Prepared remarks
Thank you for joining us and welcome to Compass Minerals Fiscal Third Quarter 2026 Earnings Conference Call. (Operator instructions) I will now hand the conference over to Tripp Sullivan, Investor Relations. Please go ahead.
Thank you, operator. Good morning and welcome to the Compass Minerals Fiscal Third Quarter 2026 Earnings Conference Call. Today, we will discuss our most recent quarterly results. We will begin with prepared remarks from our President and CEO, Edward Dowling, and our CFO, Peter Fjellman. Joining in for the question-and-answer portion of the call will be 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, August 6, 2026. 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 on 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 also available online. And with that, I'll now turn the call over to Ed.
Thank you, Tripp. Good morning, everyone. I'll start with the Plant Nutrition business because it's earned the lead. At Ogden, we produced segment-adjusted EBITDA of $15 million in the quarter on improved pricing and lower per-unit costs. We again raise our full year guidance for this business. Operational improvements we put in place two years ago are compounding. The team was determined to restore the business to the $40 million to $50 million adjusted EBITDA range per year and have now exceeded that level. We continue to invest in Ogden with the dryer project underway that we expect to complete by the end of next fiscal year. That investment will allow us to improve product yield, further improve production volume and cost profile of this operation, as well as finished goods product quality. We're excited about the continued momentum at our Ogden site, solidifying our position as the leading North American producer of sulfate of potash. In our salt business, the commercial story is strong. We realized meaningful price gains in highway de-icing during the quarter and are beginning to see a constructive pricing environment in our C&I product line as well. These are encouraging and I want to put them into context. When comparing the salt costs in our P&L between periods, there are a number of factors that must be considered, including production costs, logistics costs, regional and product mix. As a winter unfolds, where we sell our products, where they are produced, how they are shipped to the customer and our production costs all have various levels of impact, particularly in a season like this past one where inventory levels became very tight. Production tons at our mine are up year over year. That's a positive. But costs, while lower than last year as our original guidance had anticipated, have not come down the way we expected. And I want to address that directly. There are three factors driving higher-than-anticipated production costs. First, despite the above, we're not hoisting enough tons out of Goderich at the cost we had planned. Second, we have increased our maintenance spending at both U.S. mines to improve operational uptime and stability, which has been guided by the implementation of a preventative maintenance system. Lastly, we've increased the headcount to maximize every opportunity to produce more tons out of the mines. In terms of logistics, our total cost metric was burdened by global fuel costs and increased rates due to tightening of truck capacity. We have three accelerator teams working at Goderich focused on specific operational improvements. We're working on improving our cut times and rates, and investing in training required to sustain those improvements as well as overall mine design and sequencing. Our maintenance program is delivering results, focused on quicker turnarounds and improved equipment availability. Let me be direct about the trade-off that we're making. We're spending incremental dollars on labor and maintenance in the current period to improve longer-term operational stability, production volumes, and profitability. This is the right decision for the business, but also means that our cost metrics have not yet reflected the efficiency gains we're targeting. In addition, we have other accelerator teams working on logistics and enterprise-wide improvements, including network optimization, procurement efficiency, and contract management. All of these are focused on sustainable cost improvement and risk mitigation. As we think about the future of the company and sustainable improvement, we have made an operational leadership change. Patrick Merrin is no longer with the company, and I'd like to thank Pat for his service and wish him the best. Brandon Risner has been promoted to Chief Operating Officer. He's led impressive operational improvements in our Plant Nutrition segment and in the operational leadership of our C&I product line. The combination of prior mining experience and a track record of leading positive outcomes make him a natural