Compass Minerals Worldwide, Inc. (NYSE:CMP) This fall 2023 Earnings Name Transcript November 17, 2023 9:30 AM ET

Firm Members

Brent Collins – VP of IR

Kevin Crutchfield – President and CEO

Lorin Crenshaw – CFO

Jamie Standen – CCO

Convention Name Members

Joel Jackson – BMO Capital Markets

David Begleiter – Deutsche Financial institution

Greg Lewis – BTIG

Vincent Anderson – Stifel

David Silver – CL King

Chris Kapsch – Loop Capital Markets

Jeff Zekauskas – JPMorgan

Operator

Girls and gents, good morning. My title is Abby and I will be your convention operator as we speak. At the moment, I want to welcome everybody to the Compass Minerals Fourth Quarter and Fiscal 2023 Earnings Convention Name. In the present day’s convention is being recorded and all traces have been positioned on mute to forestall any background noise. After the audio system’ remarks, there will probably be a question-and-answer session. [Operator Instructions] Thanks. And I’ll now flip the convention over to Brent Collins, Vice President of Investor Relations. Mr. Collins, you might start.

Brent Collins

Thanks, operator. Good morning and welcome to the Compass Minerals Fourth Quarter and Fiscal 2023 Earnings Convention Name. In the present day, we’ll talk about our current outcomes in addition to our outlook for 2024. We’ll start with ready remarks from our President and CEO, Kevin Crutchfield, and our CFO, Lorin Crenshaw. Becoming a member of in for the question-and-answer portion of the decision will probably be Jamie Standen, our Chief Industrial Officer, and Chris Yandell our Head of Lithium. George Schuller, our Chief Working Officer is away as we speak.

Earlier than we get began, I am going to remind everybody that the remarks we make as we speak mirror monetary and operational outlooks as of as we speak’s date, November 17, 2023. These outlooks entail assumptions and expectations that contain dangers and uncertainties that would trigger the corporate’s precise outcomes to vary materially. A dialogue of those dangers may be discovered in our SEC filings situated on-line at traders.compassminerals.com.

Our remarks as we speak additionally embody sure non-GAAP monetary measures. You could find reconciliations of this stuff in our earnings launch or in our presentation, each of that are additionally out there on-line. The ends in our earnings launch issued final night time and offered throughout this name mirror solely the persevering with operations of the enterprise, aside from quantities pertaining to the condensed consolidated statements of money flows or except famous in any other case.

I am going to now flip the decision over to Kevin.

Kevin Crutchfield

Thanks, Brent. Good morning everybody and thanks for becoming a member of us on our name as we speak. Over the course of fiscal 2023, we superior the ball on a lot of vital strategic fronts. Sadly, the constructive strides we have made throughout a number of areas this 12 months have been wholly overshadowed by sustained uncertainty surrounding our lithium challenge in Utah, which has weighed closely on our share worth. I am going to come again to our strategic achievements in only a second, however I first need needed to offer some commentary on our operations in Utah and on our lithium initiatives, particularly.

As a reminder, we have been working within the State of Utah for greater than half a century, at present offering roughly 370 native jobs at our Ogden facility. We have been an engaged company citizen in the neighborhood for many years, our deliberate lithium challenge with construct upon the profitable sulfate of potash, sodium chloride and magnesium chloride companies that at present function on the lake and wouldn’t require any further brine draw from the Nice Salt Lake. The present course of attracts mineral-rich lake water or brine from the Nice Salt Lake right into a collection of photo voltaic evaporation ponds, which the brine strikes by over a two-to-three-year evaporation cycle. Because the water content material of the brine evaporates and the mineral focus will increase a few of these minerals naturally precipitate out of the brine and are deposited on the pond flooring. These deposits present the minerals needed for processing into SOP, sodium chloride, and magnesium chloride. These three merchandise make up our core Ogden enterprise as we speak. Our lithium growth would merely entail extracting a fourth mineral salt out of the brine that we’re already processing.

Our challenge would add over 100 incremental native high-paying jobs and drive substantial further royalty and tax receipts to the native financial system. In our view that is a win-win scenario, and we proceed to patiently educate all related events and decision-makers on the constructive attributes of this challenge. Utah Home Invoice 513 was enacted to determine a regulatory framework for a way lithium can be developed in addition to introduce some up to date guidelines on administration of the Nice Salt Lake. We’re conscious about the current issues and sensitivities associated to the Nice Salt Lake, sustaining the well being and sustainability of the Lake is a shared aim for all stakeholders in the neighborhood. We are not any totally different, and in reality, we have labored laborious to be a part of the options to sustaining and bettering the well being of the Lake for the long run.

A number of weeks in the past we introduced our intention to droop indefinitely any additional funding in our lithium challenge in Utah, till we obtain regulatory readability with the State. We didn’t make this determination calmly. A important linchpin to creating investments on the order of magnitude we’re contemplating right here and have now paused is regulatory certainty. With out such certainty, it is primarily inconceivable to have faith within the projected returns on invested capital over the following 30 years. Subsequently, to maneuver ahead prudently, we will need to have confidence that the regulatory setting will embody a algorithm which are affordable now and will probably be secure and predictable over the approaching many years. The March passage of Home Invoice 513 and notably the following rulemaking course of have launched uncertainty across the regulatory setting we will probably be working in, in addition to the timing of how growth may proceed.

For the reason that inception of Home Invoice 513, Compass Minerals has actively engaged with the State of Utah, in a collaborative try to make sure the provisions of the laws are carried out in a manner that won’t sluggish or halt the progress the Firm has made up to now concerning its pursuit of creating a sustainable lithium salt useful resource to service the burgeoning North American superior battery market. Regardless of the lively and ongoing greatest efforts by all events, we concluded that it is in the perfect curiosity of our shareholders to droop additional funding in our lithium challenge past sure already dedicated gadgets related to the early levels of building of the industrial scale DLE demonstration unit that we have talked about previously.

