P R O S P E R I T Y T H R O U G H I N V E S T M E N T I N V E S T O R P R E S E N TAT I O N

Transcription

1 P R O S P E R I T Y T H R O U G H I N V E S T M E N T I N V E S T O R P R E S E N TAT I O N F E B R U A R Y ,

2 F O R WA R D - L O O K I N G S TAT E M E N T S This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation statements about introducing Produquímica products into North America, capital spending and capital projects; the company s ability to develop best-in-class safety, ensure asset longevity, drive efficiency, build on its base, achieve more balanced business, improve its strategies and maximize potential; SOP pricing; the highway deicing industry; and the company s outlook for the first half of 2017 and the full year of 2017, including its expectations regarding earnings per share ( EPS ), volumes, average selling prices, operating earnings margin, corporate and other expense, interest expense, capital expenditures, depreciation, depletion and amortization and tax rates. The company uses words such as may, would, could, should, will, likely, expect, anticipate, believe, intend, plan, forecast, outlook, project, estimate and similar expressions suggesting future outcomes or events to identify forward-looking statements or forward-looking information. These statements are based on the company s current expectations and involve risks and uncertainties that could cause the company s actual results to differ materially. The differences could be caused by a number of factors, including without limitation (i) weather conditions, (ii) the impact of competition on the sales of our products, (iii) the inability to fund necessary capital expenditures or successfully complete capital projects, (iv) foreign exchange rates, (v) increasing costs or a lack of availability of transportation services, and (vi) the ability to integrate acquired businesses and realize anticipated benefits from acquisitions. For further information on these and other risks and uncertainties that may affect the company s business, see the Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations sections of the company s Annual Report on Form 10-K for the year ended December 31, 2016 and its Quarterly Report on Form 10-Q for the quarters ended March 31, June 30 and September 30, 2016 filed or to be filed with the SEC. The company undertakes no obligation to update any forward-looking statements made in this presentation to reflect future events or developments. Because it is not possible to predict or identify all such factors, this list cannot be considered a complete set of all potential risks or uncertainties. 2

3 A L E A D E R I N S T R O N G, D I V E R S E M A R K E T S W I T H U N I Q U E A S S E T B A S E A leading supplier of deicing products in North America and the U.K. Advantaged rock salt mining assets - World s largest North American mine strategically located on deep-water port and largest dedicated salt mine in the U.K. A key producer of high-quality salt for consumers and industry in North America A growing specialty plant nutrition business - The largest sulfate of potash (SOP) specialty fertilizer producer in the Western Hemisphere - A micronutrient business based on patented technology - Acquired Brazilian specialty plant nutrition company Produquímica Indústria e Comércio (Produquímica) in October S A L E S = $ 1. 1 B I L L I O N Salt Plant Nutrition 2016 adjusted EBITDA* $275 million 2016 adjusted EBITDA* margin 24% *Non-GAAP measure. See appendix for reconciliation. 3

4 O U R S A LT B U S I N E S S Highway deicing - Rock salt and other deicers sold to municipal, county and state/provincial governments - Rock salt sold to chemical producers Consumer and industrial - A broad range of non-seasonal packaged and bulk products Water conditioning Animal nutrition Many industrial applications, including food - Packaged deicers Basic, blended and premium products Advantaged assets - Goderich, Ontario World s largest rock salt mine Size and geology enable mining efficiencies Deep-water port and distribution network support efficient shipping - Winsford, Cheshire, U.K. U.K. s largest dedicated rock salt mine Geology and environment support storage businesses Salt Production Locations Primary highway deicing markets Underground salt mining Mechanical evaporation Solar evaporation Packaging plant S a l t S e g m e n t S a l e s b y P r o d u c t Great Britain Highway Deicing Consumer & Industrial 4

