BMO 2018 Farm-to-Market Conference. May 16, 2018

Transcription

1 N BMO 2018 Farm-to-Market Conference May 16, 2018

2 Forward-Looking Statements Certain statements in this presentation, including without limitation statements about the company; growth of its businesses; its growth strategy, including its ability to deliver growth, shareholder value and better shareholder returns; strengthen safety culture, engagement and asset longevity; increase business balance and diversity; drive margin improvement, growth and innovation; achieve sustainable growth and improved earnings potential; improve efficiency; reduce weather variability; grow earnings; increase free cash flow yield and cash generation; decrease capital expenditures; maintain dividend and strong balance sheet; and sustain assess and engage in value-creating opportunities, including investing in business, acquisitions and returns to shareholders; cost savings; commercial excellence, including optimization of bidding and product mix improvements; weather; volume growth; market fundamentals; cost impact of Goderich strike; operating margin; long-term demands; population growth; arable land and agricultural productivity declines; its ability to provide growers with the right tools, provide leading solutions and lead category, capture continued growth, strengthen SOP business, grow market, drive value and innovation, innovate for growth, enhance differentiation, maximize synergies, advance products in innovation pipeline, identify and execute collaborations and achieve operating margins; market growth; hectares coming into production; commercialization capabilities; and its outlook for the second quarter of 2018 and full-year 2018, including earnings per share ( EPS ), corporate and other expense, interest expense, depreciation, depletion and amortization, capital expenditures, tax rates sales, volumes, revenues and operating margins,, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Forwardlooking 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) strikes, other forms of work stoppage or slowdown or other union activities, including the Goderich mine strike, the length of the Goderich mine strike, any inability to successfully implement the company's contingency plans and any costs associated with ongoing negotiations or any final agreement with the union, (v) foreign exchange rates and the cost and availability of transportation for the distribution of the company s products, and (vi) any inability by the company to successfully implement its cost savings initiatives. 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 quarter ended March 31, 2018 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 Leader in Strong, Diverse Markets With Unique Asset Base A leading supplier of deicing salt products in North America and the U.K. Advantaged rock salt mining assets - World s largest salt mine strategically located on deep-water port in Canada - 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 - Brazilian specialty plant nutrition business focused on innovative micronutrient and other specialty products S A L E S = $ 1. 4 B I L L I O N Salt Plant Nutrition 2017 adjusted EBITDA* $287 million 2017 adjusted EBITDA* margin 21% *Non-GAAP measure. See appendix for reconciliation. 3 3

4 Our Growth Strategy OBJECTIVE Consistently deliver growth and shareholder value APPROACH Strengthen safety culture, workforce engagement and asset longevity Increase balance between two businesses Drive margin improvement, organic growth and innovation to meet customer needs EXPECTED OUTCOME A high performance company with sustainable growth opportunities and significantly improved earnings potential 4

5 Strategy Progress Made; Short-Term Headwinds Abating Most major capex projects complete - Expected to drive improved efficiency across both North American businesses and increased SOP production capability Balance between salt and plant nutrition businesses increasing - Diversifies earnings stream and reduces winter weather variability Company positioned to achieve greater earnings from a more balanced business - Free cash flow yield expected to materially increase Focused on executing to deliver increased cash generation and better returns for shareholders $250 $200 $150 $100 $50 $0 Capital Expenditures Declining (in millions) E 2019E Maintain Strong Balance Sheet 5

6 Salt Business Overview

7 Our Salt Business: Advantaged Assets Serving Broad-Based, Non-Cyclical Markets Salt is an essential mineral with thousands of applications and a diverse customer base - Recession-resistant and non-cyclical - Relatively low cost to end-users - Largely regional markets with natural barriers to entry - Weather-driven for deicing sales Highway deicing business - Rock salt and other deicers sold to municipal, county and state/provincial governments - Rock salt sold to chemical producers Consumer and industrial business - 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 Deicing Consumer non-deicing Industrial Chemical 2017 Salt Sales $770M Bulk and packaged salt and magnesium chloride for deicing Water care, consumer food salt, animal nutrition, pool care, fishery Municipal water care, food ingredient Bulk rock salt sold to chlor-alkali and other chemical producers 7 7