fit to lead our operations. Turning to the bid season, the '26-'27 highway de-icing bid season has been very constructive. In our core U.S. markets, we're seeing substantial price improvement year over year, in some cases well into the double digits, with consistent growth in demand tenders. North American highway de-icing markets remain structurally tight. Inventories across the industry are low following the past winter, and it is supporting both pricing and tender sizes. As we look forward into fiscal 2027, let me give a sense of what we are thinking about volume. The 2025-'26 winter season trended ahead of seasonal averages with snowfall events in our key markets higher than the recent past. That strong demand, coupled with our disciplined approach to working capital and the current production constraints at Goderich, has left us and the industry with historically low inventories across the system. Given those realities, along with an assumption of more normalized winter weather, we expect to commit to a reduced demand profile for fiscal 2027 relative to the past seasons. We will provide tighter guidance when we report fourth quarter results. But pricing gains we have secured for the business, combined with continued focus on production increases and cost-per-ton improvement, should position us to improve our per-unit margins headed into next year. Let me address tariffs briefly. As you're aware, tariffs on Canadian goods shipped to the United States are set to take effect on August 19th. A large majority of the gross annualized exposure relates to highway de-icing salt shipped from our Goderich mine into the United States. Through proactive measures within our commercial agreements, including pass-through provisions that are now standard in several of our key contracts, we believe we meaningfully reduce our exposure to those risks. The situation remains fluid and we're closely monitoring it. We believe that we're in a stronger position to manage this than a year ago, given our proactive measures, the constructive pricing environment, and our improved balance sheet. In addition to potential impact from tariffs, we're closely monitoring the variability within the fuel market, which is incorporated into our 2026 guidance. We expect to provide a clear understanding of the anticipated fuel impact and sensitivity within our detailed 2027 guidance when we report Q4, but we wanted to note our current focus on mitigation efforts moving into next year. On capital projects, as part of our ongoing investment in the future of Goderich, we have been planning to construct the new mill. Given the complexity of executing a project of this scale within an operating underground mine, we're taking additional time to evaluate the engineering, sequencing, and timing as well as establishing appropriate project governance. We cannot afford disruption to production during a period where we're focused on improving output and rebuilding inventory. We expect to provide a more detailed update on the project timeline early next year. I'd like to take a quick moment to clarify some news that was issued earlier in the quarter about a potential Utah lithium project. To be clear, we have no plans to get back into the lithium market. The announcement with EnergyX was a non-binding MOU where we're evaluating leasing them land and brine used in our Utah operations. We have no capital commitment or operational expenses. Nothing in these negotiations has been finalized. Turning to the balance sheet, net leverage has declined to 2.8x from 4.3x a year ago. Total net debt is down 13% year over year. A recent credit upgrade from S&P is a direct reflection of the work we've done to reduce debt and strengthen the business. I know there are questions about how we plan to allocate capital going forward, and I want to signal how we're thinking about it. Our near-term priorities are clear: investment in our assets and continued debt reduction where it makes sense. As our balance sheet strengthens and our operations stabilize, the opportunity to consider other uses of capital becomes more real. The Board is engaged in this discussion and we expect to share more on this topic when we report full-year results. Before I hand it over to Peter, let me step back for a moment. Two years ago, we laid out a back-to-basics framework on what we're going to improve at this company. At Ogden, the process of delivering the results then speaks for itself. In Salt, commercial execution is strong. The market is constructive. The balance sheet is in a very different position than it was even a year ago. Work in our mining operations is taking longer than planned, and we are being direct about that. The process is the same. The team is engaged. The work will continue. We are really excited about the future of this business and the organic opportunities this work has created.
