Company's Q4 2025 Earnings Call Contradictions Reveal Shifting Stances on Inventory, Debt, and Market Demand

Date of Call: December 9, 2025

Financials Results

• Revenue: Approximately $1.25B for FY2025, up 11% YOY

Guidance:

• 2026 adjusted EBITDA guidance $200M–$240M
• Salt adjusted EBITDA $225M–$255M; expected margin improvement ~200–300 bps vs FY2025; salt sales volumes forecast ~8% decline at midpoint
• Plant Nutrition adjusted EBITDA $31M–$36M; lower volumes expected but similar EBITDA due to higher pricing and improved cost structure
• Corporate adjusted EBITDA negative $56M to negative $51M (midpoint implies ~15% YoY improvement adjusting for a $7.9M gain)
• 2026 CapEx $90M–$110M, tied to winter and cash generation

Business Commentary:

* Financial Improvement: - Compass Minerals reported a decline in net debt by 14% or $125 million. - The company improved its financial position by reducing working capital and rationalizing the corporate cost base, leading to a $25 million improvement in SG&A year-over-year.

• Sales and Market Recovery:
• Salt segment revenue for the fourth quarter was $182 million, up 13% compared to the previous period, with highway deicing volumes increasing 20% year-over-year.

• The increase in sales and volumes is attributed to more normal winter weather and better inventory levels.

• Operational Efficiencies:

• Adjusted EBITDA for the full year was $199 million, with a reported improvement of approximately 4% year-on-year when adjusted for noncash items.

• Efforts to improve operational efficiency included curtailing rock salt production after the 2023-24 deicing season and enhancing the Ogden SOP plant operations.

• Production and Cost Management:

• The company forecasts an 8% sales volume decline in 2026 for the Salt segment, driven by a reversion to more typical winter assumptions.

• This adjustment reflects a strategic move to manage inventory levels and align production with sales forecasts, aiming to retire debt and generate cash.

• Refinancing and Financial Stability:

• The company's refinancing in June provided additional financial flexibility through enhancements in liquidity and debt maturity.
• This move supports ongoing efficiencies and organizational improvements, contributing to a more stable financial position.

Sentiment Analysis:

Overall Tone: Positive

• Ed: "Compass Minerals today is a significantly healthier, more focused company." Net debt reduced 14% ($125M); Q4 adjusted EBITDA rose to $42M from ~$16M a year ago; management provided constructive 2026 adjusted EBITDA guidance ($200M–$240M) and expects 200–300 bps margin improvement in Salt.

Q&A:

• Question from David Begleiter (Deutsche Bank): Could you address again the volume decline you're forecasting in highway deicing and whether that's a structural decline or maybe some sort of cyclical decline? Or how do you look at that number going forward?
  Response: Forecasted decline reflects a reversion to more typical winter demand (prior season ran at unusually high commitment levels); not viewed as structural.

• Question from David Begleiter (Deutsche Bank): In terms of the full year guidance range, what are the drivers do you think to get to the upper and lower end of that guidance, EBITDA band?
  Response: Primary driver is winter weather upside; operational consistency and execution of improvement initiatives are secondary drivers to reach the high end.

• Question from Jeffrey Zekauskas (JPMorgan): Given that you expect your volumes as a base case to be lower in both segments year-over-year, does that mean that your inventories are unlikely to grow next year?
  Response: Management: No planned inventory build; production and inventories will be aligned to demand and they will prioritize using cash to reduce debt.

• Question from Jeffrey Zekauskas (JPMorgan): To put it a different way, do you expect to use working capital in 2026 or not?
  Response: Yes — they will manage working capital through the season aligned to the sales forecast and will adjust production/inventory after the winter informs the next season.

• Question from Jeffrey Zekauskas (JPMorgan): And then in Plant Nutrition, why were volumes pulled forward? And how much of your volumes do you think were pulled forward?
  Response: Volumes were pulled forward by normal market timing and the company's ability to serve demand from available Ogden inventory; it was a significant portion of the year-over-year delta but no precise quantification provided.

• Question from Jeffrey Zekauskas (JPMorgan): Were there onetime benefits in the fourth quarter in that your year-over-year your projection for EBITDA next year is really no different than what you earned in '25, and you had obviously a very, very strong second half. Why are you making more in Plant Nutrition next year as a base case?
  Response: Management: The primary driver of higher Plant Nutrition EBITDA next year is higher pricing.

Contradiction Point 1

Inventory Management and Sales Forecasting

It involves changes in the company's approach to inventory management and sales forecasting, which are critical for operational planning and investor expectations.