I wish to share some further ideas about how we’re fascinated by the challenge. First, to be completely clear, we won’t transfer ahead with the challenge at any price. We’ll proceed to refine our engineering estimates on Part 1 and we’ll incorporate the proposed monetary phrases from the state after we obtain them. Then we’ll have a greater view of the economics of the challenge. We’ll solely proceed if we’re satisfied that the long-term returns justify the investments.

Second, if we do advance lithium, we’ll accomplish that in a fashion that’s financially prudent. As projected capital for the lithium program has elevated, questions on how we’ll fund this system have taken on higher significance. Clearly, bringing a companion in on the asset stage will assist to reply a minimum of a part of that query by lowering our share of the capital price. We nonetheless have some work to do on this, however the one factor I wish to stress as we speak is that we’re firmly dedicated to not utilizing widespread fairness to fund our share of any future lithium growth. We consider there are quite a few different viable sources of funds at significantly decrease price of capital and don’t dilute the possession of present shareholders.

Third, whereas beforehand we had been on a path in the direction of commencing operations within the fiscal 2025 timeframe, now we have to acknowledge that our timeline as we speak is totally different than after we began this challenge. I am hopeful that we will chart a path ahead with the State of Utah, that can permit this useful resource to be responsibly developed for the good advantage of all stakeholders, together with the State in a well timed method. However now we have to consider that we all know the foundations of the sport, and are standing on stable floor earlier than we will credibly discuss timing once more and we aren’t there but.

I am going to remark now on the progress we made on our 2023 strategic aims. Lorin will then evaluate our monetary efficiency for the 12 months and we’ll talk about our outlook for 2024. We talked about it lots this 12 months however restoration of the profitability of the Salt enterprise to historic ranges was an vital aim for the corporate in fiscal ’23. Yr-over-year, full-year adjusted EBITDA per ton for salt elevated by roughly 40% to $20.38 in comparison with $14.59 final fiscal 12 months.

Salt adjusted EBITDA margin share additionally elevated over the identical interval as much as practically 23% from 18% a 12 months in the past. This enchancment was pushed by higher pricing, as we noticed will increase of 12% and 6% in worth for freeway deicing and C&I respectively year-over-year. We did an incredible job getting again to the fundamentals and specializing in profitable markets that we will successfully and profitably service. I am additionally blissful to notice that regardless of the current bidding season occurring on the heels of a winter that throughout the North American markets that we served had solely 80% of the common variety of snow days, our base plan for 2024 reveals us persevering with to enhance salt profitability on each an EBITDA per ton and EBITDA margin foundation.

Fiscal ’23 was additionally an thrilling 12 months for our rising Hearth Retardant enterprise. After a rigorous multi-year course of, two core Fortress merchandise had been added to the US Forest Service certified product listing in December of 2022. This opens the door to permit governmental businesses to buy Fortress’ fireplace retardant merchandise, which was the primary new merchandise to enter the market in practically 20 years. Fortress was awarded its first contract in Might and we consolidated our possession of the corporate shortly thereafter. In June ’23, we achieved one other milestone after we dropped our first industrial product. The suggestions that we have acquired on the efficacy of the merchandise and the operational efficiency of the staff has been wonderful. We’re at present within the strategy of finalizing our contract with US Forest Service for 2024. We’re off to a very good begin with Fortress and we’re excited concerning the high-margin counterseasonal development potential that this enterprise can present for the Firm.

We additionally improved the steadiness sheet and monetary standing of the Firm throughout the fiscal 12 months, which was one other of our strategic objectives. Early within the fiscal 12 months in October, we efficiently closed on a strategic fairness partnership with Koch Minerals & Buying and selling to assist fund Part 1 of our lithium challenge and to pay down debt.

We additionally improved our debt maturity profile in Might with a profitable refinancing that pushed our nearest maturity out to 2027. Because of our centered execution on this aim, year-over-year we noticed an enchancment in our out there liquidity, the decline in our internet debt excellent and a lengthening of our debt maturities. The final strategic aim that I am going to contact on as we speak pertains to security and our efforts to construct a tradition of zero hurt. I say this virtually each earnings name because of its significance. We make security a prime precedence as a result of it is the best factor to do for our individuals and it is the best factor to do for our enterprise. Security is commonly a number one indicator of operational efficiency and if you cannot do the fundamentals of conserving your self and your colleagues protected, how will you probably function reliably and effectively?

Our workers have clearly embraced the tradition we’re constructing right here round zero hurt and it reveals in our outcomes. Particularly, our complete recordable damage price dropped roughly 8% to 1.17 and our lost-time damage price declined to 0.93 from a 1.02 or 9% within the comparable year-ago interval. These are excellent numbers, notably within the complicated working environments that now we have right here at Compass Minerals. I wish to lengthen my because of all the workers throughout the corporate for his or her dedication to security and contribution to those excellent outcomes.

As I mirror on the 12 months, it is disappointing to know that the stable steps ahead we made throughout our enterprise had been drowned out by noise and uncertainty that arose in Utah round our deliberate lithium challenge. We’re decided to resolve these questions as quickly as potential and we stay engaged with Utah leaders on that entrance. Compass Minerals has distinctive high-quality belongings which have super worth. I am assured that the intrinsic worth of the corporate will probably be acknowledged with continued robust execution.

So with that, I am going to now flip the decision over to Lorin.

