Climate Change Creates Immediate Opportunity in Salt
Compass Minerals will benefit from higher prices and lower costs.
Climate change is the largest environmental, social, and governance risk to salt producers as permanently warmer winters would result in less need for salt to keep roads safe. However, an average winter hasn’t really changed over the past 30 years. Instead, year-to-year volatility is the larger risk from climate change, which results in the once-stable salt business seeing a wider range of possible outcomes. One only needs to see the recent Texas winter or February in the Midwest, both of which had the most snowfall in the past decade, to see that snow isn’t going anywhere.
Following a mild 2019-20 winter that saw lower deicing salt volumes and subsequently lower prices, the market is questioning the long-term earnings power of Compass Minerals’ (CMP) salt business. Where some see caution as Compass’ profits fell for the second straight year, we see progress on a multiyear turnaround story. As unit production costs continue to fall and prices rebound following an average winter and reduced market supply, we see immediate profit growth for Compass Minerals--catalysts to push the shares closer to our $78 fair value estimate.
Seth Goldstein does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.