing to a little over 25%.
Adjusted EBITDA per ton for the fiscal year increased 20% to 24.50 dollars Moving on to our Plant Nutrition segment, as some of you may recall, calendar year 2023 saw very abnormal weather conditions that impacted sales throughout the year, which creates noise in the comparisons to the prior year period. On a positive note, demand has continued to normalize compared to what we saw last year. I'll speak about quarterly results for this segment first. For the Q4, volumes were up 33% from the prior year period. We had seen sequential quarterly price increases over the last year, but unfortunately that streak was broken this past quarter.
The pricing dynamics for SOP continues to track with global trade of potassium based fertilizer, which led to a 10% decrease in price per ton year over year to $6.23 per ton. The net effect of higher volumes and lower sales pricing resulted in an increase in Plant Nutrition revenue of 20% year over year. As a reminder, a significant portion of the Plant Nutrition businesses distribution costs are fixed. So the increase in sales volumes benefited distribution costs per tonne in the quarter, which declined roughly 10% to $88 per tonne year over year. As noted in our press release yesterday, we recognized a non cash impairment of certain water rights in the Plant Nutrition segment of approximately $18,000,000 during the quarter.
Excluding the impairment, all in product cost per tonne were up approximately 8% year over year. The net impact of these drivers is that 4th quarter adjusted EBITDA declined to a loss of roughly $4,000,000 For the full year, volumes within the segment were 273,000 tonnes, which is a 25% increase year over year. Average pricing for the year was down approximately 16% to $6.63 per tonne. Echoing what I said a moment ago about distribution costs per ton, we saw these improve by approximately 7% year over year as there were more volumes to support the fixed costs. All in product costs for the year include the water rights impairment mentioned earlier as well as a $51,000,000 impairment we recognized in the Q2 reflecting a more tempered long term financial outlook for our Plant Nutrition business, while we continue the pond restoration process as mentioned in his remarks.
Operating loss for the year was $86,000,000 and adjusted EBITDA was $17,000,000 Next (LON:NXT), I'll quickly summarize our balance sheet. At quarter end, we had liquidity of $190,000,000 comprised of $20,000,000 of cash and revolver capacity of around $170,000,000 Additionally, the consolidated total net leverage ratio was 4.9 times within the company's net leverage covenant of 6.5 times. As mentioned our intention to refinance our debt in calendar 2025. I'll provide some thoughts on how we're thinking about that. The structure that we have in place within RCS and Term Loan A is a little unusual.
It was put in place when the company was pursuing the lithium program. The idea was that there would be a more comprehensive reordering of the capital stack as the lithium project is closer to completion. Clearly, we're in a different position today post lithium. For where the company is today, we think we need a structure that provides more flexibility around covenants to accommodate our back to basics strategy, recognizing we operate a business that is highly seasonal with variability around weather. As we've spoken to credit investors and banks, we think there are a number of options that would allow us to move into a more covenant light structure early in calendar 2025.
Finally, moving to our outlook for fiscal 2025, starting with Salt. Despite a decrease in commitments, we are expecting an increase in sales volumes year over year based on trailing historical sales to commitment ratios. I should note that those ratios take into account the recent weak winners that we've experienced. At the midpoint of our guidance, we are expecting an increase in sales volumes of around 9%. As a result, we are forecasting adjusted EBITDA somewhere between $225,000,000 $250,000,000 As Ed mentioned during his comments, a key focus this year is rightsizing our inventory levels and realizing the positive working capital release associated with drawing down inventory.
And currently, we will continue to closely monitor winter activity and adjust our production schedule accordingly as we progress through the deicing seasons. Shifting to Plant Nutrition. The outlook for Plant Nutrition adjusted EBITDA is in the range of $14,000,000 to $20,000,000 Stating the obvious, declining prices are not conducive to improving profitability and unfortunately that is what we are seeing this year based on the current MLP market dynamics. There are however positive developments in the business. We are expecting sales volumes to increase by approximately 8% year over year and we are expecting all in product costs to be down roughly 9% in 2025.