8 Key Assets Offer Important Advantages Goderich, Ontario, and Cote Blanche, Louisiana, rock salt mines - Serve highway and consumer deicing uses and chemical production - Possess important logistical advantages - Goderich additional advantages include size and deep water port on Lake Huron Ogden solar evaporation facility - Produces products for almost all salt product categories - Largest consumer and industrial plant by volume Salt Production Locations Underground salt mining Mechanical evaporation Solar evaporation Packaging plant Primary highway deicing markets Adjacent market growth potential United Kingdom Winsford, Cheshire, mine in the U.K. - Only dedicated salt mine in the country - Geology supports alternative mine uses that provide attractive offset to fixed costs 8

9 Strategic Focus on Efficiency, Asset Reliability and Commercial Excellence Approximately $40 million in ongoing salt business cost savings actioned - Upgrades and efficiency programs at Goderich Mine Continuous mining and continuous haulage equipment installed in 4Q17; ramp-up continues Relining two of three shafts; spending expected to be complete in Other cost-saving initiatives underway across salt business - Achieved ~$13 million in annualized salt business savings as of end of 2017 Commercial excellence driven by optimizing North American highway deicing bidding and improving product mix in consumer and industrial business Leverage low-cost salt advantages from key assets 9

10 Well-Positioned for Growth and Margin Expansion from Current Levels Key considerations for growth: Salt Segment Operating Margin Outlook A return to average winter weather Driving incremental volume growth across all salt businesses Benefit of ~$40 million in annualized savings from salt business cost saving initiatives Current developments: Highway deicing market fundamentals improving after a more typical North American winter Goderich strike on-going; contingency plans fully implemented - Currently expect limited cost impact 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% E 10

11 Plant Nutrition Business Overview

12 Long-Term Trends Continue to Support Demand for Advanced Agriculture (billions) GROWING POPULATION Global population projected to approach 9.8 billion (arable hectares per person) LIMITED ARABLE LAND Arable land per person to decline 28% CLIMATE SHOCK Estimated to result in 17% decrease in agriculture productivity by Significant Need for Increased Yield Remains 12 Source: FAO, USDA, WASDE.

13 Bushels/Acre Bushels/Acre Specialty Plant Nutrients Help Close the Yield Gap The yield gap for crops is driven by many key factors - Adverse climate - Lack of rainfall - Sub-optimal genetics - Poor plant fertility - Poor soil health - Pressure from weeds, insects and disease Genetic potential of today s corn hybrids has reached a robust >500 bu/acre Our specialty plant nutrients can mitigate many of these stresses Our goal is to provide growers with the right tools for effective, efficient and sustainable agriculture U.S. Soy Yield Gap Yield Winner* ~87 bu/acre National Average U.S. Corn Yield Gap ~366 bu/acre *Corn data from National Corn Growers Association. Soy data from ASGROW. 0 Yield Winner* National Average 13

14 Today s Genetics and Trait Packages are Demanding Justus von Liebig s Law of the Minimum published in 1873 If one growth factor/nutrient is deficient, plant growth is limited, even if all other vital factors/nutrients are adequate plant growth is improved by increasing the supply of the deficient factor/nutrient. Advanced seed technology requires more nutrient investment Growers investing in NPK but overlooking micronutrient needs The right micronutrients at the right time and rate maximize the potential ROI for every seed 14

15 Specialty Plant Nutrients Explained What are specialty plant nutrients? Important nutritional components required for plant health and maximum production Support the 4Rs of nutrient stewardship - Right source - Right rate - Right time - Right place Why we like this category in the ag sector Lower volume, higher margin differentiated products Higher growth rates Important for ensuring sustainable agriculture Opportunity to drive innovation Zn Essential for hormone production, root growth and protein formation B Essential for cell division (growth), nitrogen metabolism and water absorption Fe Essential for chlorophyll development, activates multiple enzyme pathways, legume N fixation Mn Essential for building carbohydrates, nitrogen metabolism Fe Cu Essential for enzymatic activities, chlorophyll and seed production, pigment formation 15

16 Compass Minerals: Well-Positioned to Lead Specialty Plant Nutrition Category COMMODITY FERTILIZER N P K Nutrien Mosaic SPECIALTY K SOP, SOPM& KTS Haifa Chemical SQM Coated Fertilizer Slow Release - NPK Blends Yara SPECIALTY PLANT NUTRITION Seed Solubles Foliars Adjuvants Biologicals Treatment Koch ICL Koch COMPASS MINERALS Stoller High Volume / Low Margin Moderate Margin Low Volume / High Margin OUR VISION To provide category-leading specialty plant nutrition solutions that are effective, efficient and sustainable 16

