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Why Compass Minerals International Is Plunging Today

By Matthew DiLallo – Nov 16, 2021 at 11:47AM

Key Points

  • Production issues weighed on Compass Minerals' quarterly results.
  • The mineral company also slashed its dividend to retain more cash to reinvest in growth opportunties.
  • It continues to invest in lithium, aiming to enter the commercial market by 2025.

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The mineral producer is facing some headwinds.

What happened

Shares of Compass Minerals International (CMP 3.00%) tumbled more than 21% by 10:30 p.m. EST on Tuesday. Weighing on the minerals company was its third-quarter report. 

So what

Compass Minerals had to taper its salt production during the third quarter to manage inventory levels and volumes lost to Hurricane Ida. That decision weighed on its salt segment earnings. The company also experienced lower sulfate of potash production volumes due to temporary pond feedstock inconsistencies. This factor impacted earnings in its plant nutrient segment. As a result, the company reported a loss of $4.6 million, or $0.14 per share. 

A bright red arrow going down.

Image source: Getty Images.

Compass Minerals also unveiled an updated capital allocation plan. As part of that, it reset its dividend to $0.60 per share annually ($0.15 per share each quarter), a nearly 80% reduction from the prior rate of $0.72 each quarter. The company made this move to retain additional cash to reinvest in high-growth opportunities and better align its dividend yield with the broader market and its peers. 

One of the company's major investment initiatives is lithium. Compass Mineral continues to invest in developing a sustainable lithium resource on the Great Salt Lake, aiming to enter the commercial market with a battery-grade lithium product by 2025. It expects to invest $10 million next year on this project.

Now what

Compass Minerals battled production headwinds during the third quarter, which impacted its financial results. On top of that, it slashed its dividend by nearly 80% to invest in high-growth opportunities, including lithium. While the payout cut is painful in the near term, the company believes this strategy will pay bigger dividends in the future, given the growth it sees ahead for the lithium market.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Compass Minerals. The Motley Fool has a disclosure policy.

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