Ed mentioned our plans to utilize KCL to help restore the ponds out in Ogden, which is important for the long term health of those assets. Moving on to corporate. Our corporate expense includes everything not related to our Salt and Plant Nutrition segments, so it does include our corporate overhead, deep store and fortress, both cost and any expected revenue. We are continuing to work with the U. S.
Forest Service on a contract for this coming fire season. As those discussions are ongoing, for guidance purposes, we have not included any revenue from Fortress in our fiscal 2025 outlook, although there is a small amount of G and A related to that business. We will update the market as appropriate when we have concluded those discussions. Total capital expenditures for the company in fiscal 2025 are expected to be within a range of $100,000,000 to $110,000,000 This includes non recurring amounts of $10,000,000 to $15,000,000 for larger capital projects, including preparation work for the mill relocation at Goderich mine and refurbishment of silos at Ogden. In preparing our capital program for this fiscal year, we scheduled that investment in a manner that would allow scaling back of expenditures in the back half of the year as needed in the event of a mild winter.
To echo Ed's comments, it was clearly a challenging year for our company and we are focused on taking the necessary actions to set ourselves up for improved performance moving forward. With that, I'll turn the call over for questions.
Regina, Conference Operator: We'll take our first question from the line of Joel Jackson with BMO Capital Markets. Please go ahead.
Geoffrey Kaffee, CFO, Compass Minerals: Hi, good morning. So did you say one question or 1 plus 1? Sorry, I missed the instructions. 1 plus one, Joel. Okay, perfect.
Okay. First question I want to ask is, thanks for the 'twenty five outlook. Can you talk about so if I look at your guidance of 'twenty five, you're suggesting that Salt EBITDA margins will contract about 100 basis points in 2025. Can you roll through sort of when you compare 2024, 2025 some of the drag that's causing that? And then if we normalize the 26, with things that you're doing, assuming the never happening in average winter, what could 20 26 margins like if we do get a normal winter and normal situations as your work propagates down to margins?
Yes, Joel, this is Jeff. I think the big driver when you're looking at 2025 EBITDA margins vis a vis 2024, that's really being reflected by the curtailment of the Goderich mine, resulting in higher cost of inventory as we move into fiscal year 2025, and that's largely the big driver there. And with respect to 2026, obviously, that will be impacted by decisions that we make around production based on what we see in terms of winter weather here as we progress throughout the balance of the year. Okay. Thanks.
So there was some headlines a month or so ago that there may be Compass might be in play, you guys might be looking to sell the company or people are interested. I realize there's tons of topics, but where are you right now on working through the company trying to improve it? Do you think you've got enough improvement, that it's ready for sale? How do you see you guys as a steward of this company longer term?
Edward Dowling, President and CEO, Compass Minerals: Well, Joel, this is Ed. As a policy, we don't really comment on markets or speculations or rumors. I'll just point out that our management and our Board are competent regularly to evaluate tactical and strategic matters. As a public company, we're for sale every day if somebody wants to invest in the company. So what we're really doing is working hard to make this a better business.
That's expanding our margins and our profitability, number of activities going on on that, some of which we've been transparent about in the past, others that are new and that we'll be speaking more about as we start bringing some of these benefits to bear over the course of this year.
Geoffrey Kaffee, CFO, Compass Minerals: Okay. Thank you.
Regina, Conference Operator: And we'll take our next question from the line of David Begleiter with Deutsche Bank (ETR:DBKGn). Please go ahead.
David Begleiter, Analyst, Deutsche Bank: Thank you. Good morning. Ed, on highway de icing, can you help us with the committed bid volumes are down 9%, before casting volumes to be sold being up 9%. And I know this is average sales to the commemorations, but can you help bridge that gap between down 9% on the commitments, but up 9% on the actual sales?
