Previous Statements by CMP
» Compass Minerals International's CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Compass Minerals' CEO Discusses Q4 2011 Results - Earnings Call Transcript
» Compass Minerals International Management Discusses Q3 2011 Results - Earnings Call Transcript
» Compass Minerals International CEO Discusses Q2 2011 Results - Earnings Call Transcript
The company undertakes no obligation to update any forward-looking statements made today to reflect future events or developments. You can find reconciliations of any non-GAAP financial information that we discuss today in our earnings release, which is available in the Investor Relations section of our website at compassminerals.com.Now I'll turn the call over to Angelo. Angelo Brisimitzakis Thanks, Peggy. Good Monday morning everyone. Thank you for joining us this morning. As you know from our earnings release our results this quarter were very consistent with the outlook we provided last quarter. But some of you may have been surprised to read that we expect our highway deicing sales volume to be about averaged this coming winter, if the winter weather is more typical than this season last year. And that the average price we’ve achieved during the bid season so far has been approximately flat. I know there is generally a lot of interest in the highway deicing bid season, so I will begin my remarks by explaining the dynamics that are playing out in our served markets this summer. First, keep in mind that the bid seasons are a lot like winter weather seasons. They develop over the course of many weeks and months. Governments generally don’t consult with one another on deicing purchases because each one is trying to make the best decision for its own constituents. So, trends generally don’t emerge until about this time in the summer when the bid season is at least half over. And we sometimes see trends shift as the season progresses from this point to early fall. This bid season is highly unusual because of the record breaking warm and mild weather we experienced in North America this past winter. A lot of our customers salt storage facilities are already filled full of carryover inventory that they bought over the past six months to meet the minimum purchase requirements specified in the contracts we signed with them last year.
It’s important to remind you here that minimum purchase and maximum delivery obligations are primarily a function of contracts in the United States. Most Canadian and British contracts don’t have these features. Turning back to our customers who do have minimum purchase requirements, some customers haven’t fully met their purchase obligations under last years contracts because they just had nowhere to put more salt. A few customers do have large storage facilities, but most can only store enough salt for a couple of snow events.We’ve worked with these customers to try to find creative ways to solve their dilemma. The common strategy has been to grant an extension of the deadline for taking salt under last season’s contracts and blend this carry over volume into a new commitment covering the upcoming winter season. Predictably these customers are requesting lower volumes this bid season, but they still plan to begin the winter season with a normal amount of salt. They plan to meet their typical winter season deicing salt volume requirements through the combination of their new bid request, the tonnage they still have to purchase under the old contracts, and the higher than typical amount they currently have in storage. In the end, our customers’ priority is to secure a normal salt supply for the upcoming winter. This is a public safety imperative. When it snows this winter, our customers will replenish their supply of deicing salts. Well, let’s be clear. We’re still managing through the over hang from the unusual weather events of the past 12 months or so. You saw the effects of low restocking in our second quarter salt segment results. Salt volumes decline 10% driven by a steep decline in highway deicing sales. However, both our highway and salt segment average selling prices increased 5%. And on a pro forma basis, our salt product costs were lower leading to moderate salt margin expansion again on a pro forma basis.
To refresh your memory, pro forma figures remove the estimated effect of tornado that struck our Goderich operations in August of 2011. Both the Goderich mine and the Goderich evaporation plant are now able to fully operate at pre-tornado production rates. But we don’t expect to work through the higher cost tornado affected salt in this inventory until year-end.Read the rest of this transcript for free on seekingalpha.com