Lorin Crenshaw

Thanks, Kevin. I am going to start my remarks by discussing our fiscal ’23 efficiency earlier than offering perspective round our outlook for fiscal ’24. Beginning on the consolidated stage, fourth quarter outcomes primarily mirror weaker Plant Vitamin gross sales offset by improved profitability within the Salt enterprise year-over-year. Consolidated income declined 6% year-over-year to $233.6 million. Consolidated working earnings declined to $3.9 million, whereas adjusted EBITDA was barely decrease year-over-year at $33 million.

Internet loss for the quarter narrowed to $2.5 million from a internet lack of $5.5 million year-over-year. For the complete 12 months, a below-average freeway deicing season and the influence of adversarial climate situations in California on the Plant Vitamin enterprise negatively impacted the corporate’s income. Nonetheless, the Salt enterprise demonstrated improved profitability that allowed for features in consolidated working earnings, and adjusted EBITDA year-over-year. Consolidated income was 3% decrease at simply over $1.2 billion, consolidated working earnings was $79.1 million, up $36.2 million year-over-year and adjusted EBITDA of $200.8 million rose $12.3 million year-over-year. Internet revenue from persevering with operations was $15.5 million versus a internet lack of $37.3 million within the prior 12 months.

Our full-year efficient revenue tax price got here in at 53% which is influenced by the truth that all year long, we booked valuation allowances on US deferred tax belongings. Excluding the influence of valuation allowances, our full-year efficient revenue tax price was roughly 22%, which is beneath the vary we guided to final quarter. The speed got here in beneath our expectations, primarily because of decrease estimated revenue related to Fortress earnings slipping into the primary quarter and the refinement of sure overseas tax estimates.

Shifting to the Salt enterprise, on a quarterly foundation, section income was primarily flat year-over-year at $186.7 million, ensuing from a 9% enhance in worth, offset by a 9% lower in complete gross sales volumes, which declined for each the freeway deicing and C&I salt companies. Freeway deicing worth rose 11% year-over-year, whereas C&I worth elevated 8% reflecting continued pricing energy throughout each product traces. Quarterly distribution prices per ton decreased 8% year-over-year because of favorable freight charges throughout the C&I enterprise whereas all-in product prices per ton elevated 4% year-over-year pushed by the influence of unplanned downtime. Working earnings elevated 91% to $28.8 million whereas adjusted EBITDA improved 29% to $44.4 million year-over-year.

For the complete 12 months, Salt section income was flat year-over-year at roughly $1 billion, a beneath common freeway deicing season in our served markets in North America was the main reason behind a ten% lower in complete gross sales volumes with freeway deicing volumes down 11% and C&I volumes down 6%. Larger freeway deicing and C&I salt pricing led to a rise in general Salt section pricing of 11% year-over-year. The decline in volumes and enhance in worth had been according to the value-over-volume technique that we pursued in 2023 and was the driving force of this enterprise’ improved profitability.

On a per-ton foundation, each distribution and all-in product prices noticed modest will increase year-over-year, up 2% and 6% respectively. The Salt section generated $170.7 million in working earnings and adjusted EBITDA of $230.7 million, up 47% and 26% respectively year-over-year. Importantly, the section noticed adjusted EBITDA margins enhance by over 400 foundation factors year-over-year and adjusted EBITDA per ton recovered to over $20 per ton which, as Kevin talked about, was an vital strategic goal for us this 12 months.

Turning to our Plant Vitamin section. Fourth quarter income totaled $35.3 million down 39% year-over-year, pushed by a mixture of a 26% lower in worth and an 18% decline in gross sales quantity. The lower in worth mirrored the deterioration of worldwide potassium fertilizer costs all year long. This influenced purchaser habits as all year long, patrons did not wish to maintain stock and customarily waited to purchase product till wanted. Distribution prices per ton elevated by 6% year-over-year as a result of timing of market demand and related rail automobile storage charges whereas all-in product prices per ton declined 2%. The section had an working lack of $1.6 million for the quarter, down $14.2 million year-over-year. Adjusted EBITDA declined $15.1 million to $6.7 million.

As we have mentioned all year long, extremely uncommon climate in California was the first driver of the lower in full-year gross sales volumes year-over-year. For the complete 12 months, the section generated $172.1 million in income, down 23% year-over-year, primarily because of a 23% lower in gross sales volumes. Distribution prices per ton rose 6% year-over-year as a result of influence of decrease gross sales volumes on our fastened distribution prices, whereas all-in product prices per ton had been up 15%. Working earnings for the complete 12 months totaled $11.2 million and adjusted EBITDA totaled $45.5 million.

I might now like to offer a little bit of colour on Fortress’ outcomes for the 12 months. Fortress had its first gross sales in 2023. So, we acknowledged modest constructive contributions from the enterprise to income, working earnings, and adjusted EBITDA this era of $10.4 million, $3.2 million, and $4.6 million respectively. Our preliminary contract with the US Forest Service was largely structured as take or pay and lined the calendar 12 months ending in December ’23. We anticipate it to acknowledge the overwhelming majority of the worth of the contract throughout our fiscal 12 months resulted in September based mostly on historic patterns of wildfire exercise. Nonetheless, wildfire exercise within the remaining quarter of our fiscal 12 months, which included heavy rain within the Western US from Tropical Storm Hilary was unusually gentle. Particularly calendar year-to-date by September, acres burnt from wildfires within the US had been roughly 36% of the 10-year common, based on the Nationwide Interagency Hearth Heart. In consequence, whereas the final word worth of the preliminary calendar ’23 contract is unchanged, the majority of the income recognition associated to the take or pay portion of the contract will happen within the present quarter, three months later than our unique expectation. Accordingly, roughly $12 million and adjusted EBITDA that we had anticipated to influence the fourth quarter of ’23 will slide into the present quarter. General, we had been inspired by the working efficiency we noticed at Fortress in its preliminary 12 months of economic operations.