Thanks, Ed. Good morning, everyone. I'll walk through our third quarter results and the updated outlook. All comparisons are to the prior year quarter unless otherwise noted. For the third quarter, total company adjusted EBITDA was $39.9 million compared with $41 million in the prior year. We reported a net loss of $5.7 million compared to a net loss of $7.7 million in the prior year. ($17 million in the prior year.) In Salt, third quarter revenue increased 5% year over year to $173.9 million. Segment pricing was up 9% overall, highway pricing was up 8%, and C&I pricing was up 6%. Highway sales volumes declined 6% while C&I volumes increased 3%. Salt adjusted EBITDA was $38.9 million for the quarter, down 15%, and operating earnings decreased 25% to $21.2 million. The decline reflects lower highway sales volumes and higher per-unit production and distribution costs within the segment, partially offset by the pricing gains. In Plant Nutrition, revenue was $37.6 million for the quarter, down 16% compared to the prior year period. The decrease is primarily driven by a 19% decrease in sales volumes attributable to the Wynyard SOP asset sale in March 2026, partially offset by a 4% increase in average sales prices, excluding the impacts of the Wynyard sale volumes increased approximately 4% year over year. Despite the sale, operating earnings were $7.8 million, up 50% from $5.2 million a year ago. Adjusted EBITDA improved 32% to $15 million from $11.4 million. Both product costs and distribution costs declined on a per-unit basis year over year, driving the margin expansion at Ogden that Ed described earlier. Turning to cash flow and the balance sheet, operating cash flow for the first nine months was $162.8 million compared to $204.6 million in the prior year period. Capital expenditures for nine months totaled $62.1 million compared to $53.8 million in the prior year, reflecting planned investments across our operations. Total debt as of June 30th was $716.6 million, down from $825.3 million a year ago. Net debt was $660.3 million, a reduction of $85.6 million year over year. Total liquidity was $328.1 million consisting of $56.3 million in cash and $271.8 million of availability under our revolving credit facility. As Ed noted, our net leverage ratio improved to 2.8x from 4.3x a year ago. Now let me walk you through our updated fiscal 2026 outlook. We are raising our full-year consolidated adjusted EBITDA guidance midpoint to $230 million, with a range of $218 million to $242 million. For Plant Nutrition we're raising segment-adjusted EBITDA guidance to a range of $49 million to $57 million, up from $43 million to $47 million previously, primarily reflecting the continued strength in our pricing and cost performance at Ogden. In Salt, our current adjusted EBITDA guidance range is $225 million to $236 million, narrowed from $225 million to $240 million previously to reflect the mix dynamics, inflationary pressures and the pace of operational improvements that Ed previously discussed. Our expectations for corporate and other costs remain unchanged in the range of $51 million to $56 million for the full year, along with full-year capital expenditures in the range of $90 million to $110 million. In closing, I'd like to note that we are in a stronger financial position and Plant Nutrition is outperforming our expectations. Salt pricing and demand remain very constructive, and we are laser-focused on converting operational work at Goderich into sustainable cost improvement across the platform. We're also continuing to deploy capital with discipline, including reducing leverage where it makes sense. That concludes our prepared remarks. Operator, we're ready to take some questions.
Questions and answers
Thank you. (Operator instructions) Your first question comes from the line of Joel Jackson with BMO Capital Markets. Your line is open. Please go ahead.
Just talking about your guidance around bid season early in '27 here. When you think about how well rock salt bid season's going here, does that imply when you think about your entire business, maybe high single-digit price growth next year, maybe mid to high? It seems like you're saying that volumes might be a little bit lower if you get normalized weather, what you're actually going to sell. And then what are costs looking like in '27? Should we see costs up a little? It's really speaking about more net-back expansion, so we think about price versus cost things.
Good morning, Joel. Nice to hear your voice when you're unmuted. Appreciate the question. The bid season has been really great, really based on the previous winter and really the inventory management and discipline that's been established in the market. Most of the bids, of course, are transparent, and we see a wide range of outcomes depending on where you are. Our focus has really been to dive in and try to serve those markets where we maximize our margin and not try to serve everything everywhere, albeit we do try to spread it out just because you never know exactly where winter is going to be. It'd be safe to say overall we're around double digits in price increase. With regard to costs going forward, this is an important point. We're working really hard on our mine costs. We've got this fantastic mine, Goderich mine, the world's largest underground salt mine. The unit costs are down, but on the logistics side we're battling fuel and truck carrier pressures a bit, and we're laser-focused on this. We'll provide guidance in the fourth quarter.