17 Our Core Geographic Presence Today Locations advantaged to serve key agriculture markets in Western Hemisphere SOP production well-positioned to serve specialty crops Compass Minerals North American Crop Mix 30% 25% Tree nuts Vegetables Access to key agricultural markets in Brazil Brazil sites accessible to ports Locations serve market-leading producers of corn, soybeans, coffee, tree nuts, oranges, sugarcane and other specialty crops R&D facilities in North and South America Plant Nutrition Production Locations 41% Agriculture production facility Water Treatment & Chemicals production facility Research & development facility Toll Manufacturing Providers Compass Minerals South American Crop Mix 20% 9% 9% 3% 18% Soybeans Cereals and Other Row Crops Corn Sugarcane Specialty Fruits, Nuts and Vegetables 10% 20% 15% Fruits Other, including turf and horticulture Corn, Soybean and other Row Crops Coffee and Cocoa Sources: FAO, USDA, Compass Minerals estimates. 17

18 Robust Specialty Plant Nutrition Market Growth Expected in the World s Key Ag Markets ESTIMATED MARKET SIZE IN NORTH AMERICA ESTIMATED MARKET SIZE IN BRAZIL Specialty K Micronutrients Micronutrients & Solubles ESTIMATED MARKET GROWTH 3%-5% 1M+ tons ESTIMATED MARKET GROWTH 7%-10% $1.4B+ Expect 20-25M new hectares coming into production between ESTIMATED MARKET GROWTH 7%-10% $1.5B+ SOP Sources: Markets and Markets, CRU, Compass Minerals estimates. Sources: Markets and Markets, Abisolo, Compass Minerals estimates. 18

19 Diversified Crops Insulate From Commodity Row Crops Soybeans Strawberries Almonds U.S. acres ~90M ~60K ~1.1M Input costs/acre $473 $67,674 $6,241 Fertilizer cost /acre $41 $688 $490 No. of field passes Net return/acre $67 $30,325 $9,309 Compass Minerals product fit Wolf Trax ProAcqua ProAcqua Protassium+ Wolf Trax ProAcqua Sources: Estimated Cost of Crop Production in Iowa, Iowa State University Extension and Outreach (2018); 2017 Farm Budgets, University of Illinois FarmDocDaily; University of California Agriculture and Natural Resources Cooperative Extension and Agricultural Issues Center. Additional information on sources in Appendix. 19

20 Capacity in Place to Capture Continued Growth Ogden-focused investments key to strengthening SOP business in North America - Reliability and efficiency of pond-only SOP production increased - Increased capability to convert muriate of potash MOP to SOP - Supports Compass Minerals position as consistent SOP supplier of choice and ability to grow North American SOP market 2017 Sales Volume and Production Capacity Summary North America South America Available Capacity Volume Sold Plant Nutrition South America has ample capacity across production facilities - Expected to support strategic plan 20

21 Enhanced Commercialization Capabilities in North America Keys to success: Focusing on differentiated agronomic benefits of SOP to increase market penetration Expanding commercialization capabilities promoting specialty product portfolio Maximizing Compass Minerals portfolio synergies to cross-sell portfolios throughout Western Hemisphere Targeting independent retail and strategic distribution partners through push/pull strategy 79% of the 58 independently published potato trials from 1945 to 2015 showed SOP provided improvement over MOP* Grower Standard Practice GSP + ProAcqua Single Application GSP + ProAcqua Dual Applications NDVI Arial Image 2017 Saskatchewan, Canada 21 * Compass Minerals literature analysis

22 Driving Value Through Direct-to-Grower Distribution in Brazil Consultative sales force backed by agronomic research and proven innovation capabilities Cerrados South-Central 180+ sales associates with ~30 agronomists that reach over 4,400 large farmers in central Brazil Focused on value-added product sales (e.g. Supera system) Direct-to-grower network drives continued product innovation ~ 80% direct-to-grower sales Strong distribution system utilizing key strategic accounts throughout other agricultural regions in Brazil ~ 50% direct-to-grower sales Chemical solutions sales 22

