Compass Minerals (NYSE: CMP), the parent company to owners of Goderich salt mine, reported net earnings of $9.5 million in the second quarter of 2012 operations, which is down from $14 million in the same period last year.
Earnings were affected, in part, by losses resulting from the tornado that ripped through Goderich. Salt was purchased from third parties and there were lingering effects of inefficient production and logistics costs, according to a press release on second-quarter 2012 results issued July 30.
Compass Minerals, which is parent company to seven companies, including Sifto Canada Corp., reported flat sales year over year at $178.5 million versus $179.9 million in the second quarter of 2011. A 14 per cent gain in specialty fertilizer sales was offset by a six per cent decline in salt sales.
The company expects a return to the 10-year average sales volume of 7.5 million tons for highway deicing salt in the fourth quarter of 2012 and the first quarter of 2013, compared to 5.8 million tons during the same period in 2011-12.
“Our results this quarter continued to be pressured by the trailing effects of 2011 and early-2012 weather. However, we expect the sulfate 
of potash market to remain stable this year, and our highway deicing bid results to date suggest that a return to more-typical winter weather throughout our served markets would generate year-over-year salt earnings improvement in the fourth quarter and significant improvements by this time next year,” said Angelo Brisimitzakis, Compass Minerals president and CEO.
Operating earnings declined to $15.5 million from $22.1 million in the prior-year quarter driven by increased sulfate of potash unit production costs related to sourcing higher-cost potassium mineral feedstock as a result of unfavorable solar-evaporation weather at the Great Salt Lake in 2011 and the estimated impact of the 2011 tornado on salt costs.
As well, cash flow from operations was $115.5 million compared to $194.1 million in the first six months of 2011 primarily due to reduced earnings, partially offset by $18.0 million of insurance recoveries related to the Goderich tornado.
To read the full press release, please visit Compass Minerals’ website.
Meanwhile, a chartered financial analyst from Morningstar, a company that provides independent investment research, is suggesting Compass Minerals’ stock is trading at a 20 per cent discount to its fair value estimate of $93 per share.
“We think the stock is currently depressed because the company’s near-term profitability will be weighed down by a trio of unfavorable weather events: tornado damage costs and production interruptions at Goderich, rainfall-related production shortfalls at the Great Salt Lake facility, and mild winter weather in the Midwest that is hurting demand for deicing salt,” Elizabeth Collins, CFA, said.
Please read Collins’ full report online.