Okay. It seemed like in your prepared remarks you were saying that you'd expect with normal weather that '27 volumes could be lower based on the reasons you gave. There's been a lot of churn at the CEO level at Compass the last number of years. You have a lot of objectives that you came in with, right? Lower costs, you had a lot of things to do, working capital management, inventory management — things weren't great when you took over a few years ago. And you've got some aggressive targets on cost. But like I said, you've had a lot of churn at the COO level and you're talking about delaying some of the decisions on the mill project, not getting the cost down as fast as you wanted. I can't help but think it's all tied together. Can you sort of speak about your journey here and what has to get done to achieve what you want to do?
Yes, look, appreciate the question. First of all, let me just say we're very grateful for Pat and his service and wish him the best in the future. This is Pat Merrin. But we're really pushing hard and we need to have an organization that's fit for purpose. We're really focused on our costs. Brandon Risner — I don't know whether you've had a chance to meet him yet, but we'll make sure you do. Brandon has been leading the efforts with Plant Nutrition, which is a fantastic story for the company. In addition, he's been our operational leader in our C&I product line and has done a really good job increasing the earnings from that part of our business. He brings a history of success, whether it was in Compass or previously; he's the guy that helped shape how we look at capital allocation for project investment. Even before that, with Peabody, he has a great track record of operational improvements. That's what we need right now. As much as I like Pat, the needs of the company are more important than any individual. With regard to the project, it'd be one thing if we were building this mill in a parking lot and it'd be pretty easy. But given the fact that we're doing this in an operating underground mine, with all materials and everything coming down the same shaft as our operating people and materials, it's very complex. We need to make sure we have a very high degree of front-end loading in terms of engineering, our project execution plan, and all of the logistics. We have a rock-solid owner's team and we really need to put this all in place before I'm ready to take it to the board of directors. Okay. I think I hit your points, Joel.
(Operator instructions) We'll now go to David Silver of Freedom Capital Markets. Your line is open. Please go ahead.
Questions here. Maybe let's just start with the progress at Plant Nutrition. First of all, congratulations. There's been a significant step down in cash costs, I'll call it. To achieve those, I had a couple of questions. To what extent is the plan there to just rely on pond-based tons and how much of the bottom-line progress to date has been from supplementing with purchased potash? And then bigger picture, my models go back more than a decade here. Is the progress to date maybe reflective of getting back to the operating environment that was in effect in the late 2010s or early 2020s, or is there something qualitatively different being done to significantly boost the per-ton production economics?
Thanks, David. Great question. It's been a fantastic story for the company in terms of the restoration of that business to where it really should be. Recognize that previously when we reported Plant Nutrition we also included our Wynyard mine up in Canada. These results are without Wynyard, so it's really a great story for our Utah partners and colleagues in terms of restoring this business. There's more to go because, as you know, we're executing the dryer and compaction plant where we lose a lot of yield. We're executing a project there, which will be done about this time next year to really make a better product, so we'll see additional yield come from that. That will happen at a lower cost — it's an incremental cost — and today some material is lost and not sold, but we'll capture that going forward and we'll produce a much higher-quality product for our customer base. So the improvement, we expect, to continue to improve and we should start seeing that about this time next year. In terms of the last part of your question, I wasn't here 10 years ago, but we have restored outcomes to a competitive level of the past. Are we doing anything different? Yes. We better manage how we harvest tons, and Brandon, for example, led that. It's the way we manage stockpile into the plant, reducing variability. It's some things we've done within the plant itself to improve recovery beyond historical levels. So it's a number of changes that have driven the improvement over and above results the company had in the past.
And then maybe just a comment on the plan to supplement pond-based tons with purchased potash?
Thanks, David. Yes, we are supplementing this year with MOP (muriate of potash), and we've never really guided on that, but I think from your thinking, we're going to be doing that. Our plan is to do about the same amount next year.
Yes, David, this is Ben, and just to add to what Ed said, the utilization of MOP in our process is always going to be a part of what we do. I think to Ed's point, what we're doing differently is we better understand the leading indicators on the chemistry of the pond. Our ability to flex that utilization and that cost profile is much tighter than it has been historically, and that's why we have confidence in where we're headed.
