Compass Minerals International, Inc. (NYSE:CMP) Q4 2022 Earnings Call Transcript

Chris Shaw: Got it. And then just a quick one on the fourth quarter highway salt volumes. They seem pretty strong. I was just wondering, was that pre-buying for this season or were there a bunch of customers maybe taking advantage of the lower pricing from last year’s contracts?

Ryan Bartlett: Yeah, there’s a couple of things going on there. We were still delivering into some of last year’s contract. So, you saw a little bit of incremental volume related to kind of the Illinois, Indiana area to be clear that actually ended up being pre-filled because those don’t end up getting rebid, as well as the kind of a strategic decision to pull some direct barge and vessel shipments forward instead of trying to sell them in season, getting some of our certain commercial customers to take them a little bit earlier. So we had some volume shift into the September quarter as well. So those are the main drivers there.

Chris Shaw: Yeah. Thanks a lot.

Operator: The next question is from Seth Goldstein with Morningstar. Your line is open.

Seth Goldstein: Hi. Good morning, everyone. Thanks for taking my question. I wanted to ask — first of all, I really appreciate the winter weather range guidance. That’s extremely helpful. so thank you for that. But looking at the four scenarios, I noticed that EBITDA per ton was basically flat in the strong winter scenario versus the upper-end of guidance. Is there any sort of operating leverage that would be occurring from the strong winter weather, how you think about that?

Lorin Crenshaw: Yeah. If you look at the midpoint of the 2023 range on that slide, and I’ll let George elaborate, it implies about $20 a metric ton of EBITDA. And you do see a $1 increase in the strong winter you do see some benefit from absorption in a strong scenario. But George, maybe you can elaborate on the dynamics that drive perhaps even greater profitability in an extremely strong winter.

George Schuller: Yeah. I mean, look, just — if I was just going to pick certain operations, I mean, things that drive that, I think you’ve heard Kevin say this in some of the previous earnings calls, our flexibility to flex up is substantial in our operations, specifically a place like Goderich mine. So, with the strong winter, we have flexibility to go up several hundred thousand tons very effectively in a short period of time without adding labor, without additional equipment, that is very beneficial to us in the milder winter, I’ll call it. We also have the availability to flex down based on what we might do with some of our labor practices and maintenance practices and those types of things that allow us to kind of bid into that range.

Kevin Crutchfield: Hi, Seth. One other point, I would just color for you, as you think about a strong winter, one of the reasons we don’t have immediate leverage is by virtue of our contract structure, which is the customer has a 20% call option on anything over 100%. So, our price stays flat through 120%, and that’s beyond the 120% is when we would begin to experience spot market conditions where that to occur. So, I think, most of the leverage up to that 20% is on, as Lorin said and George, fixed cost absorption. Hopefully, that makes some sense.

Seth Goldstein: That’s really helpful. Thank you. And then, my other question is on plant nutrition. Can you walk through how should we think about the percent of production coming from the ponds versus MOP conversion, and how do you expect this to evolve in the future?