Compass Minerals' Q4 2025 Earnings Call: Contradictions Emerge on Highway Deicing Volume, Inventory Strategy, and EBITDA Guidance Drivers

Date of Call: December 9, 2025

Financials Results

• Revenue: $1.25 billion for FY25, up 11% YOY; Salt Q4 revenue $182M, up 13% YOY, but pricing down 1% YOY
• Operating Margin: Salt segment operating earnings per ton down 9% YOY; Adjusted EBITDA per ton decreased 7% YOY due to higher production costs

Guidance:

• Total company adjusted EBITDA for 2026 expected to be $200M-$240M.
• Salt segment adjusted EBITDA expected to be $225M-$255M, implying 200-300 bps margin improvement YOY.
• Plant Nutrition segment adjusted EBITDA expected to be $31M-$36M.
• Corporate overhead adjusted EBITDA expected negative $56M to negative $51M, implying ~15% YOY improvement.
• Total capital expenditures expected $90M-$110M.

Business Commentary:

* Financial Position and Deleveraging: - Compass Minerals reduced its net debt by 14% or $125 million in fiscal 2025. - This improvement was due to successful deleveraging efforts following a strategic decision to scale back production and manage inventory levels.

• Operational Improvements and Cost Rationalization:
• The company achieved an 18% reduction in SG&A expenses, resulting in a $25 million improvement year-over-year.

• This was driven by a reduction in force and the strategic decision to wind down the bioretardant business.

• Salt Segment Performance:

• Salt segment revenue in Q4 was $182 million, up 13% year-over-year, with highway deicing volumes increasing 20%.

• The revenue growth was supported by more normal winter weather and a strategic ramp-up in production after a curtailment in the previous year.

• Plant Nutrition Segment Recovery:

• Plant Nutrition segment volumes increased by 19% year-over-year, with operating earnings per ton improving to $20.

• Recovery was attributed to the restoration of the pond complex, which improved feedstock quality and plant operations.

• 2026 Guidance and Strategic Focus:

• The company's guidance for total adjusted EBITDA in 2026 is projected between $200 million and $240 million.
• This outlook is based on expected improvements in margins, driven by stronger pricing and lower per-ton costs due to higher production levels and operational efficiencies.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated the company is 'significantly healthier, more focused' and 'more stable today compared to a year ago.' Management highlighted a 'successful refinancing,' 'substantial release of working capital,' 'improvements in profitability,' and being 'well positioned to build a sustainable value.'

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?
  Response: The decline is a reversion to more typical winter assumptions, not structural; prior winter was above normal at 95%+ of commitments.

• 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 EBITDA band?
  Response: Primary driver for upper end is upside in winter weather and better market demand efficiencies; consistent operations also key.

• 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: No inventory build planned over and above current levels; focus is on managing inventory properly while using cash to retire debt.

• Question from Jeffrey Zekauskas (JPMorgan): In Plant Nutrition, why were volumes pulled forward? And how much of your volumes do you think were pulled forward?
  Response: A significant portion of the year-over-year volume variance was pulled forward due to market behavior, but exact number not provided.

• Question from Jeffrey Zekauskas (JPMorgan): Were there onetime benefits in the fourth quarter in that your year-over-year 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: Primarily due to price improvements in the P&L driving higher EBITDA.

Contradiction Point 1

Highway Deicing Volume Outlook and Market Dynamics

This represents a significant shift in the forecast and rationale for a core business segment. In Q2, the outlook was framed as constructively positive due to market dynamics, while in Q4, it was revised to a decline based on a reversion to "typical" weather, directly countering the earlier positive setup.

Can you clarify the volume decline in highway deicing - is it structural or cyclical? And how do you expect this number to trend going forward? - David Begleiter (Deutsche Bank)

20251209-2025 Q4: The forecasted sales volume decline is due to a reversion to more typical winter assumptions... The guidance is based on normal weather expectations. - Ben Nichols(CCO)

What do early bid requests for the upcoming North American highway de-icing season indicate? Have volume commitments increased compared to previous years? Are delivery points showing depot depletion? - David Silver (CL King)

2025Q2: It is very early in the bidding season. The market setup is more constructive than in recent years due to the difference in inventory levels... this suggests potential for price and volume increases... - Edward Dowling(CEO)

Contradiction Point 2

Inventory and Production Planning Strategy

This contradiction reveals a strategic pivot regarding inventory management. In Q1, the explicit goal was to reduce inventories below historical norms to free up cash. By Q4, the stance has shifted to maintaining inventory strictly at levels needed for the forecasted demand, with a new primary objective of using cash to retire debt.

