Apr 28, 2015
Executives
Theresa L. Womble - Director-Investor Relations Francis J.
Malecha - President, Chief Executive Officer & Director Matthew J. Foulston - Chief Financial Officer
Analysts
Christopher S. Parkinson - Credit Suisse Securities (USA) LLC (Broker) Ivan M.
Marcuse - KeyBanc Capital Markets, Inc. David I.
Begleiter - Deutsche Bank Securities, Inc. Joel D.
Jackson - BMO Capital Markets (Canada) Jeffrey J. Zekauskas - JPMorgan Securities LLC Robert A.
Koort - Goldman Sachs & Co.
Operator
Good day, and welcome to the Compass Minerals' First Quarter Earnings Conference. Today's conference is being recorded.
At this time, I would like to turn the conference over to Theresa Womble, Please go ahead.
Theresa L. Womble - Director-Investor Relations
Thank you, Alicia. Today, our CFO (sic) [CEO] (00:13), Fran Malecha; and our CFO, Matthew Foulston will be reviewing first quarter results.
Before I turn the call over to them, let me remind you that today's discussions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the company's expectations as of today's date, April 28, 2015, and involve risks and uncertainties that could cause the company's actual results to differ materially.
The differences could be caused by a number of factors, including those identified in Compass Minerals' most recent Forms 10-K and 10-Q. The company undertakes no obligation to update any forward-looking statements made today to reflect future events or developments.
And you can find reconciliations of any non-GAAP financial information that we discuss today in our earnings release, which is available in the Investor Relations section of our website at compassminerals.com. And with that, I will turn the call over to Fran.
Francis J. Malecha - President, Chief Executive Officer & Director
Thank you, Theresa, and good morning to everyone joining us today. I'll begin with a high level overview of the results and then move to some strategic thoughts on the remainder of 2015 and our future plans.
I'm pleased to report that our earnings significant improved this quarter despite lower revenue. The increase in profitability was largely driven by improved pricing in both of our key segments.
Our results though are about more than just price, we are also proving that our margin optimization strategies are working, so even though our sales volumes dipped year-over-year, our profitability grew and we achieved these results despite some short-term challenges, which impacted our costs in both businesses. So let's start with the salt business.
Our salt EBITDA margin topped 24% in the quarter compared to 18% in 2014. We had the benefit of a strong pricing season in highway deicing for North America.
We also had the opportunity to exit lower-margin highway deicing businesses in our bidding strategy last year, and that continues to pay dividends for us in terms of the margin we earned in salt we sold this quarter. This means our footprint of business was more freight logical.
On the consumer and industrial side, we have worked to rationalize our business, which has a positive margin implication as well. We did have some higher production costs this quarter, some of which were expected and some of which weren't.
Recall that we had purchased imported salt to increase our ability to serve customers this winter. In addition to this planned expense, we had a hoist repair at our Cote Blanche mine, which kept us from producing and shipping salt for several weeks.
And at Goderich, the Lake Huron remained iced over at our port there for a couple weeks longer than typical. This extended our planned downtime and increased our per-unit costs for the quarter.
It is a testament to the strength of the underlying business that we can still deliver these improved results despite these short-term issues. Of course, now that we have this winter in the books, it's time to look forward to the 2015-2016 bid season.
It's far too early to make any predictions; however, it's important to keep in mind that it's often a 2-year cycle for salt inventories to normalize after an extreme winter like we had last year. Given that we had an average winter on balance, we expect that at least from the producer perspective, inventories are at typical levels on the whole and this bodes well for the upcoming bid season.
Through this bid season, we'll continue to focus on margin by putting our tons to work in the most profitable markets. We will continue focusing on operating safely and efficiently and plan to run our mines, add capacity to make sure we're prepared to serve our customers' needs when and where it matters in the upcoming winter.
Now to our plant nutrition business. Results here were also heavily influenced by price.
A 23% improvement in average selling price more than offset the decline in sales volumes in the quarter. The lower sales volume was primarily due to lower than expected production of compacted SOP early in the quarter as we began processing this year's feedstock.
Once the compactor was recalibrated, the rates increased and are now running above our plan. In fact, we expect to produce more of these tons this year than last year, which is important.
Our compacted SOP garners a higher value in the North American market because of its consistent size and ability to blend with other crop inputs. Part of our continued effort to maximize the margin potential of our limited SOP production is to move more of our sales mix in this direction.
And part of our investment capital will go toward expanding our ability to compact product at our Ogden facility. As expected, we had higher cost in the business this quarter due to the poor solar pond harvest last fall, which has resulted in greater use of purchased potassium feedstock to meet our customers' demand this year.