23 A Differentiated Approach to Product Innovation Leverage 70 multidisciplinary scientists and two innovation centers Utilize a data-driven advancement and product launch strategy Realize pipeline acceleration from counter-season testing North America Innovation Center Targeted project approach based on geography and grower needs Built on strong plant nutrition system portfolio South America Innovation Center 23

24 Innovation for Future Growth 30 Active Pipeline Projects in 2018 for North and South America Discovery PHASE 1 Phase 2-3 Phase 4-LAUNCH Wolf Trax 2.0 Sunscreen Biotic Stress Mitigation Nutrient Enhanced Seed Treatments SulfurMag 24

25 % Yield vs. Grower Standard Practice % Yield vs. Grower Standard Practice Our Data-Driven Approach Leads to Success in the Field Supera Nutritional System in Brazil based on package of proprietary Compass Minerals products has demonstrated superior results 2017 Corn Field Trial Results nutritional seed treatment impact on corn yield through early season root development Avg. Yield Advantage: 6% Win Rate: 88% Avg. Yield Increase: 13% Win Rate: 94% Location Location Yield Base is 201 bu/ac 13% increase = 24 bu/ac avg. advantage with nutritional seed treatment 25

26 Strategic Partnerships Enhance Differentiation and Drive Innovation EMBRAPA Brazil Co-development of nutritional coating technology Expect to launch in Fall 2018 Biologicals In-licensing collaborations Breadth of strains and stabilization technologies Compatibility and viability with plant nutritionals Open for Collaboration Kansas State University Leading agriculture school Collaborations focused on agronomy and product discovery Field Testing Collaborations Unique field data collection platform and trial network Generating data on core Compass Minerals products in corn and soy 26

27 2017 Successes Set Stage for Growth 2017 key achievements Opened innovation center in Overland Park, Kansas, and Iracemopolis, Sao Paulo, Brazil Launched ProAcqua TM in the U.S. Launched five new products in Brazil Grew direct-to-grower sales in Brazil by 16% vs results 2017 Plant Nutrition Sales $585M 2018 focus Continue to maximize portfolio synergies in the Americas Advance key projects in innovation pipeline Identify and execute strategic collaborations Qualitative evolution of our commercial capabilities in the Americas Plant Nutrition North America Plant Nutrition South America Agriculture Plant Nutrition South America Chemical Solutions 2020 goal: achieve consistent operating margins of 17%-20% 27

28 Appendix

29 Full-Year 2018 EPS and 2Q18 Outlook (As of May 1, 2018) FULL-YEAR 2018 EPS $2.75 to $3.25 Corporate Items Outlook Commentary Corporate and other expense ~$59M Continued efforts to minimize costs Interest expense ~$57M Rising interest expense on floating rate debt Depreciation, depletion and amortization ~$140M Reassessment of certain asset lives Capital expenditures Less than $100M Focused on managing capex to maintenance of business levels Effective tax rate ~25% Lowered due to continued refinement of earnings by jurisdiction Segment Outlook Salt Plant Nutrition North America Plant Nutrition South America Full-year sales volumes 11.8M to 12.6M tons 320,000 to 350,000 tons 700,000 to 900,000 tons 2Q18 revenue $105M to $120M $40M to $50M $70M to $80M 2Q18 operating earnings margin 12% to 14% 8% to 10% 2% to 3% 29

30 Reconciliation of Non-GAAP Information Net earnings Reconciliation for EBITDA and Adjusted EBITDA (unaudited) (in millions) 12 months ended December 31, 2017 $ 42.7 Interest expense 52.9 Income tax expense 60.0 Depreciation, depletion and amortization EBITDA $ Restructuring charges 4.3 Other expense, net (1) 4.4 Adjusted EBITDA $ Total revenue 1,364.4 Adjusted EBITDA margin 21.0% (1) Primarily includes interest income and foreign exchange gains and losses. 30

31 Reconciliation of Non-GAAP Information Reconciliation for Salt Segment EBITDA (unaudited) (in millions) 12 months ended December 31, 2017 Segment GAAP operating earnings $ Depreciation, depletion and amortization 55.0 Segment EBITDA $ Restructuring charges 2.0 Adjusted segment EBITDA $ Segment sales Segment EBITDA margin 25.4% 31