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

20251209-2025 Q4: Inventory is not planned to grow beyond the proper level needed for the upcoming season.... The company's objective is to use cash to retire debt while maintaining appropriate inventory levels. - Peter Fjellman(CFO) & Edward Dowling(CEO)

Can you discuss the changes in your accounts receivable and your expectations for it, as well as your inventory reduction targets? - Jeffrey Zekauskas (JPMorgan)

2025Q1: The company is actively working to reduce inventories below historical norms, freeing up cash. - Edward Dowling(CEO)

Contradiction Point 3

Primary Driver for EBITDA Guidance

This involves a change in the narrative around the key operational levers for achieving financial targets. In Q2, a detailed, multi-year structural plan for cost reduction in the SOP business was highlighted as a material driver. In Q4, the focus for reaching the upper end of EBITDA guidance is solely on weather-related sales upside and operational efficiencies, omitting the previously emphasized structural cost plan.

Regarding the full-year EBITDA guidance range, what are the drivers for reaching the upper and lower ends? - David Begleiter (Deutsche Bank)

20251209-2025 Q4: **The primary driver for reaching the upper end of the guidance range is upside in winter weather, which would drive higher sales and demand.** Additional upside could come from operational efficiencies gained with better market demand. - Ben Nichols(CCO)

What is the outlook for improving SOP (Soda Ash) margins and cash flow over the next year or so? How will cash production costs return to historical levels? - David Silver (CL King)

2025Q2: This is a multiyear effort focused on two main areas: 1. Better control of brine chemistries... 2. A capital project to modify the dryer/compaction plant... These efforts are expected to materially reduce SOP production costs. - Edward Dowling(CEO)

Contradiction Point 4

Capital Expenditure (CapEx) Project Prioritization

This contradiction pertains to capital allocation strategy. In Q1, it was explicitly stated that the $25M CapEx reduction did **not** apply to high-priority projects like the Ogden SOP plant upgrade. In Q4, the description of the reduced projects as "lower-risk, non-essential" and "not essential EHS projects" creates ambiguity, as it implies a broader scope of cuts that could potentially include or exclude previously highlighted initiatives.

Did you solve the corrosion issues highlighted last year? - David Begleiter (Deutsche Bank)

20251209-2025 Q4: The $25 million reduction involves projects ranked lower in this risk-based hierarchy. These are not essential Environmental, Health, and Safety (EHS) projects. The projects may reappear in the 2026 capital plan... - Edward Dowling(CEO)

Are the steps being taken at Ogden for the SOP business considered capital projects, or are the associated costs expensed through the income statement on a quarterly basis? - David Silver (CL King & Associates)

2025Q1: The recent benefits at Ogden (higher SOP grade, lower costs) are from operational improvements... Future capital projects include: 1) Upgrading the dry SOP plant at Ogden... The $25 million reduction does not apply to these higher-priority projects. - Edward Dowling(CEO)

Contradiction Point 5

Explanation for Plant Nutrition Volume Variance

This involves an inconsistency in explaining performance drivers for a key business segment. In Q3, strong performance was attributed to a successful internal recovery plan. In Q4, the explanation shifts to a significant portion of volume being "pulled forward" by market demand, which is a different causal factor that could impact future period expectations.

Why were Plant Nutrition volumes pulled forward? How much of the Plant Nutrition volumes were pulled forward? - Jeffrey Zekauskas (JPMorgan)

20251209-2025 Q4: A significant portion of the year-over-year volume variance was due to market demand being pulled forward into 2025. - Ben Nichols(CCO)

Were Q3 costs unusually low or Q4 costs unusually high? - Joel Jackson (BMO Capital Markets)

2025Q3: The strong Q3 was part of a multi-year recovery plan for the Ogden plant, ahead of schedule due to good pond management and favorable weather... - Edward C. Dowling(CEO) & Patrick James Merrin(CFO)