Turning to our steadiness sheet, at quarter-end, we had liquidity of $317 million, comprised of roughly $39 million of money and revolver capability of round $278 million. Internet debt to adjusted EBITDA stood at 3.7 instances on the finish of the quarter.

Shifting onto our outlook for fiscal ’24. The newest North America freeway deicing bidding season has concluded and we anticipate the common comp frac worth for the upcoming North America winter season to be up by roughly 3% versus the prior 12 months’s bid season outcomes and complete dedicated bid volumes to say no by roughly 5% year-over-year. Regardless of the 5% lower in commitments, we predict a rise in gross sales volumes year-over-year based mostly on historic sales-to-commitment ratios and assuming we expertise common winter climate exercise. Snow days throughout final 12 months’s winter inside our North America served markets had been solely roughly 80% of the long-run common. In consequence, merely having a mean winter ought to drive greater than sufficient quantity year-over-year to offset decrease dedication ranges.

For Salt, we anticipate adjusted EBITDA within the vary of $230 million to $270 million. That is once more based mostly on the belief that now we have a mean winter. Throughout our first-quarter earnings name in February of 2024, we anticipate to replace traders on the place the Salt section is monitoring towards the vary of outcomes proven on Slide 14 of our earnings presentation. Then throughout our second-quarter earnings name in Might, we’ll revisit our Salt steering following the completion of the winter season.

The outlook for Plant Vitamin EBITDA is within the vary of $20 million to $40 million, regardless of meaningfully greater gross sales volumes. This stage of efficiency margin-wise is effectively beneath our focused potential for this enterprise at this stage within the business pricing cycle. And I am going to now take a second to debate why that is the case. From a topline perspective, gross sales are projected to be greater year-over-year at roughly 300,000 tons, primarily pushed by a restoration of extra regular West Coast demand situations, assuming the extraordinary climate situations that occurred final 12 months do not repeat themselves and better manufacturing out of Ogden. Two elements, the continuation of elevated money prices and decrease pricing year-over-year are offsetting the sharp gross sales enhance.

From a pricing perspective, we’re assuming a mean SOP worth subsequent 12 months of round $660 per ton, which is roughly 4%, round $30 beneath ranges we skilled within the fourth quarter of ’23. From a price perspective, though money unit prices are projected to say no year-over-year, they’re nonetheless roughly $100 per ton greater than our focused efficiency ranges. The rationale for that is that, whereas now we have a manufacturing technique supportive of restoring gross sales volumes again towards historic ranges and also you see that in our gross sales steering, the naturally occurring pond tons, which have the bottom unit prices stay beneath historic ranges. Subsequently, simply as we did in 2023, this 12 months, we intend to proceed supplementing our manufacturing course of with potassium chloride, the next price enter to shut the hole and cheaper pond tons out there. We anticipate this to allow us to attain the yields and volumes required to ship greater gross sales tons however at the next unit price than the historic common. Over time, assuming present demand ranges persist, utilizing potassium chloride is anticipated to permit us to maximise evaporation seasons and allow the replenishment of our stockpile, leading to lower-cost pond-based tons rising as a share of our manufacturing combine over time and potassium chloride use declining over time, leading to decrease unit price as that occurs.

Now that now we have a manufacturing technique that we anticipate to permit us to ship gross sales tons consistent with historic ranges, a key operational initiative in 2024 will probably be to establish further price discount methods to decrease our unit prices. Such actions are usually not mirrored in our steering. Nonetheless, we’re dedicated to figuring out a path to restoring the unit price of this enterprise nearer to historic ranges by reducing the fee within the brief run and producing extra pond-based tons long run.

Turning to our company steering, we anticipate this section to return in at a variety of between minus $55 million and minus $65 million. As a reminder, company is comprised of three elements, Fortress, lithium, and different. Different consists of prices unrelated to the Salt and Plant Vitamin segments and the influence of our DeepStore Doc and Information Administration enterprise. Because it pertains to Fortress, we’re at present working intently with the US Forest Service to determine a contract for calendar 12 months 2024. Nonetheless, an settlement just isn’t anticipated to be finalized till late December 2023 or early January 2024. In consequence our preliminary steering solely consists of the roughly $12 million in adjusted EBITDA associated to the 2023 contract that we’ll acknowledge within the present quarter. Nonetheless, our present expectation is that we’ll obtain a minimum of an analogous stage of revenue for our 2024 contracts. When our negotiations have concluded and now we have a finalized contract, we’ll replace our steering accordingly. Lithium-related bills are projected to be within the vary of $5 million and $10 million for fiscal ’24. These prices will probably be closely influenced by whether or not enough regulatory readability in Utah is achieved to renew lithium growth.

Complete CapEx is anticipated to be in a variety of $125 million to $140 million and is comprised of three components. Sustaining CapEx associated to Salt and Plant Vitamin of roughly $90 million to $100 million, CapEx of between $25 million and $30 million associated to the orderly suspension of the lithium challenge and Fortress associated development CapEx of roughly $10 million.

In closing, our firm stays effectively positioned financially and operationally with robust aggressive positions within the manufacturing of important minerals with few viable financial substitutes. As Kevin alluded to in his remarks, we made a number of constructive steps throughout the enterprise in fiscal ’23 that set us up effectively for fulfillment in 2024 as we proceed specializing in maximizing the efficiency of our high-quality Salt, Plant Vitamin and rising Hearth Retardant companies.

With that mentioned, I’ll flip it again to the operator to open the traces for Q&A. Operator?

Query-and-Reply Session

Operator

Thanks. [Operator Instructions] And we’ll take our first query from Joel Jackson with BMO Capital Markets. Your line is open.

