Compass Minerals Intl Inc

been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, simply press star one again. I would now like to turn the conference over to Brent Collins, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good morning and welcome to the Compass Minerals Fiscal 2024 second quarter earnings conference call. Today we'll discuss our recent results and update our outlook for fiscal 2024. We'll begin with prepared remarks from our President and CEO, Edward Dowling, and our CFO, Lauren Crenshaw. Joining in for the question and answer portion of the call will be Gordon Dunn, our Chief Operations Officer, Ben Nichols, our Chief Sales Officer, and Jenny Hood, Chief Supply Chain Officer. Before we get started, I will remind everyone that the remarks that we make today reflect financial and operational outlooks as of today's date, May 8, 2024. These outlooks entail assumptions and expectations that involve risks and uncertainties that could cause the company's actual results to differ materially. A discussion of these risks can be found in our SEC filings located online at investors.compassminerals.com. Our remarks today also include certain non-GAAP financial measures. You can find reconciliations of these items in our earnings release or in our presentation both of which are also available online. I will now turn the call over to Ed.

Thank you, Brent. Good morning, everyone, and thank you for joining our call today. I'll begin with a few remarks today about the quarter, then discuss some of the actions we're taking to enhance the company's ability to free up and generate more cash and pay down debt. These actions include some tough choices, but ones which I believe are necessary to unlock the intrinsic value of our company. As we all know, the winter has been especially mild across much of North America. In the representative cities that we track for snow event purposes, this is the second worst winter in 27 years of snow events. Our operating results for the quarter clearly reflect that reality. Will salt segment volumes down 21% year over year? Notwithstanding these recent challenges, the basic fundamentals of the salt business remain sound. Gross revenue per ton was up 9% year over year. Net revenues was up 11% per ton. Adjusted EBITDA was 19% per ton to just under $24. The problem is that we just didn't have enough weather to generate sales volume, which resulted in the SALT revenue declining 14% and adjusted EBITDA declining 7% year over year. In the plant nutrition business, the results for the quarter are a bit of a mixed bag. On the positive side, we've seen demand in our core markets normalized to around historic levels after the last year's weather-driven suppressed demand. We also saw sales price per ton for SOP increase 3% on a sequential basis after five quarters of price decreases. So there are some positive things happening in that business. We changed the leadership of the Ogden facility during the second quarter, and I'm pleased with the operational improvements we're seeing there. We're making a fresh set of eyes, renewed energy in every facet of that operation. One of the primary things the team's focus on is improving our cost structure. It's early days, but I'm confident we'll continue to see positive impacts as that team continues to drive increased value out of that asset. The obvious negative for the quarter was the impairment of goodwill in the plant nutrition segment. Lauren will provide detail on that in a moment. Moving on to Fortress, our fire retardant business. As we've previously announced, the path forward for magnesium chloride-based aerial fire returns is uncertain. Accordingly, we recognize the $56 million non-cash loss on impairment of goodwill and tangible assets in the quarter. We're evaluating various alternatives regarding the path forward for the fire retardant business given the development over the last few weeks. Now I'll transition to the actions that we announced yesterday to improve our ability to maximize cash flow and to pay down debt. After several consecutive mild winters and several substantial investments in the past years aimed at trying to grow the business, the fact is the balance sheet is clearly not a place where we, or most of our investors, want it to be. We believe that the best thing we can do at this time to help unlock the intrinsic value of our company is to deleverage. To