5 S A LT: S T R O N G F I N A N C I A L AT T R I B U T E S D E S P I T E W E AT H E R VA R I A B I L I T Y Superior Assets Geology of rock salt mines enables production efficiencies High-quality, low-cost salt and magnesium chloride assets Logistical Advantages Convenient access to water transportation Deep-water port at Goderich Extensive depot network Insulated Markets Transportation costs limit imports Significant barriers to entry Strong Deicing Portfolio Vertically integrated raw-materials for specialty products Low-cost rock salt advantage in packaged deicing products $90 $80 $70 $60 $50 $40 $30 $20 $10 93 Salt Segment Price & Volume Average Sales Price (Dollars per ton) Salt Segment 2016 Snapshot (in millions) Sales $812 EBITDA* $247 EBITDA* margin 31% Snowfall Events** Short Tons Sold (Thousands of tons) ,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 $ *Non-GAAP measure. See appendix for reconciliation. **The sum of days with one or more inches (~2.5 cm) of snow in 11 selected U.S. and Canadian cities in CMP s service area, as reported by the NOAA National Weather Service, Environment Canada. 5

6 B U I L D I N G A L E A D I N G S P E C I A LT Y P L A N T N U T R I T I O N B U S I N E S S Largest producer of SOP in Western hemisphere Purchased Wolf Trax in 2014, leader in dry dispersible powder micronutrients Expanded into Brazil with acquisition of Produquímica Now two segments: Plant Nutrition North America Plant Nutrition South America Plant Nutrition 2016 Snapshot* (Pro forma, in millions) Sales $560 Adjusted EBITDA** $125 Adjusted EBITDA** margin 22% P l a n t N u t r i t i o n S a l e s b y S e g m e n t Plant Nutrition North America Plant Nutrition South America *Includes unaudited amounts for full-year Plant Nutrition North America and the three months ended December 31, 2016 for Plant Nutrition South America combined with pro forma revenue and EBITDA from Produquimica for nine-months ending September 30, 2016 See slide 20. **Non-GAAP measure. See appendix for reconciliation. 6

7 VA L U E T O E N D - U S E R S D R I V E S S P E C I A LT Y P L A N T N U T R I E N T D E M A N D SOP improves the economics of growing many high-value and chloride-sensitive crops - Strengthens root systems - Increase nutrient uptake - Increase total yield and yield quality - Provides plant-ready sulfur, an important nutrient for crop yield, quality and marketability High Tree nuts Citrus Tobacco Strawberries Chloride Sensitivity Low Avocado Potatoes Lettuce Alfalfa Grapes Tomato Other berries Micronutrients and other specialty plant nutrients promote: - Stronger, larger roots - More consistent early-stage growth - Better stress tolerance - Enhanced color and flowering 50% to 60% of Compass Minerals SOP sales 7

8 C O M PA S S M I N E R A L S C O M P E T I T I V E A D VA N TA G E I N P R E M I U M P O TA S S I U M Only North American SOP producer Wynyard, Saskatchewan SOP Production Sites - Unique asset at Ogden with low-cost solar evaporation SOP production Can expand production by adding muriate of potash (MOP) Historically hold 70% to 80% of North American SOP market Fruit, Vegetables, Nuts, Turf Fruit, Potatoes Ogden, UT Fruit, Vegetables, Turf - Logistically favorable to key high-value specialty crop markets Turf, Tobacco Import competition from Europe and South America - Can vary depending upon foreign exchange rates, fuel costs and MOP price - About 50% of global SOP production uses high-cost chemical conversion process that begins with MOP North American SOP Consumption* 30% 25% 30% 15% Tree nuts Vegetables Fruits Other, including turf and horticulture *Annual consumption based on company estimates. 8

9 M I C R O N U T R I E N T S : K E Y E L E M E N T S F O R P L A N T H E A LT H Mn Co Cu Mg N P Ca K S B Zn Ni Essential minerals that maximize the health of all crops Highly fragmented market in North America and Brazil Nutrient-deficient soil profile in Brazil requires comprehensive plant nutrient mix to ensure yield - Brazilian growers increasingly turn to technology-driven solutions - Specialty product application rates growing at higher rate than NPK fertilizers Cl Mo 9

