Compass Minerals ( CMP ) produces and sells salt, specialty plant nutrition and chemical products around the world. Despite a strong fourth quarter, Compass stock was a weak performer due to concern around the lack of snow in their geographic footprint. Though the company guided to 12% volume growth in salt in 2017 as municipalities restocked, prices still remain under pressure, as a lot of volume was contracted in the summer months when inventories were high. The news was similarly mixed at their sulfate of potash ( SOP ) operation. While prices seem to be stabilizing and volume growth was exceptional, cost improvements have been slow to materialize. As a result, much of the inventory they are selling now was produced under their higher legacy cost structure. We believe the salt business will recover as soon as we have a "normal" winter and recent capital investments lower their costs even more. In addition, SOP prices are stabilizing and once Compass adjusts its cost structure to the current reality, the business will return to earning historic returns on capital.
From Weitz Funds' first-quarter 2017 Balanced Fund shareholder letter.
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