Compass Minerals is a leading provider of essential minerals that solve nature’s
challenges, including salt for winter roadway safety and other consumer, industrial
and agricultural uses; specialty plant nutrition minerals that improve the quality
and yield of crops; and specialty chemicals for water treatment and other industrial
processes.
The largest rock salt mine in the world in Goderich, Ontario, Canada;
The largest dedicated rock salt mine in the U.K. in Winsford, Cheshire;
A solar evaporation facility located in Ogden, Utah, which is both the largest
sulfate of potash specialty fertilizer (“SOP”) production site and
the largest solar salt production site in the Western Hemisphere; and
Several facilities producing essential agricultural nutrients and specialty
chemicals in Brazil.
Our salt business provides highway deicing salt to customers in North America
and the U.K. as well as consumer deicing and water conditioning products, ingredients
used in consumer and commercial food preparation and other salt-based products
for consumer, agricultural and industrial applications in North America. In
the U.K., we operate a records management business utilizing excavated areas
of our Winsford salt mine with one other location in London, England.
Our plant nutrition business produces and markets specialty plant nutrition
products to distributors and retailers of crop inputs, as well as growers worldwide.
Our principal plant nutrition product in North America is SOP which we market
under the trade name Protassium+. We also sell various premium micronutrient
products under our Wolf Trax brand.
We sell our salt and plant nutrition products primarily in the United States,
Canada, Brazil and the United Kingdom. See Note 15 to our Consolidated Financial
Statements for financial information relating to our operations by geographic
areas.
We significantly expanded our plant nutrition business with the acquisition
of Produquímica Indústria e Comércio S.A. (“Produquímica”),
which now constitutes our Plant Nutrition South America segment. This segment
operates two primary businesses in Brazil - agricultural productivity, which
manufactures and distributes a broad offering of specialty plant nutrition solution-based
products, and chemical solutions, which manufactures and markets specialty chemicals,
primarily for the water treatment industry and for use in other industrial processes.
See Note 3 to our Consolidated Financial Statements for further discussion of
this acquisition.
Plant Nutrition South America manufactures, distributes and markets a wide
array of specialty plant nutrients and supplements developed and formulated
from essential primary and secondary nutrients, micronutrients and biostimulants.
These products consist of different chemical molecules, chemical compositions
and production processes from conventional NPK fertilizers, and this specific
category of plant nutrients offers a diversity of delivery mechanisms, low environmental
impact, low dosages per acre, a high degree of innovation and product development
and also requires more product marketing than conventional NPK fertilizers,
among other differences. Brazilian soils are naturally deficient in nutrients
such as zinc, manganese and boron, among others. In parallel, the increased
adoption of technologically advanced seeds (both conventional and genetically
modified) has driven farmers around the globe to address the higher nutritional
demands of such crops and to apply essential nutritional supplements to unlock
the yield potential embedded in these seeds. We estimate that Brazilian farmers,
on average, only use approximately 25% of the optimal prescription of essential
nutritional supplements.
In addition to agriculture products, this segment produces water and wastewater
treatment chemicals in Brazil for cleaning, decontaminating and purifying water
as well as process chemicals for industrial use. This business benefits from
the rapidly expanding focus on, and increased investment in, improving standards
for drinking water purification and wastewater treatment. Our water treatment
customers include state and municipal entities, wastewater treatment companies
and manufacturing companies that treat their own wastewater. Our chemical solutions
business also benefits from growth in Brazilian industrial sectors that use
our products, including the oil and gas exploration, mining, pulp and paper
production and ethanol production industries. Our involvement in both businesses
allows us to benefit from greater purchasing power with suppliers, given that
approximately 75% of the mineral inputs for both businesses are identical.
Our strategy for Plant Nutrition South America is to leverage the product portfolio
and expand sales opportunities in North America where possible. We expect to
continue to drive market growth by increasing the adoption rate and acre penetration
of nutritional supplements. Our plan is to reinforce the use of these supplements
as a profitable tool to enhance crop productivity. We use a three-pronged approach
to deliver under our strategy, consisting of (1) our specialized agronomic research
teams, (2) our technical in-the-field agronomic sales force, and (3) continuous
innovation.
We expect to increase sales through new product introductions and growth in
direct distribution channels. We continually invest in the development of new
products and new generations of existing products that meet the specific needs
of our customers. As a result of these efforts, our direct-to-end-customer sales
to large farmers have increased as a proportion of total agriculture productivity
revenues. Additionally, our Plant Nutrition South America segment provides geographic
diversification for our combined plant nutrition business.
Our Plant Nutrition North America segment includes sales of SOP and micronutrients.
The average annual worldwide consumption of all potash fertilizers is approximately
77 million tons, with MOP accounting for approximately 85% of all potash consumed
in fertilizer production, based upon industry data. SOP represents approximately
10% of all potash consumption. The remainder is supplied in forms containing
varying concentrations of potassium (expressed as potassium oxide) along with
different combinations of co-nutrients. SOP (which contains the equivalent of
approximately 50% potassium oxide) maintains a price premium over MOP.
Historically, our domestic sales of Protassium+ have been concentrated in the
Western and Southeastern U.S. where the crops and soil conditions favor the
use of low-chloride potassium nutrients, such as SOP. Consequently, weather
patterns and field conditions in these locations can impact Plant Nutrition
North America sales volumes.
While long-term global consumption of potash has increased in response to growing
populations and the need for additional food supplies, the market has faced
challenges over the last three years due to a downturn in the broader commodities
market which has pressured grower incomes. We expect the long-term demand for
potassium nutrients to continue to grow as arable land per capita decreases,
thereby encouraging improved crop yields. Additionally, as the broader agricultural
market rebounds, increases in grower incomes are expected to also improve the
near-term demand for our products.
While used in small amounts, micronutrients play important roles in plant development,
and nutrient deficient soils must be replenished to obtain higher crop yields.
Growth rates in North America for this specialty plant nutrient market have
slowed recently in response to the drop in commodity prices. We expect our future
growth to stem from the innovation and commercialization of our products, which
provide more technology-driven solutions that growers demand in this market.
Approximately 92% of our Plant Nutrition North America sales volumes in 2016
were made to U.S. customers, who include retail fertilizer dealers and distributors
of agricultural products as well as professional turf care customers. In some
cases, these dealers and distributors combine or blend our Plant Nutrition North
America products with other fertilizers and minerals to produce fertilizer blends
tailored to individual requirements.
We estimate that the consumption of highway deicing rock salt in North America,
including rock salt used in chemical manufacturing processes, is approximately
36 million tons per year based on average winter weather conditions, while the
consumer and industrial market is approximately 9 million tons per year. In
the U.K., we estimate that the consumption of highway deicing salt is approximately
2 million tons per year based on average winter weather conditions. According
to the latest available data from the U.S. Geological Survey (“USGS”),
during the 30-year period ending in 2014, the production of salt used in highway
deicing and for consumer and industrial products in the U.S. has increased at
a historical average rate of approximately 1% per year, although there have
been recent fluctuations above and below this average driven by winter weather
variability.
Salt prices vary according to purity, end use and variations in refining and
packaging processes. According to the latest USGS data, during the 30-year period
ending in 2014, prices for salt used in highway deicing and consumer and industrial
products in the U.S. have increased at a historical average rate of approximately
3% per year, although there have been recent fluctuations above and below this
average. Due to salt’s relatively low production cost, transportation
and handling costs tend to be a significant component of the total delivered
cost, which makes logistics management and customer service key competitive
factors in the industry. The high relative cost associated with transportation
tends to favor producers located nearest to customers.
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