do that, we need to maximize cash available for paying down debt. To that end, and most immediately, yesterday, we announced the company's board of directors decided not to declare quarterly dividends for the foreseeable future. This step frees up approximately $25 million on an annual basis. A second action, which we announced earlier, was our decision to temporarily curb production at our Godrich mine. This is being done to build and enhance operating flexibility as well as address excess inventory we're currently carrying following two mild winters. As part of this curtailment, we've laid off approximately 20% of the mines represented workforce. If and when market conditions improve, we'll be ready to recall impacted employees as needed. Assuming normal winter ahead, our plan is to aggressively reduce production to position us to substantially reduce inventory levels and release the cash as the next winter's de-icing season begins and we start selling highway de-icing salt. Third, We've advanced the multifaceted G&A cost-saving initiative that is intended to improve cost competitiveness of the company over the next 18 months. Our goal is to position ourselves as a leader in SG&A among our proxy peer group. As part of this effort, we've recently implemented another headcount reduction at the company headquarters. We've begun the process of rationalizing functional support across the organization, restructuring contracts, eliminating or paring back on professional services, to name a few. We expect some of the improvement SG&A will be recognized in 2024 and increasingly in 2025. The full run rate improvement will come in fiscal 2026. We enjoy a full year contribution from the various actions that we're advancing. Lastly, we've rolled out a more rigorous standardized methodology for evaluating and prioritizing MRO expenditures and assessing the relative criticality of individual projects. will be a tool that enables us to challenge historical assumptions around what is the right amount of maintenance capex for the business. While improvements from this action are not as readily visible to investors, it's important cultural change that I believe will positively impact sustainable cost-effective operations. Ultimately, that will allow us to maximize cash generation and returns on capital. This is just an initial step toward our operational excellence objectives. As I mentioned on our last quarterly call, my mandate is to improve cash flow generation and returns on capital we provide to our shareholders. These actions are discussed today, help us make progress toward these goals. As a leadership team, we are acutely aware that most of these actions I outlined have had direct impact on shareholders and employees. Do not take these steps lightly, and most are not easy decisions to make. However, for us to realize the inherent value of the company, We need to take divisive and decisive actions now and accelerate our ability to generate free cash and then pay down debt, particularly when we begin relieving inventory in the coming de-icing season. My vision for the company over the coming years is that we will lower our cost structure and capital intensity such that the company generates free cash flow even in mild winters, strong free cash flow during normal winters, and outstanding cash flow in strong winters. As the health of the balance sheet is restored, Over time, back towards two or two and a half times net leverage, we would expect to consider turning our focusing to returning capital to shareholders through share buybacks and or dividends. Over the medium term, we'll continue to work on plans to improve the production effectiveness, asset efficiency of our salt and plant nutrition businesses, maximize the potential performance of our unique proven assets. We'll share more details of these plans over time. For those of you attending our Godrich Mine tour in mid-June, we'll show you some of the things that we're planning, and we'll expect the mine to be more efficient and profitable. Compass Minerals is composed of high-quality assets and benefits from contribution of talented and committed employees. We're excited to lead the company through this period of balance sheet restoration and believe that we'll have a great opportunity to create value for shareholders over time. With that, I'll turn the call over to Lauren to review the quarter in more detail.