10 P L A N T N U T R I T I O N S O U T H A M E R I C A : AT T R A C T I V E P R O D U C T P O R T F O L I O Agriculture = 73% of 2016 revenue Soil nutrients: micronutrients, secondary nutrients and other supplements Technology products: controlled and slow release formulations Nutritional supplements for cattle poultry and dairy cows Agriculture Chemical Solutions Chemical solutions = 27% of 2016 revenue Caustic soda and chlorine for municipal and industrial clients to treat waste water Process chemicals for industrial customers, including oil and gas, mining, pulp and paper and others AGRICULTURE PRODUCT SALES ~65% DIRECTLY TO FARMS 50% of 2016 agriculture revenue from NEW PRODUCTS* Almost ½ of Brazil s population lacks access to sewage systems** Less than 40% of sewage in Brazil currently treated** *Includes new products introduced since **Source: Company estimates. 10

11 E X PA N D E D P L A N T N U T R I T I O N B U S I N E S S O F F E R S M O R E B A L A N C E Completing Produquímica acquisition is a key step to becoming a global leader in specialty plant nutrition - Expands product portfolio - Diversifies geographic footprint and served markets - Enhances research and development capabilities - Establishes new reporting segment, Plant Nutrition South America Brazil s plant nutrition strength balances weaker fundamentals in the U.S. in Strong U.S. currency benefits Brazilian farm income while challenges U.S. commodity prices Expect to begin introducing Produquímica products into North American markets over next 12 months Number of Product Categories Number of SKUs Before PDQ Acquisition After PDQ Acquisition Revenue by Business 78% 59% 22% 41% 2015 Pro Forma 2016 Salt Plant Nutrition 11

12 N E A R I N G C O M P L E T I O N O F M A J O R C A P I TA L P R O J E C T S Peak period of capital spending complete - Expect approximately 25% reduction in capex for 2017 vs Goderich mine: continued commissioning of additional continuous miners - Expect to be complete by end of Anticipate $30 million in annual cost savings once fully implemented Goderich Mine: one shaft lining complete - Second expected to be complete in 2018 Ogden: new SOP compaction plant expected to be commissioned in 1Q17 Ogden: new expanded crystallizer in SOP facility expected to be commissioned midyear Capital Plan ($ in millions) $200 $160 ~25% ~25% $120 $80 $40 $ Base MOB Plant Nutrition South America Special MOB Investment Capital 12

13 P L AT F O R M F O R G R O W T H DEVELOP BEST-IN-CLASS SAFETY; ENSURE LONGEVITY OF KEY ASSETS BUILD ON ESSENTIAL MINERALS BASE; ACHIEVE MORE BALANCED BUSINESS STRENGTHEN GROW DRIVE EFFICIENCY THROUGHOUT OPERATIONS IMPROVE IMPROVE GO-TO-MARKET STRATEGIES; MAXIMIZE MARGIN POTENTIAL 13

14 P R O S P E R I T Y T H R O U G H I N V E S T M E N T 2017 OUTLOOK ( A S O F F E B R U A R Y 8, ) 14

15 W I N T E R W E AT H E R R E T U R N E D T O S O M E K E Y N O R T H A M E R I C A N M A R K E T S Stronger snow events in 4Q16 vs. prior year - Snow events tracked by company in 11 key cites were up 194% vs. very mild 4Q15 - Regional variances in weather with most snow occurring in northern markets Average to below-average winter weather in central and southern U.S. markets and the U.K. Profitability remained robust despite mild winter impact on volumes and price throughout th Quarter Snow Events* 10 Year Avg Salt Segment Adjusted Operating Margin** 25.3% 24.7% 19.7% 20.8% 17.9% - Lower per-unit logistics costs - Improved profitability in consumer and industrial business - Improvements offset partially by higher production cost in 4Q16 due to lower operating rates at salt mines and unplanned downtime at Goderich mine *The number of snow events in 11 cities in Compass Minerals primary North American deicing region compared with the 10-year average number of snow events, which is the mean number of snow events for the periods ended in the season. For more information, please see the Investor Resources section of the company s investor relations site at **Non-GAAP measure. See appendix for reconciliations. 15