Edward Dowling, President and CEO, Compass Minerals: Yes. We use what we call sales to commitment calculation. And that number is sort of a moving average based on sort of past performance. And because we've really had 2 kind of weak, one particularly weak winners, that number is much lower. So when we look at what that means, so that's really the answer that pops out when you're looking at it because it's basically using a different divisor in our calculation.
So that's really what it is. I'd just say that we are very focused and say the bidding season, of course, was competitive, but we're all about value over volume. And we think we've got great assets and we're not going to be chasing tons at any price, okay?
Ben Nichols, Chief Sales Officer, Compass Minerals: And David, this is Ben. I would just also point to the fact that the 2023, 2024 season was the lightest winter within the last 25 years. And so when you do a year over year comparison against what is kind of an artificially low number, that's where you're seeing the growth.
David Begleiter, Analyst, Deutsche Bank: Got it. And then just on Fortress, has the team been able to develop a new formulation that solved the problems with the prior formulation? Has that been fully has that been tested out?
Jenny Hood, Chief Supply Chain Officer, Compass Minerals: Hey there, David. So we're not going to speak about our magnesium chloride based products. That's, of course, undergoing evaluation by the NTSB and NIST. So we're not going to speak to those products.
David Begleiter, Analyst, Deutsche Bank: But we can gather that since negotiations are continuing, there has been some progress made on your part. Is that fair?
Jenny Hood, Chief Supply Chain Officer, Compass Minerals: Yes. So we do have an alternate product that's under development and under consideration, and that is what we're talking about through the script this morning.
David Begleiter, Analyst, Deutsche Bank: Okay. And would you expect some resolution on these negotiations in the first half of twenty twenty five?
Jenny Hood, Chief Supply Chain Officer, Compass Minerals: It's too soon for me to comment on the Forest Services process. We're following their process. And as we said in the script, we'll update everyone as that process continues to unfold.
David Silver, Analyst, C.L. King: Understood. Thank you.
Regina, Conference Operator: Our next question will come from the line of David Silver with C. L. King. Please go ahead.
David Silver, Analyst, C.L. King: Yes, thank you. Couple of questions. I guess just to start with the Plant Nutrition segment. I would like to maybe kind of ask pose this question from a longer term perspective. But you harvest brine in year 1 and it's a 2 to 3 year production or evaporation and separation process.
So keeping that in mind, I mean, when I look at the 4th quarter results and I strip out the pricing change and whatnot, it does look like there is a meaningful shift, I guess, in the overall production cost structure. And I'm just wondering about the path back from your perspective in Plant Nutrition. In other words, is it as simple as making sure the original brine that you pump out is appropriately, I don't know, saturated with the right minerals? Or is there something more that needs to be done? In other words, maybe just a thought on the path back for the plant nutrition, I guess, the cost structure or economics back to where it has been in the past?
Edward Dowling, President and CEO, Compass Minerals: Okay. I'll start out here. This is Ed and then Espen to comment as well. We're working hard on the restoration efforts at Ogden. There's really sort of 2 fronts of that.
The first of which you call the pond restoration. And that's occurring. We are adding potash to the mix, which helps with the proven of the quality and the volumes, which should improve over time. And then there's some capital projects we need to do in the dry plant in terms of a dryer and dust collector. And we're working on the engineering on that.
It's too early to really speak about that. But what I would say is that we're seeing good progress on this restoration plan. Our volumes are improving. Costs are improving, but remain too high. These are really critical to get back to our short profitability.
Pricing is a little lower year over year. I'll ask Ben to speak about that. But we are moving along according to plan. Ben, do you want to comment on?
Ben Nichols, Chief Sales Officer, Compass Minerals: Yes. I think the pricing dynamic is exactly what Ed said. It's moved back to more historical norms following the run up with the Ukraine, Russia impact a couple of years ago. And so we really believe in this business. We have a very established customer base.