Thanks, Ed. There were a lot of moving parts this quarter that impacted our financials. Consolidated revenue was $364 million for the second quarter, down 11% year over year. Our profitability this quarter was impacted by the $107 million aggregate loss on impairments we recognized during the quarter related to write-downs of goodwill and intangible assets related to the fortress fire retardant business and a goodwill impairment in the plant nutrition segment. As further background on the write-downs, Given the sustained decrease in the company's share price and market capitalization continuing into fiscal 24 and recent developments related to its mag chloride-based fire retardant business impacting Fortress, we determined that there were indicators of impairment and therefore performed long-lived assets and goodwill impairment testing across our portfolio of assets. The analysis for plant nutrition resulted in no long-lived asset impairment but did result in a goodwill impairment, while the fortress analysis resulted in an impairment of our magnesium chloride-related assets and goodwill. For the quarter, the company recognized $107 million in impairments, which were partially offset by our recognition of $21 million of other operating income, primarily related to the decline in the valuation of the contingent consideration liability associated with the fortress acquisition. The change in that liability reflects substantial changes to our assumptions regarding the future value of the associated milestone and turnout payments, given the obstacles that gave rise to the U.S. Forest Service deciding not to award us a contract for mad chloride-based fire retardants for the upcoming fire season. Ed touched on those items briefly, and I'll elaborate on them a little more in a moment. The consolidated operating loss for the corridor was $46 million versus operating income of $48 million last year. We reported a net loss of $48 million for the quarter, which compares to a net loss of $22 million last year. Adjusted EBITDA was approximately $87 million, up 13% year-over-year. In the SALT segment, revenue totaled $310 million for the quarter, down 14% year-over-year. The mild weather that we experienced in the first quarter unfortunately continued through the second quarter, and we ultimately experienced one of the mildest winters that we have seen in our served markets over the last 25 years. Highway deicing volumes were down 22% year-over-year, and CNI volumes, which includes retail deicing products, were down 14% over the same period. Total segment volumes were down 21% year-over-year. As Ed mentioned, the SALT business is operating well from a production standpoint. However, we unfortunately simply didn't have much weather this winter to pull sales through the income statement. As one would expect with these kinds of volume declines, we saw segment operating earnings and adjusted EBITDA decline by 9% and 7%, respectively, in absolute dollars. However, the profitability of the business improved year over year, with adjusted EBITDA margin increasing by approximately 200 basis points and adjusted EBITDA per ton increasing by 19% to just shy of $24. Moving on to our plant nutrition segment, investors and analysts will remember that calendar 23 saw very abnormal weather conditions that impacted sales throughout last year. Demand has continued to be in a more normalized range. with volumes up 23% from the prior year. The pricing dynamic for SOP continues to track with global trade for potassium-based fertilizers, which led to a 15% decrease in price per ton year over year to $680 per ton. However, as Ed pointed out, Delta's price per ton actually increased this quarter on a sequential basis after five consecutive quarters of price declines. The net effect of higher volumes and lower sales pricing was an increase in plant nutrition revenue of 5% year over year. A significant portion of the plant nutrition business's distribution costs are fixed, so the increase in sales volumes benefited distribution costs per ton in the quarter by 12%. As noted in the press release yesterday, we recognize an impairment of goodwill in the plant nutrition segment of $51 million during the quarter. In the context of impairment indicators evidenced by the sustained decline in our share price and market cap, the impairment reflects tempered long-term financial assumptions for this asset. U.S. GAAP requires that these impairment costs be reflected in operating earnings, and as a result, on a reported basis, you get an all-in product cost on a per-ton basis that isn't very meaningful. Excluding the goodwill impairment, All-in product costs per ton were down 12% year-over-year due to higher absorption and fixed costs resulting from higher sales volumes. The net impact of these drivers is that second quarter adjusted EBITDA declined slightly year-over-year as the favorable impact of higher volumes was more than offset by significantly lower pricing and higher cash costs. As a result of the developments in the fire retardant business and the uncertainty surrounding the future use of these mag chloride based products we recognize a loss on impairment in the quarter of a 55.6 million dollars related to write downs of goodwill and intangible assets at fortress we also recognized a non-cash gain of 24.3 million dollars for the quarter within other operating income line item related to the decline in the valuation of the contingent consideration liability associated with the fortress acquisition as a reminder When we purchased Fortress, approximately 50% of the purchase price was contingent, with roughly half of that linked to the achievement of certain business development milestones, and the other half based on volume sold and paid over a 10-year period. As our expectations of the future value of those liabilities rise, we recognize non-cash losses reflecting that change. When our expectations of the future value of those liabilities decline, as they did this quarter in a