16 P L A N T N U T R I T I O N : S T R O N G F I N I S H T O I N N O R T H A M E R I C A A N D B R A Z I L Demand in North America sparked by increased affordability - 4Q16 sales volumes increased 53% vs. 4Q SOP imports down 28% from 2015; pricing remains stable but competitive Brazil plant nutrition market maintained strength sales volumes increased 9% from prior year - Supported by strong crop economics and good growing conditions $750 SOP Imports into North America* -28% SOP Pricing Stabilizing Tons in thousands 100 $ $ $300 $ $0 20 1Q16 2Q16 3Q16 4Q16 Average price per ton Sales volumes *Source: Compass Minerals research; Datamyne. 16

17 1 H 1 7 A N D F Y 1 7 O U T L O O K ( A S O F F E B. 8, ) 2017 OUTLOOK: FULL YEAR EPS - $3.20 to $3.70 Salt Segment 1H17 FY17 Volumes 6.1 million to 6.5 million tons 11.8 million to 12.6 million tons Average Selling Price (per ton) $66 to $70 Operating Earnings Margin 16% to 18% Plant Nutrition North America Segment Volumes 145,000 to 165,000 tons 300,000 to 330,000 tons Average Selling Price (per ton) $615 to $645 Operating Earnings Margin 11% to 13% Plant Nutrition South America Segment Volumes 360,000 to 390,000 tons 800,000 to 1.1 million tons Average Selling Price (per ton) $380 to $410 Operating Earnings Margin Corporate Corporate and Other Expense Interest Expense Capital Expenditures Depreciation, depletion and amortization break-even ~$60 million ~$52 million $125 million to $140 million ~$125 million Effective Tax Rate ~28% 17

18 P R O S P E R I T Y T H R O U G H I N V E S T M E N T APPENDIX 18

19 P R O S P E R I T Y T H R O U G H I N V E S T M E N T PLANT NUTRITION SOUTH AMERICA SUPPLEMENTAL INFORMATION

20 P R O F O R M A Q U A R T E R LY P L A N T N U T R I T I O N S O U T H A M E R I C A R E S U LT S * Three months ended (US$, in millions except foreign exchange rate) March 31, June 30, September 30, December 31, Segment sales $ 61.3 $ 71.8 $ $ Sales excluding shipping and handling Operating earnings Operating margin 4.7% 8.5% 19.7% 7.0% Adjusted operating earnings** Adjusted operating margin** 4.7% 8.5% 19.7% 14.4% EBITDA** EBITDA margin** 12.1% 15.0% 23.9% 11.7% Adjusted EBITDA** Adjusted EBITDA margin** 12.5% 15.5% 24.2% 19.1% Sales volumes (in thousands of tons) Agriculture Chemical solutions Total sales volume Average selling price (per ton) Agriculture $555 $474 $518 $713 Chemical solutions $272 $281 $269 $372 Total Plant Nutrition South America $394 $385 $436 $587 Assumed US$-to-R$ per quarter *Three months ended March 31, June 30, and September 30, 2016 are unaudited, pro forma amounts for the historical results of Produquímica. These amounts assume Compass Minerals acquired Produquímica on January 1, 2016, and include the effects of acquisition accounting for those periods. **Non-GAAP measure. See reconciliation section of presentation. 20

21 B R A Z I L A G R I C U LT U R E F U N D A M E N TA L S Brazil s Leading Position in Key Products (2014/2015) Abundant Land Available for Cultivation (in hectar millions) Product Soy Coffee Production #2 #1 Exports #2 # Sugar #1 #1 Arable Land Unavailable Arable Land Available Orange #1 #1 Source: 2015 estimates from FAO, Embrapa, Conab, MAPA Corn #3 #2 Meat #3 #1 Source: USDA, FAO 21

22 P R O S P E R I T Y T H R O U G H I N V E S T M E N T HIGHWAY DEICING INDUSTRY IN NORTH AMERICA

23 G O V E R N M E N T- D I R E C T E D S E L L I N G P R O C E S S O V E R V I E W Each government issues a Request for Quotation (RFQ) for blind, sealed bids - RFQs are typically issued between April and October - Each government s RFQ specifies a volume or volume range, a bid due date and a bid open date Bids are made public on the bid open date - Creates a transparent process Contract is awarded to the lowest bidder - Negotiation and relationship building are prohibited Contract is for a 12-month period sometimes longer - Price cannot change during 12-month contract period 23