With lower volumes expected in both segments year-over-year, will inventories likely not grow next year? - Jeffrey Zekauskas(JPMorgan)

20251209-2025 Q4: We will continue to align our inventories and production levels to meet the range of demand. Edward Dowling: Our objective is to use cash and retire debt, ensuring proper inventory levels without building inventory beyond necessary. - Peter Fjellman(CFO), Edward Dowling(CEO)

Can you explain the increase in accounts receivable from December to March? Is this a significant source of incremental cash moving forward? - David Silver(CL King)

2025Q2: There are a couple of insurance settlement matters within the AR and both the AP balances. These balances will continue to come down slightly related to just the natural flow of the inventory sell-through. - Peter Fjellman(CFO)

Contradiction Point 2

Debt Management Strategy

It involves differing statements on debt management, which is critical for investor assessment of the company's financial health and stewardship.

Is the plan to pay down the '27 stub debt with cash flow or refinance it? - Unidentified Analyst (JPMorgan)

20251209-2025 Q4: We intend to use cash flow to pay down the remaining '27 bonds. - Edward C. Dowling(CEO)

Where are broader industry inventory levels? Where is your target leverage ratio on a normalized EBITDA basis moving forward? - Unidentified Analyst (JPMorgan)

2025Q3: We aim for investment grade, debt-to-EBITDA ratio of 2 to 3, around 2.5. We'll manage cash and working our way down, retiring debt before considering capital returns. - Edward C. Dowling(CEO)

Contradiction Point 3

Market Demand and Pricing Dynamics

It reflects differing perspectives on market demand and pricing expectations, which are fundamental to business strategy and financial forecasting.

Were there one-time benefits in Q4 contributing to the unchanged EBITDA guidance for next year compared to 2025, despite strong second-half performance, and why is Plant Nutrition projected to earn more next year as the base case? - Jeffrey Zekauskas(JPMorgan)

20251209-2025 Q4: The projected increase in Plant Nutrition EBITDA is primarily due to pricing rather than one-time benefits. - Ben Nichols(CMO)

What insights can you share from early bid requests for the upcoming bid season? Have volume commitments increased noticeably? - David Silver(CL King)

2025Q2: It is very early in the bidding season. The market is more constructive than we've seen over the past several years. This indicates potential for price and volume increases. Not all areas are the same, and some may experience more snow than others." Ben Nichols: Tender sizes are ranging to slightly up, significantly up in some regions. All things being equal, the dynamic is positive year-over-year moving forward. - Edward Dowling(CEO), Ben Nichols(CMO)

Contradiction Point 4

Volume and Inventory Management in Plant Nutrition

It involves inconsistencies in the company's explanation of volume shifts and inventory management strategies, which could impact investor expectations and operational decision-making.

Why were Plant Nutrition volumes pulled forward, and how much of your Plant Nutrition volumes were pulled forward? - Jeffrey Zekauskas (JPMorgan)

20251209-2025 Q4: The volumes were pulled forward due to the stability of our production at Ogden and having inventory in place to serve the market. The exact amount is hard to pin down, but it was a significant portion of the year-over-year variance. - Ben Nichols(CRO)

How did bid season results compare to expectations for pricing and market share, especially regarding Cargill and American Rock Salt's challenges? Did you anticipate higher prices or significant volume shifts among major players? How have deicing pricing markets evolved? - Joel Jackson (BMO Capital Markets)

2025Q3: Plant Nutrition is a multi-year recovery plan. Ponds' recovery is ahead of schedule due to good management and weather. Improvements in wet and dry plants are ongoing. - Edward C. Dowling(CEO)

Contradiction Point 5

Highway Deicing Volume Forecast

It involves changes in the company's outlook for highway deicing volumes, which directly impacts revenue projections and operational planning.

Can you clarify the forecasted volume decline in highway deicing and whether it's structural or cyclical, and how do you expect it to trend in the future? - David Begleiter(Deutsche Bank)

20251209-2025 Q4: This forecasted volume decline in highway deicing is due to a reversion to more typical winter assumptions, as the prior winter experienced unusually high commitment levels. This is a cyclical decline, not structural. - Ben Nichols(CMO)

With recent winter weather, can you provide the outlook for highway deicing volumes in Q2 and the full year? - David Begleiter(Deutsche Bank)

2025Q1: We're in February now. January was great, mainly in our southern markets. Currently, storm tracks are into our core served markets, and February is looking pretty good. We'll see how March unfolds and adjust production plans based on the season's end. - Edward Dowling(CEO)