Compass Minerals: Core Salt Business Can't Carry The Valuation

Compass Minerals is a company that operates in the fertilizer and salt industries. In 2019, the company acquired a core salt business from K+S AG for $375 million. However, the valuation of this business has been a concern for investors and analysts.

According to a report by Bloomberg Intelligence, the core salt business is not expected to generate enough cash flow to justify its current valuation. The report estimates that the business will generate only $10 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2021, which is significantly lower than the $375 million valuation.

Furthermore, the core salt business faces several challenges that could negatively impact its performance. The market for salt is highly competitive, with many large players controlling a significant share of the global market. Additionally, the COVID-19 pandemic has disrupted supply chains and demand for fertilizers and other agricultural products, which could further impact the core salt business.

In light of these challenges, some investors and analysts have questioned the wisdom of the acquisition. They argue that the core salt business may not be a good fit for Compass Minerals and that the company should focus on its core fertilizer business instead.

Overall, while the core salt business may have strategic importance for Compass Minerals, it is clear that the valuation of this business is a concern for investors and analysts. The company will need to carefully manage its operations and navigate market challenges in order to generate sufficient cash flow and justify its current valuation.