24 B I D AWA R D T I M E L I N E S H A P E S S T R AT E G Y Illustration of Bid Timeline Sun Mon Tue Wed Thur Fri Sat Govt. A RFQ issued Govt. A Bids due/opened 24 Govt. B RFQ issued Govt. A Bids awarded Govt. B Bids due/opened 10 Govt. C RFQ issued Govt. B Bids awarded Govt. C Bids due/opened Govt. C Bids awarded Timing is different for each government customer Compass Minerals evaluates bid results and adjusts strategy accordingly Compass Minerals prepares thousands of bids 24

25 T H E G O V E R N M E N T - D I R E C T E D P R O C E S S P R O H I B I T S P R I C E N E G O T I AT I O N Bid requests usually include several delivery points Most U.S. customers guarantee a minimum purchase and require maximum delivery Suppliers bid prices include delivery Contracts are awarded on a delivery-point by delivery-point basis Sets price for entire winter season Delivery Location Illustration of a Government Bid Request* Requested Quantity Guaranteed Minimum Purchase Required Delivery Capability Percentage Range Dover 2,000 1,700 2,300 85% - 115% Fairview 6,500 5,200 7,800 80% - 120% Franklin % - 120% Greenville 10,075 8,060 12,090 80% - 120% Hudson % - 130% Delivery Location Illustration of a Government Bid Award* Requested Quantity Illustration of Winning Bid* Illustration of Bid Winner* Dover 2,000 $50.00 Competitor A Fairview 6,500 $53.50 Competitor A Franklin 175 $54.50 Competitor B Greenville 10,075 $57.35 Competitor C Hudson 350 $51.00 Competitor D * For illustration purposes only. This is not an actual bid request. 25

26 A C T U A L S A L E S O C C U R M O N T H S L AT E R Deliveries begin in late fall and end in early spring Typically, governments keep only enough rock salt on hand for two or three applications - Highway deicing salt is too bulky for most governments to store in large quantities Governments reorder as their supply is used - Supplies are shipped from the nearest depot - Each delivery creates a new sales transaction After mild winters, suppliers have most of the extra supply - Very little inventory is held by the customer 26

27 S T R O N G P O S I T I O N I N A C O M P E T I T I V E I N D U S T RY North American salt production capacity in millions of tons Rock Salt Evaporated Salt Compass Minerals* K+S** Cargill All Others SOURCE: Roskill Information Services 2015 information and company estimates. * Reflects Goderich mine at 8.0 million tons of current capacity, not its 9.0 million-ton potential capacity. ** Also imports salt from South America and the Bahamas. 27

28 L O G I S T I C S I S A C O M P E T I T I V E S T R E N G T H Mines Depots 28

29 P R O S P E R I T Y T H R O U G H I N V E S T M E N T NON-GAAP FINANCIAL RECONCILIATIONS 29

30 R E C O N C I L I AT I O N O F N O N - G A A P I N F O R M AT I O N Reconciliation for EBITDA and Adjusted EBITDA (unaudited) (in millions) 12 months ended December, Revenue $ 1,138.0 Net earnings Interest expense 34.1 Income tax expense 34.6 Depreciation, depletion and amortization 90.3 EBITDA $ Adjustments to EBITDA Gain from remeasurement of equity method investment (59.3) Business acquisition-related items (1) 8.4 Indefinite-lived intangible asset impairment 3.1 Other income, net (2) 1.1 Adjusted EBITDA $ Adjusted EBITDA margin 24% (1) Primarily includes additional expense recognized from the sale of finished goods inventory, which had its cost basis increased to fair value as a result of the acquisition of Produquímica. (2) Primarily includes interest income and foreign exchange gains and losses. The 12 months ended December 31, 2016, include a charge of $3.0 million related to the refinancing of the company s debt. 30