Joel Jackson

Good morning, everybody. I’ve just a few questions. I am going to go one after the other. On the ’24 steering in Fortress, so thanks for the colour that you simply’d anticipate this 12 months’s contribution from Fortress to be a minimum of just like $12 million. What — so I assume what is going on to occur in ’24 is will probably be a little bit of double counting, now we have the ’23 earnings that comes at ’24 and the ’24, simply attempting to determine what normalized ’24 earnings can be like, it seems like, it could be a little bit bit greater than $12 million contribution and the way would you anticipate that enterprise to ramp into ’25 — fiscal ’25. Simply how that is going to ramp? Thanks.

Lorin Crenshaw

So I am going to begin after which ask, Jamie. So, we did guide about $4 million, $5 million of Fortress revenue in 2023 and $12 million will roll into subsequent 12 months. And so that you add these collectively, you get, sort of $15 million and alter and all of it relies on the extent of profitability that we see on this upcoming contract. Jamie, you wish to elaborate?

Jamie Standen

Yeah, I believe. Sure. So you consider normalized ’23 was about $15 million or so, $15 million, $16 million. Lorin’s ready remarks mentioned we anticipate in ’24 to attain one thing a minimum of at that stage. So the negotiations are ongoing. We’re determining which foundation, what it seems like. It is probably that it will not be a take-or-pay situation subsequent 12 months. So, that is about all of the incremental colour we can provide you proper now.

Lorin Crenshaw

And Joel moderately than speculate, we simply felt it could be higher to let the mud settle after which replace you in February.

Joel Jackson

Proper, okay. So actually this steering quantity is, it is a bear case steering for Fortress, it should be higher, as a result of from a normalized perspective…

Lorin Crenshaw

Precisely.

Joel Jackson

Proper. Okay. Okay on prices, excuse me, on the Salt enterprise, prices, I might be fallacious first blush, it seems like possibly you are — in your steering projecting, possibly a couple of greenback per ton enhance in Salt price, is that proper, if I am not, let me know and inform me what’s driving Salt prices this 12 months?

Lorin Crenshaw

From a money price perspective, Salt prices are about flattish round, I do not know roughly type of $40 a ton and EBITDA per ton is definitely up about $1 and so, I am undecided what you are seeing however Salt is up from an EBITDA per ton perspective and roughly flat from a money ton perspective year-over-year.

Joel Jackson

Perhaps then in that flat setting earlier than I cross the baton on, possibly discuss what prices are up, what prices are down, thanks, to make it flat?

Lorin Crenshaw

So from a gas perspective, which is vital for that enterprise and the primary half of this 12 months is the place we’ll devour a lot of the gas. We’re assuming Brent sort of within the mid ’80s. And for those who look year-over-year, that is sort of roughly flattish from that standpoint. After which, this pertains to C&I from a pure gasoline perspective, we’re going to profit from what we hope would be the absence of pure gasoline spike that we noticed final 12 months at a excessive stage. Jamie the rest you wish to share?

Jamie Standen

I might say on the working facet on the money price itself, you understand, we noticed some unplanned downtime in 2023, gadgets like that not anticipated to repeat. So, we have got some inflationary strain on the enter facet nonetheless, however that is being offset by improved manufacturing ranges, as we go into 2024 on Salt.

Joel Jackson

Thanks.

Operator

And we’ll take our subsequent query from David Begleiter with Deutsche Financial institution. Your line is open.

David Begleiter

Thanks. Good morning. Kevin, on lithium — on lithium, is there a timeframe the place you’ll say these negotiations are simply taking too lengthy and we’ll transfer on and doesn’t pursue lithium, is it six months, is it a 12 months, is it longer, that may be useful. Thanks.

Kevin Crutchfield

Yeah, I imply look, that is a very good query, David, it is sort of laborious to pin it down. However what I am going to inform you, I imply there’s sort of two work streams when it comes to sort of how we’re fascinated by this. I believe as everyone is aware of, they launched the draft guidelines that had been promulgated as a part of Home Invoice 513. These have to get sorted. So, they’re out for public remark. I believe we have made our feedback on these and we’ll work with the State to give you a set of draft guidelines that govern how lithium might be extracted on the lake, and we had some issues about the way in which they had been launched and we’ll be on the desk attempting to bid that consequence in a manner that works for us in addition to people in Utah. After which secondarily there’s legislative session arising in — after the — after the primary of the 12 months that we’ll clearly be concerned in. So I believe all that can sort of settle in however possibly the April timeframe. And I believe that can give us the sort of readability, we have to decide on whether or not this factor nonetheless acquired legs or put it on the shelf for an additional time. So, I might sort of direct you to that April-Might timeframe subsequent 12 months.

David Begleiter

Okay. Very useful. And simply on Plant Vitamin, what do you assume is normalized earnings on this section? I believe the final 4 years, it averaged possibly $55 million to $60 million of EBITDA. Is {that a} good quantity or may it even be greater when it comes to normalized?

Lorin Crenshaw

Yeah, we’re $100 beneath the place we anticipate this enterprise to be on a cash-cost foundation. In case you look again over the previous 5 years, you multiply that instances our tons once you get $30 million. These companies must be in that within the vary you simply referred to. And that is going to be a spotlight of our efforts within the coming years. From a long-term perspective, as we harvest much less and fewer the ponds, simply deposit and focus, we anticipate that we’ll get higher yields over that two or three-year deposition course of, however we’re not going to simply await that. We’re additionally trying on the price base at Ogden when it comes to issues we will do within the close to time period to enhance the fee base as we await the ponds to regenerate.

David Begleiter

Superb. Thanks.

Operator

We’ll take our subsequent query from Greg Lewis with BTIG. Your line is open.

Greg Lewis

Yeah, thanks and good morning and thanks for taking my questions. My first one was, I did wish to return on prices. So, as we take into consideration freight, it looks as if that might be pulling on that a little bit bit. Anyway to sort of gauge how a lot of your freight prices are fastened or is it, they’re after we may see like these agreements, like I suppose re-contract or reset?

