Compass Minerals Business Update. August 6, 2018

Transcription

1 N Compass Minerals Business Update August 6, 2018

2 Forward-Looking Statements Certain statements in this presentation, including without limitation statements about the highway deicing bid season, including price and volumes awarded; mining efficiencies; market and business fundamentals; capital expenditures and spending; free cash flow improvement; ability to create value, reduce debt, improve ratings and profitability, maintain dividends, sustain assets, invest in existing business, engage in strategic acquisitions, direct returns to shareholders and drive growth; agriculture sales and fundamentals; weather; margin improvement; mine operating rates; demand; position of salt business; farmer economics; operating efficiencies; and its outlook for the second half of 2018 and full-year 2018, including sales volumes, revenues, operating earnings margins, earnings per share ( EPS ), corporate and other expense, interest expense, depreciation, depletion and amortization, capital expenditures and tax rates, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. We use 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) pressure on prices and impact from competitive products, (iii) any inability by the company to fund necessary capital expenditures or successfully implement any capital projects, (iv) foreign exchange rates and the cost and availability of transportation for the distribution of the company s products, (v) any inability by the company to successfully implement its cost savings initiatives, and (vi) impacts of the Goderich mine strike, including any work stoppages or slowdowns. 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, 2017, and Quarterly Report on Form 10-Q for the quarters ended March 31, 2018 and June 30, 2018, 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 2

3 Top-Line Growth in all Segments Continues Total revenue up 8% from 2Q17 results - Year-over-year sales increases in all segments Operating earnings declined vs. prior-year results - Primarily due to increased depreciation within the Plant Nutrition North America Segment Adjusted EBITDA* increased 13% vs. 2Q17 driven by improved results across all segments CMP Consolidated Results (Dollars in millions) Second Quarter Sales $247 $228 Operating earnings $2.8 $6.0 Operating earnings margin 1% 3% Adjusted EBITDA* $39 $34 Adjusted EBITDA* margin 16% 15% Earnings per diluted share ($0.23) ($0.19) Cash flow from operations increased 25% to $182 million from 2Q17 results *Earnings before interest, taxes, depreciation and amortization, adjusted for special items. This is a non-gaap measure. See appendix for reconciliations. 3

4 Salt: Positive Pricing Trends for Rest of 2018; Long-Term Operational Efficiencies Expected Second quarter results lifted by strong highway deicing sales North American deicing bid season ~75% complete - Currently expect average contract price increase of ~15% vs. prior year - Awarded volumes expected to be to down vs. prior year due to Goderich supply constraints New labor agreement completed at Goderich mine ending 11-week strike - Further aligns our operations with continuous mining investments - Safety focus continues - Mining efficiencies enabled 20% 15% 10% 5% 0% -5% Year-over-Year Change in Compass Minerals North American Highway Deicing Average Contract Price -10% 2015/ / / /19E 4

5 Plant Nutrition: Solid Second Quarter; Positive Indications for Rest of Year Plant Nutrition North America Sales growth for both SOP (sulfate of potash) and micronutrients - Volumes up 3% from 2Q17 with stable pricing Higher depreciation continued to pressure earnings Plant Nutrition South America Agricultural market fundamentals expected to support growth in Brazil $600 $550 $500 $450 Steady Growth in Total Plant Nutrition Revenue (Trailing 12-month results, in $ millions) Year-over-year growth in sales volumes despite national trucker strike in Brazil $400 TTM 2Q17* TTM 3Q17 TTM 4Q17 TTM 1Q18 TTM 2Q18 *Pro forma results. Includes 3 months of unaudited, pro forma amounts for the historical results of Produquímica. 5