31 R E C O N C I L I AT I O N O F N O N - G A A P I N F O R M AT I O N : S A LT Reconciliation for Salt Segment EBITDA and Adjusted EBITDA (unaudited) (in millions) 12 months ended December 31, 2016 Segment sales $ Segment operating earnings Depreciation, depletion and amortization 46.7 Segment EBITDA $ EBITDA margin 30.5% Reconciliation for Salt Segment Adjusted Operating Earnings (unaudited) (in millions) 12 months ended December 31, Segment sales $ $ $ 1,002.6 $ $ Segment operating earnings Gain from insurance settlement (1) - - (82.4) - - Adjusted segment operating earnings $ $ $ $ $ Adjusted segment operating margin 17.9% 19.7% 20.8% 25.3% 24.7% (1) In the third quarter of 2014, the company reported a gain from an insurance settlement relating to damage sustained by the company as a result of a tornado that struck the company s rock salt mine and evaporated-salt plant in Goderich, Ontario. 31

32 R E C O N C I L I AT I O N O F N O N - G A A P I N F O R M AT I O N Reconciliation for 2016 Plant Nutrition North America and Plant Nutrition South America EBITDA (unaudited) (in millions) Plant Nutrition North America Segment Pro Forma Plant Nutrition South America Segment (1) Pro Forma Combined Plant Nutrition (1) Segment sales $ $ $ Segment operating earnings Depreciation, depletion and amortization EBITDA $ 54.5 $ 57.5 $ Adjustments to EBITDA: Indefinite-lived intangible asset impairment Earnings in equity investee Business acquisition-related items (2))\\ Adjusted Segment EBITDA $ 57.6 $ 67.1 $ Adjusted Segment EBITDA Margin 28.4% 18.8% 22.3% (1) Nine months ended September 30, 2016 are pro forma results, assuming Compass Minerals acquired Produquímica on January 1, 2016 and include the effects of acquisition accounting for those periods. (2) Primarily includes additional expense recognized from the sale of finished goods inventory, which had its cost basis increased to fair value as a result of the acquisition of Produquímica. 32

33 R E C O N C I L I AT I O N O F N O N - G A A P I N F O R M AT I O N : P L A N T N U T R I T I O N S O U T H A M E R I C A Reconciliation for Plant Nutrition South America Segment Adjusted Operating Earnings (unaudited) (1) (in millions) Three months ended March 31, 2016 June 30, 2016 September 30, 2016 December 31, 2016 Reported GAAP segment operating earnings $ 2.9 $ 6.1 $ 21.7 $ 8.0 Business acquisition-related items (2) Segment adjusted operating earnings $ 2.9 $ 6.1 $ 21.7 $ 16.4 Segment sales Segment adjusted operating margin 4.7% 8.5% 19.7% 14.4% (1) Three months ended March 31, June 30, and September 30,2016 are unaudited, pro forma amounts for the historical results of Produquímica. These amounts assume Compass Minerals acquired Produquímica on January 1, 2016, and include the effects of acquisition accounting for those periods. (2) Primarily includes additional expense recognized from the sale of finished goods inventory, which had its cost basis increased to fair value as a result of the acquisition of Produquímica. 33

34 R E C O N C I L I AT I O N O F N O N - G A A P I N F O R M AT I O N : P L A N T N U T R I T I O N S O U T H A M E R I C A Reconciliation for Plant Nutrition South America EBITDA (unaudited) (1) (in millions) March 31, 2016 Three months ended June 30, 2016 September 30, 2016 December 31, 2016 Plant nutrition S.A. segment GAAP operating earnings $ 2.9 $ 6.1 $ 21.7 $ 8.0 Depreciation, depletion and amortization Segment EBITDA $ 7.4 $ 10.8 $ 26.3 $ 13.0 Earnings in equity method investee Business acquisition-related items (2) Adjusted segment EBITDA $ 7.7 $ 11.1 $ 26.6 $ 21.7 Segment sales Adjusted segment EBITDA margin 12.5% 15.5% 24.2% 19.1% (1) Three months ended March 31, June 30 and September 30, 2016 are unaudited, pro forma amounts for the historical results of Produquímica. These amounts assume Compass Minerals acquired Produquímica on January 1, 2016, and include the effects of acquisition accounting for those periods. (2) Primarily includes additional expense recognized from the sale of finished goods inventory, which had its cost basis increased to fair value as a result of the acquisition of Produquímica. 34