major way, we recognize non-cash gains to reflect the change in value. As of March 31st, the net present value of this liability was approximately $13 million. Each quarter there will be gains and losses as the liability is revalued to reflect changes in the discount rate used in the valuation, changes in our outlook for the business, and the passage of time. These changes are not included as adjustments in the calculation of adjusted EBITDA in accordance with accounting guidance. Overall, our adjusted EBITDA as a company would have been $24 million lower if we removed that non-cash gain. Moving on to the balance sheet, at quarter end, we had liquidity of $278 million, comprised of $40 million of cash and revolver capacity of around $238 million. During the quarter, the company amended its existing credit facility to provide covenant relief and provide for greater flexibility over time across a broad range of operating scenarios. At quarter end, the consolidated total net leverage ratio was 4.3 times, well within the amended covenant of six times. As Ed noted, the actions that we have undertaken will improve our ability to generate more cash for paying down debt. Given the seasonal nature of the majority of our sales and the timing of when most of the SG&A initiatives we are working on will manifest in the financial statements, we expect the benefits of our cash flow enhancing actions will start making a major impact on debt in fiscal 25. Moving on to our outlook for the rest of the year, regarding our SALT segment, with the conclusion of the highway de-icing season, we can now narrow the range of guidance for fiscal 24. As a reminder, we enter the year with guidance resembling a bell curve that laid out $205 million in adjusted EBITDA in the event of a mild winter, $290 million in the event of a strong winter, and somewhere between $230 and $270 million in the event of a normal winter. Clearly, coming out of a winter that saw snow events track at only approximately 60% of normal, our current guidance for the year a range of $200 to $210 million, reflects the weak side of the original bell curve of possible outcomes we initially shared for guidance. Specifically, while sales volumes and revenues are expected to be slightly lower than what we originally projected in a mild winter scenario, our projected adjusted EBITDA for the fiscal year is in line with our original mild winter guidance of approximately $205 million. Mild weather is not the only driver of the decline in full-year guidance for the salt segment. We are also reducing full-year guidance to reflect our expectation that we will incur certain costs in connection with temporarily reducing production levels at Goderich. Ed mentioned that we are taking steps to lower our production at Goderich Mine. The decision to curtail production at Goderich Mine results in incremental costs that adversely impact adjusted EBITDA guidance for this year by approximately $14 million. These costs are split roughly evenly between the remaining quarters of the year and include accelerated recognition of certain production costs. When operating within normalized production levels, fixed production costs are inventoried and then recognized as cost of goods sold expense when inventory is sold. As a result of curtailed production levels being implemented at Goderich Mine being well below the mine's long-run average, U.S. GAAP required a portion of the company's fixed production costs to be reflected as expense in the periods in which they are incurred rather than as a component of inventory. Our current guidance for this segment of between $200 and $210 million would be roughly $215 to $225 million absent these costs we will be incurring as a result of the actions we are taking at Goddard's Mine. We are confident that the focus on cash flow rather than short-term impacts on EBITDA is the right approach to driving cash flow to apply towards debt reduction and ultimately the right approach to creating shareholder value. Shifting to plant nutrition, we have trimmed the high end of our plant nutrition guidance by $5 million to $30 million. and left the lower end unchanged from prior guidance at $15 million, reflecting the passage of time and our current thinking on the most likely range of potential outcomes between now and year end. Our commercial team has managed to maintain strong product pricing relative to alternative products, staying disciplined not to chase sales volumes, which are tracking towards the lower part of the provided range. Moving on to corporate, our corporate expense includes everything not related to salt and plant nutrition, so it includes our corporate overhead, the cost of our now-terminated lithium program, and the impact of Fortress. Overall, at the midpoint, our total corporate cost guidance is $10 million more favorable than our prior guidance, including approximately $21 million in year-to-date non-cash gains related to the decline in the Fortress contingent consideration liability I referred to earlier. This gain is being partially offset by a $10 million reduction in our expected earnings contribution from Fortress, which has fallen to a new range of $2 to $3 million from $13 million previously. This decline reflects the absence of a 2024 U.S. Forest Service contract and the cost of maintaining staffing while the company evaluates various alternatives for the path of this business. Our corporate expense, excluding Fortress, is tracking in line with prior guidance. Lithium-related costs are included in this number and are unchanged from what we previously reported. With respect to plan CapEx for the year, we lowered the bottom end of the range, and we now expect to invest $115 million to $130 million in 2024. The change relates to the fire retardants business, where we expect CapEx to be in a range of $5 to $10 million. That summarizes our second quarter results and our outlook for the remainder of the year. With that, I'll turn the call over for questions. Operator?

