Seasonality in Salt Business
The demand for salt is seasonal in nature. The largest proportion of salt sales is to government and municipals. The salt is used during winter to deice roads. However, winter season only last for three to four months in a year. The production of salt is also seasonal since it is affected by the elements of nature. One of the method that is used to produce salt is solar evaporation. It is only feasible in seasons where there is adequate sunshine.
Compass Mineral has diversified its business. For instance, the company also manufactures fertilizers and mineral additives for animal food. The company expanded its specialty fertilizer portfolio that is produced from sulfate of potash by acquiring a salt mine in Ontario. The company has also invested heavily on acquisitions to expand both its market and salt production globally. For instance, the company acquired mining rights of close to 100 million tons salt reverses that in Chile. The acquisition solidifies the company’s hold on the deicing business and industrial business because it is assured of a constant supply of salt in future. Compass Mineral secured the rights for a 15 year period, after which it has an option of buying out the royalties or maintaining its mining interest. Besides, the acquisition allows the company to access low-cost mining regions which would translate into lower production costs. Lower production costs will improve EBITDA. A reduction in prices will also expand market share and revenues. Compass should invest in new technologies that reduce its reliance on nature in its production of salt. For instance, artificial systems that simulate the sun can be used to supply heat for evaporation in the solar evaporation process. That way, the company can ensure a sustained production of salt all-year round.
Seasonality in Plant Nutrients Demand
The demand for plant nutrients is affected by a variety of factors that affect the agricultural sector. The agricultural sector is prone to cycle disruptions due to adverse weather conditions. Compass Minerals heavily relies on the domestic market for its plant nutrients supply. In 2014, 95 percent of macro nutrients sales were made in the American market. Therefore, adverse climate and weather conditions will result in a dip in revenue from the segment. California experienced a drought that is argued to be the worst since in the last 120 years. It is likely to adversely affect Compass Minerals if it persists.
Compass Minerals is diversifying its international market in the segment through acquisitions. It acquired a stake in Wolf Trax which will allow it to access European, Caribbean and South American markets. It also acquired a stake in a leading agricultural fertilizer firm in Brazil. International diversification will hedge against demand fluctuations in the domestic market and expand revenues.
Health and Safety Violations
The mining industry is prone to health and safety violations given the nature of the extraction process of minerals. Health and safety violations not only adversely affect the reputation of the firm, but can also lead to litigation. According to the American Society of Safety Engineers, revision of the POV rules has heightened the legal expectation of firms in promoting employee safety. Therefore, mining firms, including Compass Minerals, need to ensure and uphold health and safety rules.
Compass Minerals has an Environmental, Health, Safety and Security (EHS&S) Policy that not only complies with meets the minimum legal standards, but also exceeds industry best practices. The company has a governance framework that ensures effective monitoring of the health and safety compliance.
Compass Mineral should promote a culture where employees look out for their own safety and that of their peers. A safety culture should incorporate the organizational norms, values and commitment that are related to safety and health as part of the overall goals.
Besides, should be encouraged to follow safety procedures and rules. Employees who ignore or cut safety corners to achieve certain results should not be rewarded. Rewarding such behaviour encourages non-compliance. The workforce should also be trained on both the need to maintain safety and how to maintain it.
American Society of Safety Engineers. "Safety Matters." Professional Safety 1 November 2014: 20. Print.
COMPASS. "Compass Minerals Acquires Rock Salt Mining Rights in Chile." World of Mining: Surface & Underground Dec/Nov 2012. Web.
Compass Minerals. "Compass Minerals Annual Report." 2014. Print.
Firl , Craig and Steve Kosch. "The Cost of Doing Business Protecting Lives or Paying Fines." Professional Safety 1 April 2016: 1-3. Print.
Jin , Ruoyu and Qian Chen. "Safety Culture Effects of Environment, Behavior & Person." Safety Management (2013): 60-70.
Sumner, Thomas. "California drought worst since A.D. 800." Science News 10 January 2015. Web.