FULL YEAR: COMPASS MINERALS' SALES UP 4%, EARNINGS UP 3%
Feb. 9, 2017
Source: Compass Minerals news release
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Compass Minerals (NYSE: CMP), a leading producer of essential minerals, posted solid fourth-quarter and full-year 2016 earnings driven by the resilient performance of the salt business and the contribution of the Brazilian specialty plant nutrition company, Produquímica, which was acquired on October 3, 2016. The company also benefited in the fourth quarter from improved demand for its sulfate of potash products in North America.
"Each of our key businesses ended the year with positive momentum based on improving market conditions. We've experienced more typical winter weather, which is driving salt sales volumes above prior year, and demand for our portfolio of specialty plant nutrients was robust in South America and improved in North America," said Fran Malecha, Compass Minerals' president and CEO.
"As we enter 2017, we expect to build on this momentum, capitalize on improving underlying market fundamentals and continue executing on our strategy to diversify and strengthen our company."
Fourth-quarter net earnings rose 67 percent to $97.6 million, or $2.87 per diluted share, from $58.4 million, or $1.72 per diluted share, in the fourth quarter of 2015. The company's 2016 results were impacted by special items, which in aggregate represented a net after-tax benefit of approximately $51.5 million, or $1.52 per diluted share. These items included the recognition of a $59.3 million gain on the company's equity investment in Produquímica, which was partially offset by a purchase accounting adjustment and other transaction-related costs stemming from the Produquímica acquisition.
In addition, the company reported a partial write-down of the Wolf Trax trade name. Additional details regarding these special items, along with reconciliations of any non-GAAP measures used in this press release, can be found in the tables at the end of this press release.
For the full year, net earnings was $162.7 million, or $4.79 per diluted share, up from $159.2 million, or $4.69 per diluted share, in 2015. Excluding special items, 2016 non-GAAP net earnings totaled $111.2 million, or $3.27 per diluted share.
Total revenue for the fourth quarter was $443.2 million, a 53 percent increase from fourth-quarter 2015 revenue. The current period includes $113.5 million in revenue from the company's new operating segment, Plant Nutrition South America, which was formed following the completion of the Produquímica acquisition. For the full year, total company revenue increased approximately 4 percent from 2015 results.
Consolidated operating earnings in the fourth quarter of 2016 decreased 9 percent from 2015 fourth-quarter results. Excluding special items, total company adjusted operating earnings increased approximately 7 percent, as the contribution from the company's Plant Nutrition South America segment and improved performance of the Plant Nutrition North America segment (formerly called the Plant Nutrition segment) more than offset a year-over-year decline in salt segment operating earnings.
Full-year consolidated operating earnings in 2016 were $174.6 million, a 21 percent year-over-year reduction. Excluding special items, 2016 adjusted operating earnings were $186.1 million.
PLANT NUTRITION OVERVIEW
In October 2016, Compass Minerals completed the purchase of Produquímica. This acquisition has significantly expanded the company's geographic footprint, product portfolio and research and development capabilities in specialty plant nutrition as well as provided a strong regional chemical solutions business in Brazil. The addition of Produquímica, as well as a $12.1 million increase in plant nutrition revenue in North America, lifted Compass Minerals' total plant nutrition revenue in the fourth quarter of 2016 to $176.1 million compared to $50.5 million in the fourth quarter of 2015. Operating earnings from the combined segments in the 2016 fourth quarter were $16.0 million, and adjusted operating earnings reached $27.5 million, when excluding special items. This compares to $11.5 million in the 2015 fourth quarter.
Segment data will be provided going forward for both the legacy plant nutrition business, now called Plant Nutrition North America, and the acquired Brazilian business, now called Plant Nutrition South America.
PLANT NUTRITION NORTH AMERICA
Revenue generated by the Plant Nutrition North America segment rose 24 percent from $50.5 million in the fourth quarter of 2015 to $62.6 million as a 53 percent increase in sales volumes more than offset an 18 percent decline in average selling price.
For the full year, the segment generated $203.0 million in revenue, 15 percent below prior-year results due to depressed demand for specialty fertilizers for most of the year, which pressured average selling prices for Compass Minerals' SOP products.
Plant Nutrition North America segment operating earnings were $8.0 million in the 2016 fourth quarter, compared to $11.5 million in 2015. When excluding the partial write-down of the Wolf Trax trade name, adjusted operating earnings for the 2016 fourth quarter of $11.1 million were down 3 percent compared to the fourth quarter of 2015, while adjusted EBITDA increased approximately 2 percent. Lower year-over-year average selling price and an increase in shipping and handling costs in the 2016 quarter were partially offset by a growth in sales volumes and improved per-unit operating costs.
Full-year 2016 operating earnings for this segment declined 64 percent and adjusted EBITDA decreased 34 percent from 2015 results primarily due to a 15 percent reduction in average selling prices and an 11 percent increase in per-unit shipping and handling costs related to higher warehousing costs and an unfavorable geographic sales mix.