Compass Minerals Intl Inc

Thank you for standing by. My name is Carly and I will be your conference operator today. At this time, I would like to welcome everyone to the Compass Minerals second quarter fiscal 2025 earnings call. All lines have 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 followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Mr. Brent Collins, Vice President, Treasurer, and Investor Relations. Please go ahead.

Thank you, Operator. Good morning and welcome to the Compass Minerals fiscal second quarter earnings conference call. Today we will discuss our recent results and provide an update of our outlook for fiscal 2025. We will begin with prepared remarks from our President and CEO, Edward Dowling, and our CFO, Peter Fellman. Joining in for the question and answer portion of the call will be Pat Marin, our Chief Operations Officer, and Ben Nichols, our Chief Commercial Officer. Before we get started, I will remind everyone that the remarks we make today reflect financial and operational outlooks as of today's date, May 8, 2025. 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

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 us on our call today after a disappointing first quarter the second quarter was much better in terms of winter weather this in turn has unlocked the benefits of the strategy we embarked upon a year ago Last year, the company made the strategic pivot to refocus its efforts on the core business. Our goal is to improve the cash flow generating capability of our business by optimizing business practices and structures, lowering capital intensity of our assets, and improving the efficiency of our operations. Because of the nature of our seasonal business, the steps we take to achieve these goals sometimes take quarters to play out. was pleased to share that we continue to make progress on our back-to-basics strategy. Almost exactly a year ago, we shared our plan on how we intended to rationalize North American highway de-icing inventory levels that had grown too large after consecutive mild winters. The primary goal of this initiative was to free up cash that was hung up on working capital and use that cash to reduce debt. Additionally, we knew that salt inventories across the broader system were high, which has impact on the supply-demand balance in the market. We didn't want to further exacerbate that dynamic. We decided to curtail production at Godrich Mine and to a lesser extent at Cote Blanche with the view that with some help from winter, we'd see a meaningful drawdown in our salt inventories and realize significant working capital release out of inventory. As a result of that curtailment, we knew that we'd experience some short-term margin compression due to a higher fixed cost absorption but it was the right business decision for the long-term success to move our business to lower inventory levels. Fast forward a year, you can see that we executed well on the plan. A few points to help bear that out. North American highway de-icing inventory values are down 47% year over year. North American highway de-icing inventory volumes are down 59% year over year. Across our depot network, we saw a number of depots being fully depleted by the end of the highway de-icing season, and throughout the season, there were multiple media reports about shortages of salt in some of the markets, which suggests there's some tightness in the market during the winter. The successful execution of our plan allowed us to realize approximately $145 million working capital release out of inventory alone, which in turn helped us reduce our total debt in the quarter by more than $170 million. The drawdown in inventory across our network was significant this season. We also believe that competitors and customers saw similar drawdowns in their respective networks. Against this backdrop of low system-wide inventories, the company is well-positioned to optimize production inventory levels as we approach the 25-26 North American Highway de-icing bid season. During the second quarter, there's obviously a lot of noise around tariffs, and we needed to see where these things landed before forming up our production plans for the coming year. The salt and fertilizer products that we produce in Canada are qualified under the USMCA trade agreement. As a result, they're currently exempt from any tariffs that have been implemented or proposed. With that huge question mark seemingly addressed, the company is in the process of ramping up production, which should have a favorable impact on our per unit cost, all things being equal. From a pricing perspective, the setup is constructive as we enter North American bid season. There's a psychological component to the highway de-icing business. It worked against us when we held mild winters for a couple of winters, and customers could look in their sheds and see that they were full of salt. The recently completed de-icing season was a good reminder that winters do, in fact, happen. It's not unreasonable to think that the pendulum could sweep back in our favor this bid season and allow for some stronger pricing. We could see positive impact on volume commitments in the coming season as well. Our efforts over a year ago are bearing fruit, a position as well to maximize value of our highway de-icing business in the coming year. We will continue to maintain flexibility in our operations and capital plans so that we can appropriately respond to the market conditions. I'll now move to actions we took during the second quarter that expect to have benefits in future periods. In March, we announced that we're eliminating over 10% of our corporate workforce. This is an extension of our efforts to align our cost structure with our current business needs. We're working on advancing additional cost improvement projects as we continue to focus on driving down costs across the platform. We also announced that we begin to wind down Fortress North American business. These actions simplify our business, allow the company to generate additional cash flow and accelerate the leveraging. With that, I'll turn the call over to Peter for a review of our quarterly results.