I think you're seeing that in the volumes returning over the last couple of quarters. And so working hard to return the cost profile to where it should be, That's how we deliver the profitability we believe this business can generate year over year.
David Silver, Analyst, C.L. King: Okay. Thank you. My next question relates to the 2025 guidance, I guess, from an overall perspective. And I'm thinking ultimately about free cash flow. So if we take the midpoint of the company EBITDA, maybe $189,000,000 and layer in $110,000,000 for CapEx and $70,000,000 for interest, there is some room there.
And of course, contingencies based on kind of winter de icing volume. But that's kind of the starting point. And I'm kind of scratching my head and I'm thinking about interest, but I think maybe more on the tax line. So can you remind me, apart from the nominal rate, can you talk about what the cash tax liability might look like if you were to hit the midpoints of your guidance ranges for 2025? I noticed in the Q4 there was a small credit, which I wasn't expecting.
But is the assuming that you do hit your guidance midpoints, under that scenario, what happens on the tax line? Will you be able to maybe get some credits there? Or is this the case where the valuation allowances and other things mean that there will be a cash tax liability?
Geoffrey Kaffee, CFO, Compass Minerals: Yes. So I would say how the cash taxes play out will ultimately depend on kind of the mix. What I will say from a 2025 perspective is you're right, based on our base case guidance, we do anticipate delivering free cash flow, this coming year. And then maybe I'll touch a little bit on the effective tax rate because it does look a little bit nonsensical. And I think you hit on it a little bit there.
But to remind everyone, we have book losses on the U. S. Side that are being offset by growing income in our foreign jurisdictions. And so as that spread narrows and the aggregate book loss becomes closer and closer to 0, any increase in income tax from those foreign jurisdictions throws off a pretty nonsensical answer in the effective tax rate.
David Silver, Analyst, C.L. King: So I guess what you're saying is it depends, right? But okay, I know it's pretty complicated, multiple jurisdictions. Thank you. I'll get back in the queue.
Regina, Conference Operator: We have a follow-up question from the line of David Silver with C. L. King. Please go ahead.
David Silver, Analyst, C.L. King: Okay. Just one more and apologies if I'm making you repeat yourself. But I have noted the strength in the salt margins over the past year or so. And I believe just in my records that the margin per tonne in the Q4 here was the highest, I think, going back to at least 2016, not sure about that. But and I'm also aware that salt certainly on the deicing side can be a very volume sensitive, high fixed cost, low variable cost operation.
So to me, I mean, it's interesting that the volumes are lower, but the margins have actually improved. Just a couple of things, but firstly, you are still doing some things underground at Goderich. And I would like maybe if you could comment on give us an update on that and what you're expecting the impact of relocating some facilities and equipment underground could do to your cost position there? And then secondly, I mean, I do not mean this in a glib way, but what are what is the current team at Compass doing correctly or right that maybe was not done or was done differently maybe over the past 3 to 5 years? In other words, what were you able to find or what were you able to innovate through your production and delivery system that has created much greater margin performance?
And then I would ask you what you think maybe the potential is if you look out a year or 2, as someone else said, on a more normalized winter volume year, for instance? Thank you.
Edward Dowling, President and CEO, Compass Minerals: Okay. That's kind of a 3 part question here. The first is going to salt margins and some of that is things are better and other part of it is related to timing. You want Jeff talk about that a second? Yes.
The flow through inventory?
Geoffrey Kaffee, CFO, Compass Minerals: We touched on this this is Jeff. We touched on this a little bit in our prepared remarks, but the one thing that we wanted to point out and make sure that was understood is the impact that the DD and A had add back has in low volume quarters, which is what you're seeing really in the Q4. The company records depreciation on a straight line basis and what gets added back to EBITDA is current year depreciation inclusive of amounts that are capitalized to inventory on the balance sheet. And so what you get in the low volume quarter is a higher DD and A add back per ton that is pushing that number up a little bit.