6 Strengthening Farm Economics for Brazil Agriculture Soybean Largest Single Crop Served by Compass Minerals in South America 20% Soybean Harvested Area in Brazil Expanding Average Price* Premium for Brazil Soybeans vs. U.S. Increased +21% 41% 18% 9% 3% 9% % +8% Plant Nutrition South America Crop Mix Soybeans Corn Coffee and Cocoa Cereals and Other Row Crops Sugarcane Specialty Fruits, Nuts and Vegetables / / /19E (in millions of hectares, by growing season) H18 Jul-18 (Average soybean price premium at Paranagua, Brazil vs CBOE futures price) Sources: CONAB; WADSE; CEPEA and FactSet 6

7 Investments in Place; Expect Improving Free Cash Flow Execution & Declining CapEx Improving Market Fundamentals Salt Sales Free Cash Flow Improvement Capital Expenditures (in millions) $250 $200 $ CapEx expected to decline 54% from peak in 2015 Salt Sales Plant Nutrition Sales $100 $50 $ E 2019E Plant Nutrition Sales 7

8 SEGMENT RESULTS & OUTLOOK 8

9 Strong Highway Deicing Demand Pushed Salt Segment Results Above Prior Year April snow events and early summer deicing restocking orders in the U.K. drove a 17% increase in sales volume and 11% growth in revenue vs. 2Q17 Highway deicing sales volumes increased 27% from prior-year; prices were 1% higher Salt 2017 Segment Results ($ in millions) Q18 2Q17 %Δ Revenue $121 $ % Operating earnings $13 $11 +17% Operating earnings margin 10.3% 9.8% +½ pt EBITDA* $27 $23 +14% EBITDA* margin 22.0% 21.5% +½ pt Consumer and Industrial volumes dropped 5%; average selling prices increased 3% - Reflects price increases introduced in 2017 for all non-deicing products 2Q18 Sales Volumes (in thousands of short tons) 1, Average Per-ton Selling Price $75/ton Operating and EBITDA* margins benefited from improved operating rates in the U.K. and more profitable sales mix in North America 2Q $79/ton *Non-GAAP measures. See appendix for reconciliations. 9

10 Plant Nutrition North America Top Line Growth Continues Revenue growth driven by increased sales volumes vs. 2Q17 - Total sales volumes increased 3% SOP sales volumes up 2% Micronutrient sales volumes up 39% - Average selling price essentially flat Net pricing up modestly vs. prior year due to more FOB sales for SOP Operating earnings pressured by increased production costs - Driven by 51% year-over-year increase in depreciation expense related to investments in Ogden SOP plant 2Q18 Plant Nutrition North America Segment Results ($ in millions) 2Q18 2Q17 %Δ Revenue $52 $51 +3% Operating earnings $4.7 $7.6-45% Operating margin 8% 15% -7 pts EBITDA* $17 $16 +6% EBITDA* margin 33% 32% +1 pt 80 Plant Nutrition North America Sales Volumes (in thousands of short tons) Average Per-Ton Selling Price $644/ton 2Q17 78 $642/ton *Non-GAAP measures. See appendix for reconciliations. 10

11 Strength in Plant Nutrition South America Revenue up 8% from prior year - Increased sales volumes in agriculture - Average selling prices stable - Changes in the average exchange rates vs. prior year negatively impacted U.S. dollar results by 11% Plant Nutrition South America Segment ($ in millions) 2Q18 USD 2Q17 USD %Δ 2Q18 BRL 2Q17 BRL %Δ Revenue $71 $66 +8% R$252 R$212 19% Operating earnings $0.7 $0.8-13% R$3.4 R$2.8 21% Operating margin 1% 1% - 1% 1% - EBITDA* $6.7 $6.4 5% R$24 R$21 14% EBITDA* margin 9% 10% -1 pt 10% 10% - National trucker strike in Brazil impacted both agriculture and chemical sales volumes Plant Nutrition South America - Expect agriculture sales in 2H18 to offset most lost sales resulting from the strike Operating earnings and EBITDA* increased vs. 2Q17 in local currency due to stronger agriculture sales partially offset by increased input costs 2Q18 2Q Sales Volumes (in thousands of short tons) Average Per-Ton Selling Price $448/ton $439/ton *Non-GAAP measures. See appendix for reconciliations. Agriculture Chemical Solutions 11