Okay, great. I'd like to ask a more philosophical question about the bid season results to date. I assume your company has extensive knowledge of marketing areas, bid histories, competitor tendencies, and so on. Based on the mostly qualitative discussion thus far, it seems like you've identified pockets where either volume or price or both can be pushed further. My assumption is that you are responding to what you see in bid season results to date — competitor behavior. For the balance of the bid season, which should be mostly done by September, will you be able to bid more aggressively for the rest of the season? Or are you altering or structuring your bidding profile, both tons and price, based on your mining plan? In other words, what's going into your in-season bidding strategy?
Let me try to field that and I'll have Ben help as well. We do have a deep understanding of our markets and the distribution network. Every year we come up with a bid strategy. Part of our strategy this year was to really maximize the margins, recognizing the market was tight. We focused on where we really want to serve to maximize margins. That's delivered results: pricing minus costs. We'll see what winter does and how we're able to bring that home. We have variability due to mix and regional sales, but our focus at this point: we're largely through our big state contracts, albeit there's still some states coming back and rebidding areas they weren't able to fill. Largely our focus right now is our commercial customers, which we should be wrapping up in the next couple of weeks. Ben, do you want to add something?
No, thanks, Ed, and David, thanks for the question. Going into this bid season, our overwhelming focus was the value of our product in the market. Coming off a big winter like the last season, we were excited to see the market had a renewed understanding of the importance of our product relative to public safety. Focus number one was the value of every ton that we sell. In addition to that, we've spent a lot of time working with key customers on terms and ensuring that the way we operate fits the terms we need, specifically around minimum takes and having a higher level of confidence in what we commit and what's going to move through the pipeline. We're really excited about the results we've seen. The market has a lot of momentum and we're looking forward to the next season.
Okay, and then one last one, a clarification on how you're thinking about the looming tariffs on Canadian shipments to the U.S. A little over a year ago, another round of tariffs would have impacted cross-border trade but ultimately did not apply to Goderich shipments to the U.S. Is there something qualitatively different about this round of tariffs? What has to happen for cross-border trade from Goderich to not be impacted by this latest announced round of tariffs?
The real difference from a year ago to today from a tariff standpoint is the clarity around USMCA, the United States-Mexico-Canada Agreement, where certain cross-border materials were clarified. Once that was clarified, a year and a quarter ago, we started ramping up at Goderich mine. What's also different is we've recognized the potential exposure and our commercial team has worked to minimize the impact on the company if something like that happens again. Ben and his team have been looking at contract terms, tightening up minimums and maximums and having success on that. Being able to pass through costs like this to customers has really been the focus. We understand the exposure, we've looked at ways to mitigate that, and a big part of our effort has been to underscore the message to government that Goderich is a critical asset for interstate commerce and public safety in the United States. The U.S. market cannot be fully served without Goderich. We're highly engaged in that effort right now.
Okay, great. One last quick one related to the outlook and guidance for the Salt segment for 2026. You bumped up the low end of your guidance range by 150,000 tons for highway de-icing volumes. Should I assume that's all just pre-buy or pre-season shipment increases from bid season customers, or is there some chemical volume in there or something else? It's unusual for highway salt volumes to move up from third quarter to fourth quarter. Just a comment on that, please.
We don't generally get that granular publicly, but part of what we're doing is re-establishing inventories where they need to be to serve the contracts we've committed to. Many warehouses were scraped clean last year, and we're working in the normal course of business to rebuild inventories to serve our commitments. There's nothing unusual about that in our plan.
There appear to be no further questions. I will now turn the call back to Ed Dowling for closing remarks.
Okay, thank you all for joining us. We're excited about the future here at Compass Minerals and we look forward to speaking to you again. We have a number of investor calls coming up and I'm sure we'll be chatting with many of you over the next couple of days. Thanks very much.
This concludes today's call. Thank you for attending. You may now disconnect.