Edward Dowling, President and CEO, Compass Minerals: Okay. Then David, you were asking about the Goderich Mill relocation. And first, I'd like to say that, that project is underway, that what we're doing is where we're going to be relocating the mill right now. We're doing the reinforcement areas in terms of ground control, making sure that's stable for the decades of foreseeable future It's in a particular area of the mine that's particularly stable. We're starting a bit of the excavation work.
We've got the equipment on-site through excavation work for, our storage, etcetera. Engineering is moving ahead. We're looking at a couple of different sort of ways to skin the cat, so to speak. We'll be more transparent on that. Once we've had a chance to dig in that more deeply, that'll probably be some point in the spring.
So the advantages that this brings are quite a few. I mean, first of all, it's going to be once the East Main Drive ties into the Shass, we'll have a couple of things that helps us with. One is quicker access to the working areas rather than going all the way around the mine, showing people in and out materials in and out around the mine to really the working areas. The mill is located between that and the exit of the mine. I think importantly, ventilation will be able to be managed better at the mine.
That allows us some flexibility to look at different sort of mining methods and a kind of a combination perhaps between continuous mining and some drilling and blasting behavior. I think we will ultimately abandon the complete south side of the mine where we have a lot of ground control expenses that and capital that we spend and that's really to keep the roof up. I think I don't know what the exact number was for fiscal year 2024 yet, but it's probably approaching $2 a ton in terms of ground control costs and just from that part of the mine. And so we abandoned that mine. All these things together, we're going to have a much simpler and lower cost mine.
So we're not going to stick a stake in the ground or make any promises about what that is, but I think you could see that's going to be much better. Then I think the question here, the last question is, what's happened? Well, first of all, I think the company was headed off in a different direction in terms of looking at lithium and other sort of downstream diversification strategies in the past. And that may have diverted some focus from really back to the basic, which is really where our strategy is now. We've changed the team out a lot.
It's occurred at a number of levels. We continue to work, for example, a COO, get that in place. We're being very careful about that. And what we're I think really the benefit of what you're seeing the differences is that to really focus on what's important here right now, where maybe management and I'm just speculating on this might have been a bit distracted on some of these other things that were going on. So, David, I hope that helps.
We have a very clear focus about what we're out for. Okay?
David Silver, Analyst, C.L. King: Yes. No, I appreciate all you shared there. A lot of great color. Okay. Thank you very much.
That's it for me. Appreciate it.
Regina, Conference Operator: Our next question will come from the line of Joel Jackson with BMO Capital Markets. Please go ahead.
Geoffrey Kaffee, CFO, Compass Minerals: Hi. Just trying to think about Compass sort of normalization over time. I think your guidance is a little over 8,000,000 tonnes for hybridizing is all volume this year. What is a normal what should be normal volume? Is it kind of 9,500,000 tonnes hybridizing?
Like I'm trying to look over different averages and what do you guys think is sort of what is normal?
Ben Nichols, Chief Sales Officer, Compass Minerals: Joel, are you asking on a demand basis?
Geoffrey Kaffee, CFO, Compass Minerals: Yes, exactly. I'm not asking about Godard's capacity. I'm asking, when I look back sort of historically, it seemed like maybe 9,500,000 tonnes, high VDI is kind of a normal run rate in that normal winter. Again, those are very elusive goals, but a normal winter if one ever happens. And this year you'll leave at 8 for reasons we know.
I'm just trying to figure out when you guys plan, you look at the mine, you're looking at working capital, you're looking at union. I mean what do you plan? What are the normal sales portfolio look like for highway the icing if winter weather was normal inventories were normal?
Ben Nichols, Chief Sales Officer, Compass Minerals: Yes. I think we think about our served markets in that 7,500,000 to 8,500,000 tons, obviously pending prior seasons. But I hate to give you too big of a range, but 7.5, 8, 8.5 on a big year is probably appropriate.