We will now begin the question and answer session. If you'd like to ask a question, simply press star one on your telephone keypad. Our first question will come from the line of David Biglighter with Deutsche Bank. Please go ahead.

Good morning and thank you. Given the mild winter weather and the elevated inventories, do you have any early thoughts on pricing for the upcoming highway de-icing season?

Yeah, good morning. This is Ben. I would first say we're just starting to get into our bid process for the 24-25 season. So it is a bit early to start extrapolating against the data points that we have in-house. So I would just I'm not going to offer up anything of substance. The one thing I would say, though, is what we've seen today, the team is working hard against. I think we're going to find a way to continue pushing momentum in that business, and we're going to remain focused on driving the type of values we've driven in the past.

Very good. And, Ed, in terms of Fortress, what's a time frame to determine which path to pursue? And what are the various options you are looking at right now? Thank you.

Look, I mean, we're limited in what we can say because of things going on for the investigation. Much of this information is new, and we're looking at a number of strategic alternatives. And when we've got that information, we'll share that. Jenny, you want to add anything?

I think that's perfect, Dad. I would just say it's too premature at this point. Obviously, there's been several developments over the last several weeks, so we're just evaluating the options at this point.

Thank you.

Thank you.

Your next question will come from the line of Jeff with JP Morgan. Please go ahead.

Thanks very much. From a longer-term standpoint, I think if you look at your 10-year SALT sales on average and you compare it to the previous 10 years, maybe it's down by 13 percent. And there's, you know, the weather's changed in the United States, it seems. Each year, you talk about whether, you know, you've had a good winter or a bad winter, as though it's random, rather than that there's a downward pattern. Do you think in doing your longer-term forecasts and trying to determine what your staffing should be and how many mines you should have, that using sort of an idea of that there's no change in the weather is not the best base case, that maybe the cost structure needs to be, you know, rethought over a longer period of time in the light of the longer-term demand trends. Or do you think, you know, that there's just not enough evidence to do that and that the way you're going about it is reasonable.

Yeah, look, that's a totally fair question, but we totally agree with you. And that's why, speaking operationally, we're working on the changes that we make to build flexibility in our minds to ramp up or ramp down to manage inventory and cash flow in the business. We've taken some of those actions now, and we'll continue to do that. as things progress. You know, our crystal ball is no better than anyone else, and weather is variable, and we need to have a business that accommodates that. Ben, you want to add something to that?

No, I think that's right. The other factor is you think about how we plan and look at annual operating plans. We get information from our customers directly, which ties to our contractual obligations. And so I think in aggregate, your point is spot on in what Ed has said is correct, but there's another factor of we're planning our business to fulfill our contractual obligations that are a function of what our customers are telling us.

Do you have a target for what your inventories might be at the end of the year and what your payables might be at the end of the year?

We don't have a target that we would share around either of those numbers, but what I would tell you is that All of the efforts we're taking and that we've announced today, specifically around Goderich, are in the service of driving our inventory days down through next winter. As we approach this year, 930 of this year, at a total company level, our days were in excess of 200. Every 10-day reduction is worth 20 to 25 million of cash. And if you look at our five-year average, We're 30 to 40 days away from where we ought to be. How long it takes us to get there is in part a function of mother nature, but everything we're doing is not in the spirit of EBITDA, but in the spirit of driving cash flow. And so we won't share with you a target for inventory days. I would tell you that coming on the heels of a 60% winter, you should not expect the end of the year inventory to be that different from 9-30-2023, but that the harvesting of cash would happen through next winter. And so that's what I would say. Okay, great.

Thank you so much.

Again, for any questions, press star 1 on your telephone keypad, and your next question will come from the line of David Silver with CL King. Please go ahead.

Yeah. Hi. Thank you. I'm following up, I guess, on your action plan, the fourth initiative, MRO reassessments and whatnot. You know, I guess there is still some portion of the Goderich underground mine plan that is yet to be completed. And With this reassessment, could you maybe just update us on your thinking about the underground improvements at Goderich? Will they be continued in full, or is there some reassessment, let's say, compared to last quarter? Thank you.

Thanks. What we've done is overlaid a risk assessment approach in the company. And, you know, we don't have capital. We don't have the balance sheet to do everything everybody would want to do. And so we've got to be able to say no to certain things. And so we needed a way to assess that and put the capital to where it's best served for the health of our business. I would say in terms of your specific question with regard to Godrich, you know, all of those things are being considered in how you may or may not allocate the capital for the mill relocation and things like that that we've talked about in the past. And we're running these numbers as part of our planning process right now. Once we have answers to that, it'll become more self-apparent. I would invite you to come, if you're not on the list, come up to Guybridge in June, and we'll be able to talk more about that. Or do you want anything to the capital allocation?