Kevin Crutchfield

Hey, Greg. We — you had been garbled up there. Might you please repeat your query for us?

Greg Lewis

It was round freight prices and actually [Technical Difficulty] if we had been to see freight prices typically throughout North America moved decrease, like how ought to we take into consideration the corporate benefiting from that influence, i.e., as you have a look at your freight publicity, how a lot of its sort of a spot contract [Technical Difficulty] is my query, the primary one.

Jamie Standen

Certain. Greg, that is Jamie. So, we have assumed we talked about it in numerous buckets. On the vessel and barge facet for 2024, we’ll see typical inflationary strain, plenty of these are fastened. Once we have a look at truck for 2024, we expect the truck market is definitely bottoming out now, possibly first quarter, and can be anticipated to rise. Given the a few of the freight provide rationalization, Conway, Yellow bankruptcies, so we expect the availability image of freight is shrinking truly. And with the post-pandemic destocking behind us, we expect there’s demand enhance in retail over the following 12 months. So, we have baked into our plan, and for 2024 elevated truck charges actually within the again half of the 12 months. Now that’s important. It’s a important enhance. Consider it as 15% or so. But when that doesn’t happen and the underside stays in longer and freight charges do not rise, we’d stand to profit from that versus our present working plan.

Greg Lewis

Okay, good. Tremendous useful. After which, I did wish to realizing that we have to sort of transfer ahead within the challenge, however after we take into consideration a strategic companion, you talked about on the lithium facet, I imply actually with the challenge and largely funded a minimum of Part 1, like after we take into consideration a strategic companion, is that simply actually an offtake companion, is that sort of a good manner to consider it or any sort of tough the way you’re fascinated by like what you are in search of when it comes to that companion? And actually simply given what is the ongoing, I do not know panorama in Utah, is that one thing the place we most likely will not see that companion till we sort of get extra readability and may transfer ahead, and although now we have a greater line of sight on after we may see I suppose the lithium challenge transfer ahead?

Kevin Crutchfield

Yeah. So, I believe when it comes to situations precedent to having a companion, it must be regulatory legislative readability in Utah, the place you’ve got acquired a horizon that’s appropriate for lengthy — making long-term investments. So clearly, as I discussed earlier, when David requested his query, there’s work there to be executed. After which secondarily, we nonetheless have — we nonetheless wish to show out the DustGard unit to exhibit to the world that, that may be a scalable know-how at industrial stage. So something that we’d do with a companion can be conditioned upon these two standards having been met. After which when it comes to the kind of the companion the place we would be in search of, I imply, clearly a steadiness sheet, scale back our capital publicity on the challenge stage after which ideally, it could be good to have a companion that is acquired some type of prowess in that area area, lithium or the EV world itself. So that provides you sort of some sense of how we’re fascinated by it.

Greg Lewis

Okay, tremendous useful. Thanks, very a lot.

Kevin Crutchfield

Yep, thanks.

Operator

[Operator Instructions] And we’ll take our subsequent query from Vincent Anderson with Stifel. Your line is open.

Vincent Anderson

Yeah, thanks, good morning. Going again to the drivers of Salt margin expectations, I imply you hit on the variable elements, tremendous useful, however I hoped you could possibly possibly body the season-on-season adjustments in fastened price leverage. After which any incremental internet again constructive — positives or negatives based mostly on the geographical mixture of your commitments this 12 months versus final 12 months.

Kevin Crutchfield

Nicely, to the extent that our volumes enhance on account of a normalized winter, simply the sheer leverage from a 3%, 4% enhance within the tonnage on the identical price base will enhance the tons and that is what you are seeing. Because it pertains to gas, as I mentioned, to the extent that, that in truth is type of flattish year-over-year and now we have taken some efforts that we referred to within the final name, when it comes to price reductions, we referred to efforts on the websites to cut back price following our efforts on the company heart to cut back price. These are the sort of issues that if we will — in the event that they cling in there ought to permit us to see a $1 or $2 enhance in revenue per ton and that is what’s within the midpoint of our steering.

Vincent Anderson

Okay. Okay, no, that is useful. After which simply turning over to Fortress, only a two-parter right here. So first, does the CapEx funds mirror any on-base investments after which sort of associated to that, you mentioned you anticipate this 12 months probably will not have take-or-pay contracts. However as I perceive it, these are in place to assist help preliminary commercialization of a brand new product. So ought to I interpret that as, you are anticipating a excessive sufficient stage of natural base wins that you’ll now not qualify for that?

Jamie Standen

Yeah, it isn’t a matter of qualification. Vincent, that is Jamie. It is a matter of how the settlement unfolds. The take or pay ingredient of final 12 months’s contract was associated to gallons. There are a variety of components within the contract that give us safety round day by day charges. So, there are plenty of shifting components and that is why we have sort of mentioned, hey, we’ll wait and let this sort of provide you with some transparency after we finalized the contract. So, there are fairly just a few issues shifting. Because it pertains to funding, one of many neat issues about our supply mechanisms is that they are basically cell. So, regardless that we get assigned a base on a everlasting foundation, so to talk, now we have mobility. So, we’re investing for the longer term, that is the $10 million in capital and now we have flexibility to place that — to fabricate that, get it prepared after which deploy it to the bases that had been awarded. So, it isn’t — it is much less capital intensive than a typical scenario. We’re not burying pipes and pouring concrete and investing in infrastructure at bases, now we have extra of a cell construction.

Lorin Crenshaw

And I might simply add, we do present — after we do present steering on this enterprise we’ll strategy it just like what you see in our earnings deck as we speak with regard to Salt, to the extent it isn’t take or pay, this will probably be a enterprise that’s topic to the wildfire season. And so you must anticipate us to return out with a variety that tells you what we expect are regular wildfire season would appear like and the bell curve for that on either side. And so I simply wish to underscore that you should have that dimension.