Edward Dowling, President and CEO, Compass Minerals: Look, let me follow-up on that too. In terms of planning, what we're planning that's different is we're planning on operating this business much more flexibly and focusing on costs and so that we can expand margins. And the highway de icing will flex up and down depending on the season. So we kind of have a base load and over time you can look at averages and things like that, Joel. But in any given year, that's just going to be what it is.
So it's really our ability to control the things that we can control, which is sort of cost and operating the mines flexibly. So we've demonstrated the ability to be able to do that at Goderich and at Coquelinge really try to attack the fixed costs as we ramp things down a bit. We've also organized our capital structure now this year, be able to flex that up or down depending on how the season goes. And we're prepared to do that, if we need to. So I think that's the important thing to take away from here.
We're going to we're focused on costs and operations effectiveness and we'll be talking more about that as the year goes on. But the, I think building flexibility in this business to meet our served markets is what's key. The market is going to
Ben Nichols, Chief Sales Officer, Compass Minerals: be what it is. And Joel, I should clarify the number I gave you was the North American Highway Deicing business. We obviously also service our chemical business and then you would have to include kind of an average for our U. K. Business.
So just a quick clarification.
Geoffrey Kaffee, CFO, Compass Minerals: Okay, right. Because I'm looking at highway de icing as a segment. So if you said 8, 8.5 and then chemical salt like what 2.5 something like that?
Ben Nichols, Chief Sales Officer, Compass Minerals: Roughly $1,000,000
Edward Dowling, President and CEO, Compass Minerals: Yes, de icing 1,000,000
Ben Nichols, Chief Sales Officer, Compass Minerals: Roughly $1,000,000 for chemical and then UK is just below $1,000,000 $600,000 $700,000
Geoffrey Kaffee, CFO, Compass Minerals: Okay. So when I said $9,500,000 of the full business, you're guiding to about $10,000,000 correct? That sounds about right? Right. 10 for the whole IVDicing business?
Okay. Which makes sense and makes my next follow-up question not necessary. But the other question I wanted to ask and it's kind of a nuanced question, but I was actually looking at this morning. I was looking at what Compass used to sell for high VDI volumes 2 decades ago, a decade ago. I was looking at what you've sold in the last bunch of years.
And what I've noticed is that there's a very clear downward trend in average December quarter volumes. So March quarter volumes look similar as 20 years ago. Is there something going on with salt industry the last 10 years where December quarter sales just are lower is that we've had lower average winter weather, so you have a lower pre buying season or is there something going on with December quarters are weaker than historical versus March quarters? Do you get what I'm getting at?
Ben Nichols, Chief Sales Officer, Compass Minerals: Yes. Joel, I think it's a common question. And as we look at the data and also as we've discussed forecasting with our customers, we see that same trend. We're not trying to overreact to that obviously, but there is a feeling that has winter shifted a little bit more towards calendar Q1, Q2 timeframe. And I don't think we would make a definitive statement on that, but we monitor that data as well.
Geoffrey Kaffee, CFO, Compass Minerals: Winter shifted, so not like so you're saying like December moved to April, something like that or there's more snowfall in early April, is that where you're getting at?
Ben Nichols, Chief Sales Officer, Compass Minerals: There's some sense that that may have happened. I wouldn't I would tell you that there's not a definitive change in behavior or communication from the market around that type of shift. But if you just look at the trend out on a monthly basis, you're seeing the same thing we are.
Geoffrey Kaffee, CFO, Compass Minerals: Okay. Thanks for that.
Regina, Conference Operator: That will conclude our question and answer session. I'll turn the call back over to Ed Dowling, President and CEO for closing remarks.
Edward Dowling, President and CEO, Compass Minerals: Okay. Thank you very much Regina. Thank you all for your interest in Compass Minerals. 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.
Thanks very much.
Regina, Conference Operator: And that concludes our call today. Thank you all for joining. You may now disconnect.
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