You know, I would just say I'm thrilled with this new prioritization framework. where we're looking very deeply at MRO capital. And I think it's going to elevate the rigor and the discourse around what's truly required to run the business. And so I'm thrilled with the framework, and I think it's going to step up our game there.

One final comment I would make is that this has a big cultural effect in the business. I'm a big believer in culture. in the business and this is driving a culture of understanding the business better and discipline within differently than things that we've done in the past. I think you'll see improvements from that over the future.

Okay, thank you.

And my next question regards the amended credit agreement. you know the 8k was out on March 27th I believe but I was trying to you know read through the amendments and then relate it to maybe the expected you know cash free cash flow positive negative for the next year or so but I'm sure you're in many scenarios but Assuming that the next 12 months are exactly the same as the last 12 months in terms of SALT volumes and pricing, SOP volumes and pricing and whatnot, does that amended credit agreement provide sufficient flexibility that you wouldn't be bumping up against those particular covenants? I think you mentioned it six times, maybe maximum, but the devil's always in the details. So assuming we had another, you know, subpar winter and whatnot, is there sufficient headroom in that amended credit agreement such that you wouldn't be violating any of the covenants? Thank you.

David, I appreciate that question. And I would say we're thrilled with the package that we were able to negotiate and also thankful for a unanimous support from our banks. And to Ed's point earlier, we structured these covenants not assuming normal winter weather out of an abundance of caution and to give us greater degrees of freedom. And so these covenants are set not using a normal winter, but something other than a normal winter, precisely so that we have the degrees of freedom to deliver and to manage prudently with adequate headroom. And so as you see those covenants, some people have asked why are the covenant levels where they are, they're higher than perhaps some might have expected. And it's because we set them in a conservative fashion to accommodate a warmer winter. Oops. Sorry.

Sorry. People are calling. Sorry about that. No, thank you very much. I will get back in queue. I do have at least one other question, but thank you. I appreciate the detail.

Your next question will come from the line of Joel Jackson with BMO Capital Markets. Please go ahead.

Good morning, everyone. You spoke a little earlier that's a little premature about bid season. Can we talk about as we transition from this past winter's contract to some of the things we're seeing in the new season, talk about what percentage of, it was one of the mildest winters ever, right? So you had a lot of customers that were under the minimums. Who decides to take their minimums? How do those discussions work? We know that states like Minnesota and Wisconsin, I believe, have decided to take the minimums and also negotiate, I believe, rollovers of maybe 3% or 4% gross price increases this year. So you can talk about what we're seeing for what is out there in the public, minimum commitments here, the rollovers, and how that might inform things going forward. Thank you.

Yeah, Joel, good morning. Thanks for the question. This is Ben. I would tell you, I'm not going to speak to any states specifically, but I would tell you in aggregate, we are moving minimums relative to what we previously reported and what you would expect with our prior bid results. As it relates to rollovers and other negotiations, again, I'm not going to call out specific states or regions that we're doing work against, but we're pursuing all levers to drive the value and the strategy that we've previously spoken to. I would anticipate by the next quarter, we'll be able to provide a little more color on where the bid season is tracking to help you guys model and understand where that market is moving.

Okay, let's stay with this. So you presented slides the last few quarters of what a normal winter range would be for 24 for highway de-icing. On average, it's about 9.6 or 9.7 million tons demands for 24 if everything had been normal weather, which it wasn't. Should we expect for fiscal 25, 9.6, 9.7 would be the normal range, or would that be lower because the government customers are going to be starting to fiscal 25 flush with salt they took because of their minimums they had to pay up for minimums that's what i'm trying to get at should we expect fiscal 25 normal winter sales range to be lower than what it would have been in fiscal 24 because of what we're describing first before ben uh as i say of course we'll provide perspective in november it's a little premature to talk with specificity about our volumes uh nothing has happened in the past year

changes the fundamental earnings power of our business. But perhaps then you can share conceptually around puts and takes on our bidding strategy and our book of business.