Vincent Anderson

No, that is useful. I admire that. If I may sneak another in for Kevin, truly, if I am not mistaken, 2024 will put you on the again line of your Goderich overhaul. I used to be simply hoping to get an replace on priorities for this 12 months and possibly any bigger initiatives deliberate for the March turnaround?

Kevin Crutchfield

Yeah, again, so just like the — possibly the eleventh gap of the again line, simply to be — simply to be particular, Vincent. However yeah, honest. We proceed to drive our primary entryways. George just isn’t right here. I haven’t got a precise share, however we’re most likely 65%, 67% of the way in which pushed there. So, as we have shared earlier than connecting up these new entries with the shaft backside and the brand new sections within the west of the mine. We’ll then promote our means then to sort of shut the outdated part of the mine and cease spending cash, you understand, holding roof up and been lighting and lighting and all that type of factor. In order that’s sort of first section. After which we proceed to develop the panels out within the West and a few new panel infrastructure up into the sort of the north — north a part of the mine. So, you’ll, see the outcomes can steadily begin to filter by on the fee facet over the following, you understand, two to a few years as we — as we have talked about earlier than, there’s not going to be some magic second the place hastily price precipitously fall, it will likely be gradual. However you may begin to see that as quickly as we join these street roadways up. So, I believe we nonetheless acquired most likely near a 12 months or so, earlier than we do get these linked up, however that is once you’ll begin to see issues start to alter at Goderich, Vincent.

Vincent Anderson

Certain. No, very useful, thanks once more, everybody.

Operator

And we’ll take our subsequent query from David Silver with CL King. Your line is open.

David Silver

Yeah, hello, good morning. Thanks. Couple of questions I believe first, I would prefer to ask concerning the stock ranges at September 30. I believe it is one of many greater totals in recent times and it’s up fairly considerably year-over-year. So simply questioning for those who may sort of discuss possibly the fee versus quantity components in there, is this sort of a carryover from a sub — subpar beneath common winter season final 12 months. Simply how to consider that stock stage at September 30 or possibly for those who may replace it for November 15 or one thing. I am going to cease there. Thanks.

Lorin Crenshaw

Hello David, it is Lorin, and once you have a look at 9/30 on a year-over-year foundation, you are proper, it’s greater. And it is roughly half associated to Salt and half Plant Vitamin. When it comes to Plant Vitamin, Ogden carried out very effectively production-wise all through final 12 months. Within the face of a gross sales setting that was severely diminished and so we restored our stock ranges at Plant Vitamin to ranges which are frankly extra regular and if there’s any silver lining that was it. From a Salt perspective, we ran Goderich for a standard winter, and solely an 80% winter truly occurred. And so these are two causes for the stock to be greater. With that mentioned, for those who look again over the past 4 or 5 years from a items perspective, our items of inventories are solely up about 5% versus that common, 5% to 10%, it is inflation for that very same unit that has risen. And one of many issues that Kevin talked about is that this notion that our clients perceive that the price of holding this stock has gotten costlier and I do not know, Kevin, if you wish to elaborate however we have restored the profitability of the enterprise EBITDA per ton however working capital is costlier to hold.

David Silver

Okay, thanks for that. I would additionally simply ask you for an replace, I suppose, on your corporation realignment or your price discount program. You had some targets when it comes to reducing the fastened price base as of the kick-off, I suppose, of fiscal 12 months ’24. So, for those who may simply replace us on that, that may be nice. Thanks.

Lorin Crenshaw

Yeah, after we did — we did an 8-Okay the place we laid out about $15 million to $20 million of price that we had been going after final 12 months, and people are break up roughly 50% SG&A, 50% price of products bought possibly half Salt, quarter Plant Vitamin, et cetera. And so, we have captured these prices and they’re mirrored on this, the steering that you simply see. After all there are offsets like advantage that may eat into a few of that together with different elements, however we be ok with what we have achieved and it is mirrored in our steering.

David Silver

Okay, nice. After which possibly only a final one, I want to return to Fortress. And I perceive there’s fairly just a few shifting components on how your first fireplace season when and timing points and whatnot. However I consider you had some longer-term, I suppose, market share targets for — how your product is perhaps — is perhaps positioned as soon as it is totally accepted out there. And any ideas about the place your market share shook out, this primary 12 months and whether or not the expectation is that — that share can be maintained or elevated over the following 12 months. Thanks.

Jamie Standen

Yeah, positive. David, that is Jamie. We had been — we had been proper round 3% to five% share because it pertains to the US Forest Service complete contract in 2023. We anticipate that to develop that year-on-year, we completely anticipate to extend our base depend and anticipated volumes as we negotiate this contract right here this month, hopefully to be resolved later this month or early January after which we’ll construct from there. Our expectation is to proceed to reinvest within the enterprise, add bases, add share, and develop over the following a number of years. So, nothing on that entrance has modified that was a part of the funding thesis, after we made the acquisition and we be ok with the place we — how we’re positioned and we will ship on that plan.

David Silver

That is nice, thanks very a lot.

Operator

We’ll take our subsequent query from Chris Kapsch with Loop Capital Markets. Your line is open.

Chris Kapsch

Yeah, good morning. I had one on the Salt enterprise, particularly across the 3% pricing consequence from the fiscal ’24 contract bidding season and possibly simply supposed you’ll be able to nonetheless look again at ’23. So that you particularly used phrases like referring to your worth over quantity technique in ’23, however I do not assume I’ve heard these phrases reflecting ’24. So, I am curious concerning the consequence this 12 months was, is it partly a operate of that technique nonetheless or is it extra merely a operate of different concerns like, whether or not it is the inflation, for instance, you flagged the rates of interest and better carrying price of inventories or different residual inflationary prices or another dynamics just like the winter mine strike. Simply questioning for those who may present further colour on that — on the worth over quantity technique if that is persisting. Thanks.

