Morningstar | Compass Minerals Announces CEO Transition; We Foresee No Significant Changes To Existing Strategy
On Nov. 19, Compass Minerals announced that current CEO Fran Malecha will step down, effective immediately. Lead independent director Dick Grant will serve as interim CEO until a new CEO is hired, at which point Grant will serve as board chair. With no changes to our forecasts, we maintain our $81 per share fair value estimate for wide-moat Compass. At current prices, we continue to believe Compass shares offer compelling risk-adjusted upside.In its search for a new CEO, Compass' board will prioritize the need for consistent execution and operational efficiency. The company recently completed nearly all of its major capital addition projects and will now need to focus on the successful execution of its cost savings initiatives. Most importantly, this will involve the restoration of full production levels at the low-cost Goderich salt mine. We do not believe the CEO transition will change the company's strategy in a meaningful way.
Due to the CEO transition, we lower our stewardship rating to standard from exemplary. Although the company has struggled from an operational perspective more recently, we still contend that Malecha's long-term track record with capital allocation was strong. Over time, he enhanced the company's long-term earnings potential via investments to reduce unit production costs in the salt and plant nutrition North America segments. When the company's temporary operational issues at the Goderich salt mine are resolved, we are confident that the positive impact of the company's salt-related reinvestment projects will be readily visible.
Compass Minerals International is a holding company. Through its wholly owned subsidiaries, the company is a provider of minerals, including salt, secondary nutrients and micronutrients, and specialty chemicals. The company has three reportable segments: Salt, which produces, markets and sells salt and magnesium chloride and sodium chloride; Plant Nutrition North America, which includes sales of sulfate of potash specialty fertilizer and specialty plant nutrients; and Plant Nutrition South America, which manufactures, distributes and markets an array of specialty plant nutrients and supplements developed and formulated from primary and secondary nutrients, specialty plant nutrients and biostimulants.
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