Yeah, I wouldn't add much there, Lauren. Joel, that's going to be a function of how tender size is and what the states tell us they need and then those contractual obligations. So again, we'll know more as we get through this bid process and how movement. But it would be premature for me to speak on it.

Okay. And finally, on the salt mine operation, so you chose not to take any temporary layoffs at Cote Blanche in Louisiana. Talk about that decision, because it may also inform how you're going to play bid season and what you're going to pursue. But are you not downsizing temporarily production at Cote Blanche? And then at Goderich, you know, is there a goal here to maybe, and I relate a sense of topic, to convert some of these temporary layoffs maybe to more permanent or to change shifts or to lower production over time, you know, as a runway based on Jeff's prior question and also, you know, what we're seeing with this year's dynamic?

Right now, the Koch Watch, we're operating to meet our customers' demand. I'll just put it that way. But all options are on the table. um you know um and we're something that we uh regularly review at uh at godrich um we you know you know we're going to run at a lower rate probably through um much of next winter to see where we stand at that point um and at which point you know if you have a good winter where you you know hopefully could bring some of the people back um into the workforce but um We don't have any plans right now to make this a permanent layoff. This is a temporary layoff.

So, Ed, I'll ask one more question. Sorry, I'm being greedy here. So, just to put us all together, wouldn't that mean that in fiscal 25, in a normal winter scenario, compasses, highway de-icing, salt volumes would be lower in a normal winter scenario than what you presented for this year? You're running Goderich, your biggest mine, at lower volume. And the government customers are sitting with more inventory probably starting the year than they did the prior year. Doesn't it make sense that a normal run rate compass in fiscal 25 would be lower high-ready icing in a normal scenario than the fiscal 24 numbers presented?

Just recall that we're going to be, you know, the salt that we're making this year gets sold next year for a large extent. And so much of the salt going to our customers during what will be fiscal year 24-25 is coming from the inventory. That's what we want to do to free up cash. So we're going to keep Godrich at a lower rate until the inventory gets to a point where we think it should be, which in that point we'll adjust the mine production accordingly. And I'll also add, Joel, that the way that we've decided to manage the temporary layoffs in the production level At Godrich, it gives us flexibility in that regard and also minimizing our fixed costs during this period.

Anyway, we've found such a way to do that, okay? Thanks, Ed.

Once again, to ask a question, press star 1 on your telephone keypad, and your next question is a follow-up from the line of David Silver with CL King. Please go ahead.

Yeah, hi. Thank you. This question I would like to direct to Gordon Dunn, if possible. But you've recently assumed greater responsibilities within Compass after spending a very long time running the UK operations and before that working for some very sophisticated industrial companies. you know, the UK business has much smaller minds. It's, I think, more sensitive to import competition, etc. You know, when you look at the North American assets and maybe try to apply your, you know, UK-based experience or your industrial experience before that, I mean, maybe if you could just comment on where you see the greatest opportunities. Are there some, is there some low-hanging fruit that you can identify or best practices you could transfer. If you could just give us your assessment. It is early days, but your assessment at this point on what can be done or the extent of efficiency gains you think are possible. Thank you.

Thank you for that, David. Yes, although I've been working in the UK for the last 10 years, I've been closely associated with Goderich for a long time and was briefly in charge of Goderich as an interim basis. So I'm very familiar with the US operation. Yes, I agree. We just jumped about. In the UK, we've always worked our inventory in relation to what the weather has been because it's extremely flexible. And that's the model that we're introducing in the U.S. and Canada as well. So we will take the opportunity to flex the operation and match it in line with what the true demand is. I agree there are some low-hanging fruits. I completely agree with you. Continuous improvement is a big focus. That's something that Ed and I have only been speaking about yesterday with how we get that up and running and introduced so it becomes part of the culture of the organizations.

Thank you very much. Appreciate the comments.

With that, I'll turn the call back to Ed for any closing remarks.

Thank you again for your interest in compost minerals. Please don't hesitate to reach out to Brent. If you have any follow-up questions, we look forward to speaking to you in the next quarter.

Everyone, that will conclude our call for today. Thank you all for joining, and you may now disconnect.