12 2H18 and Full-Year Segment Outlook Segment Outlook Salt Plant Nutrition North America Plant Nutrition South America Full-year sales volumes 11.8M to 12.3M tons 340,000 to 360,000 tons 750,000 to 875,000 tons 2H18 revenue $440M to $470M $115M to $135M $250M to $275M 2H18 operating earnings margin 23% to 25% 12% to 14% 18% to 20% Strong highway deicing prices expected to drive +15% revenue growth vs. 2H17, assuming average winter weather; expected margin improvement driven by bid season price benefits and higher mine operating rates Steady demand growth expected in Plant Nutrition North America, driving modest increase in full-year volume expectations Plant Nutrition South America entering key agriculture selling season with strong agriculture fundamentals as a backdrop 12

13 Full-Year 2018 EPS Outlook Unchanged FULL -YEAR 2018 EPS - $2.75 to $3.25 Corporate Items Current Outlook Prior Outlook Commentary Corporate and other expense ~$59M unchanged Interest expense ~$57M unchanged Depreciation, depletion and amortization ~$140M unchanged Capital expenditures Less than $100M unchanged Focused on managing capex to maintenance of business levels Effective tax rate ~21% ~25% Lowered due to discrete items and continued refinement of earnings by jurisdiction 13

14 In Conclusion Salt business well-positioned for the future - Positive resolution with our Goderich employees - Continuous mining and haulage systems at Goderich along with other efficiency initiatives throughout our salt operations expected to improve profitability Plant Nutrition focus continues on specialty and innovative solutions to drive growth - Expect improving farmer economics in Brazil to boost results vs. prior year - Steady demand in North America for both SOP and micronutrients expected Strong free cash flow outlook for 2019 and beyond driven by expectations for lower capital spending, increased operating efficiencies and improved business fundamentals 14

15 APPENDIX 15

16 Reconciliation of Non-GAAP Information Reconciliation for EBITDA and Adjusted EBITDA (unaudited) (in millions) Three months ended June 30, Net loss $ (7.6) $ (6.4) Interest expense Income tax benefit Depreciation, depletion and amortization EBITDA Adjustments to EBITDA Other income, net (1) Adjusted EBITDA Total Revenue Adjusted EBITDA margin (5.1) (1.5) $ 37.5 $ $ 38.5 $ 34.2 $ $ % 15.0% (1) Primarily includes interest income and foreign exchange gains and losses. 16

17 Reconciliation of Non-GAAP Information Reconciliation for Salt Segment EBITDA (unaudited) (in millions) Three months ended June 30, Segment GAAP operating earnings $ 12.5 $ 10.7 Depreciation, depletion and amortization Segment EBITDA $ 26.6 $ 23.4 Segment sales Segment EBITDA margin 22.0% 21.5% Reconciliation for Plant Nutrition North America Segment EBITDA (unaudited) (in millions) Three months ended June 30, Segment GAAP operating earnings $ 4.2 $ 7.6 Depreciation, depletion and amortization Segment EBITDA $ 17.2 $ 16.2 Segment sales Segment EBITDA margin 33.2% 32.1% 17

18 Reconciliation of Non-GAAP Information Reconciliation for Plant Nutrition South America Segment EBITDA (unaudited) (in US$, in millions) Three months ended June 30, Segment GAAP operating earnings $ 0.7 $ 0.8 Depreciation, depletion and amortization Earnings in equity method investee Segment EBITDA $ 6.7 $ 6.4 Segment sales Segment EBITDA margin 9.4% 9.7% Reconciliation for Plant Nutrition South America Segment EBITDA (unaudited) (in BRL, in millions) Three months ended June 30, Segment GAAP operating earnings R$ 3.4 R$ 2.8 Depreciation, depletion and amortization Earnings in equity method investee Segment EBITDA R$ 24.2 R$ 20.6 Segment sales Segment EBITDA margin 9.6% 9.7% 18