Kevin Crutchfield

Let me hit that at a excessive stage, Chris after which Jamie most likely wish to add some colour, however we strategy the bid season once more with the identical mindset, which is worth over quantity, let’s deal with areas that we’re geographically advantaged from a supply and transport price, that final mile stuff on this enterprise like several enterprise and we stayed very disciplined by the entire advertising and marketing season. Opponents do what rivals do they usually’re pushed by various things, however our aim was to advertise worth within the market, which is what we did and I would like to simply hand kudos to the staff for delivering 3% worth up within the face of — or on the heels of an 80% winter, which is sort of unprecedented when you consider it. So our staff did a very good, I believe when it comes to sort of selling that worth within the market and I might inform you you could anticipate that technique to proceed going ahead as we attempt to march above $20 a ton and proceed to maneuver that quantity up over time.

Chris Kapsch

Okay, that is useful, thanks. After which only one fast follow-up on Fortress and I consider there have been some incentive or premium pricing that was relevant, possibly even the federal government statutes incentivized various suppliers when there is sort of a sole supply scenario. So curious if that can apply to the fiscal ’24 provide agreements when they’re extra definitive.

Kevin Crutchfield

Sure. Our — the open solicitation at present is a sole supply. So it is our competitor has a has a sole supply contract as can we for 2024. So, sure, that continues into 2024, the phrases might be a little bit bit totally different than they had been in ’23, however basically, it is the identical construction after which finally over time, we anticipate this to maneuver away from that mechanism and transfer extra right into a aggressive setting with bidding — regional bidding occurring from 12 months to 12 months.

Chris Kapsch

Okay after which sorry, may you simply — then the follow-up is simply on the scenario in Canada. I believe they had been successfully piggybacking off the US approval for this product. Is there, are you able to simply present any colour on how that is progressing as effectively. Thanks.

Jamie Standen

Yep. The Canadians use the US Forest Service QPL. Our focus in North America for the early days of this enterprise are the US Forest Service contract, CAL FIRE, after which Canada. So sure, we’re in a position to compete up there, however our focus proper now’s within the US.

Chris Kapsch

Thanks.

Operator

[Operator Instructions] And we’ll take our subsequent query from Jeff Zekauskas with JPMorgan. Your line is open.

Jeff Zekauskas

Thanks very a lot. Are you able to briefly talk about, how administration comp modified and our incentive comp modified in 2023 versus 2022 and the way it may change in 2024?

Kevin Crutchfield

So, there are a few elements of incentive compensation, Jeff. One is sort of a money bonus, annual incentive plan sitting right here pondering, however I do not assume that modified from one 12 months to the following. It is pushed off of money circulation, EBITDA, security and a few shared objectives and ESG actions that sort of factor. The long-term incentive plan which is stock-based plan did change. Have we disclosed that but? No. So you may examine that arising right here shortly. So, the short-term incentive plan did not change the long-term incentive plan, plan to stock-based plan is modified modestly from one 12 months to the following. And you may examine that within the upcoming proxy.

Jeff Zekauskas

Okay. You talked about in search of a companion in your lithium challenge. So if it turned out that regulatory developments had been favorable, would you then start spending as you probably did earlier than and search for a companion? Or would you await a companion earlier than you spent extra? Or for those who could not — if you did not have a companion, would you proceed to spend? Are you able to simply make clear the significance and the timing of the collection of a companion if issues resume?

Kevin Crutchfield

Nicely, that is lots to unpack in there, Jeff. I imply I believe the perfect consequence for us is to have a companion on the challenge stage for lithium once more to allay a few of that capital danger and, you understand, as I discussed earlier to the extent that they’ve area experience, that is a — that is a pleasant bonus [Technical Difficulty]

Operator

And girls and gents, we apologize for the disruption. We’re again dwell with our presenters.

Kevin Crutchfield

Perhaps I am going to attempt to choose up the place I believe I acquired cut-off after which will formally shut the decision down. However Jeff, I used to be answering your query round a companion and I believe I’ve mentioned the place I acquired cut-off was, ideally a companion would have some capital wherewithal steadiness sheet wherewithal and positive some area experience will surely be a value-add. However when it comes to timing, as I discussed earlier on one other query, it is vital that we resolve issues in Utah, in a manner that’s favorable to our challenge and that is going to be a wonderful steadiness between what the legislators are trying ahead and what the regulator is — however what now we have to have when it comes to regulatory legislative readability to make such long-term investments. In order that’s sort of situation primary. Situation quantity two is, we would like to complete out the Dustguard unit to exhibit to the world that may be a commercially viable, scalable know-how and now we have each perception that it will likely be, however I believe that is an vital proof level. And I believe doing one thing on a partnership stage previous to these standards having been met, it should jeopardize challenge valuation clearly, it creates uncertainty. So these can be two worthwhile situations precedent to getting something executed with a — with a companion, however you’ll be able to anticipate us within the meantime to be persevering with to collaborate and work intently with the parents in Utah, that work on these different issues in parallel as effectively. So hopefully that is aware of your query.

Operator

And there are not any additional questions presently, so I’ll now flip the call-back to Mr. Kevin Crutchfield for closing remarks.

Kevin Crutchfield

Thanks. We apologize sincerely for the decision abruptly stopping and everyone having to dial again in, however we thanks to your curiosity in — continued curiosity in Compass Minerals and sit up for conserving you up to date as time progresses. So, thanks for dialing in as we speak.

Operator

Girls and gents, this concludes as we speak’s name and we thanks to your participation. Chances are you’ll now disconnect.