We expect production cost to remain elevated throughout the year; however, assuming a normal 2015 solar evaporation season, we expect that 2015 incremental cost to reverse in 2016. We've offset much of the impact in 2015 through higher prices for our products.
As you are all aware, we are making large capital investments in both businesses over the next couple of years. In our slide deck, we have detailed an outline of the major capital projects that are underway and I'm going to highlight two starting with the Ogden plant expansion.
You'll notice that one of the key components of that project is to increase your compaction, which will allow us to sell not just more product, but more of the product that our customers demand. In addition, we'll add another crystallizer, which will allow us to increase our annual production capacity from 400,000 tons to 550,000 tons per year.
The cost of the project is approximately $83 million, which is about $550 per incremental ton of capacity. In addition to increasing capacity, this project is expected to reduce our cash cost as well.
We've also outlined our capital plans at Goderich including the shaft relining and the expanded use of continuous mining there. Our continuous mining investments will reduce our mining costs, increase production flexibility and improve safety.
Our work here is just getting started and we now expect some of that capital spending on the Goderich project to continue into early 2017. But with the project complete, we anticipate being able to access additional salt for the 2017-2018 winter season.
And Matthew will provide a little more color on these items in his remarks. What I want to stress is that these investments are critical to maintaining and improving the productive capacity of our key advantaged assets for the long term.
They support improved asset reliability and efficiency. The additional capacity these investments yield support our organic growth objectives and are certainly an important part of our path to $500 plus million EBITDA by 2018.
We continue to make great progress toward our long-term objectives. Rest assured that we are focused on margin optimization in both businesses, improving operational performance and best-in-class execution of our upcoming capital projects.
Now I'll turn it over to Matthew, so he can take us through the first quarter financial results in more detail.
Matthew J. Foulston - Chief Financial Officer
Thanks, Fran, and good morning, everyone. Let me start with a brief review of our consolidated results.
Adjusted EBITDA and EBITDA margin were up 22% and 6 points respectively on 7% lower revenue. This improvement resulted from strong performance in both businesses and I'll start with salt.
If you're following along with our investor presentation, the salt segment results can be found on slide nine. Operating earnings were up 20% on 10% lower revenue.
Strong highway deicing pricing in addition to lower per-unit shipping and handling costs more than offset the impact of higher per-unit salt costs and lower sales volumes. It's probably not surprising that we sold fewer tons of salt this quarter compared to last year when strong winter weather throughout North America drove extremely robust demand.
On a year-over-year basis, highway deicing volumes were 19% lower, while consumer and industrial sales volumes fell 21%. Some of the weakness was offset by higher sales in the UK where winter was average compared to a mild prior winter.
While volumes were lower year-over-year, they were essentially in line with our expectations given the tenor of the winter we had. I'd like to take a few minutes to discuss the ebbs and flows of the North American winter, because I think it will give you some insight into our results and our evaluation of the winter weather impact.
As the chart earlier in the presentation showed, winter kicked off with a flurry in November. In addition, our sales volumes were driven higher by our customers' need to restock after the prior winter.
This was followed by a very mild December, which resulted in a mild fourth quarter in terms of total snow events. More snow events in the first quarter offset that mild fourth quarter and actually resulted in an average winter across our service area.
But the timing of deicing sales over the winter did not match typical 10-year average winter patterns, which form the basis of our winter weather impact calculation. That's the reason for the positive sales and earnings benefit in the fourth quarter that we took you through on the last call and the offsetting negative impact in the first quarter.
Despite the downturn in sales volumes, the salt segment earned approximately $88 million of EBITDA, which was up 17% from last year's first quarter. The EBITDA margin at 28% for the quarter was up 7 points from the prior year.
Fran discussed some of the factors that prevented the margin from being even higher, and I would like to put some financial context around these. We estimate that the impact from imported salt costs, additional downtime at Goderich and the added reserves for the 2010 labor matter negatively impacted our EBITDA margin by over 3 percentage points.
Following last quarter's discussion of improvements in oil prices and our per-unit shipping and handling costs, we did see the relationship between Brent crude and on-highway diesel reestablish, but unfortunately it was a result of increasing Brent prices, not the lower highway diesel prices we were hoping for. As expected, our shipping and handling costs did improve, but some of the benefit was offset by higher usage of ice breaker boats in our northern markets and general freight rate increases.
Now, turning to plant nutrition on slide 10. Operating earnings were up 31% and 12% higher revenue.
The revenue improvement was driven by improved pricing, more than offsetting a 9% decline in sales volume. The year-over-year decline can largely be attributed to the early quarter shortfall in our planned production of compacted SOP as Fran described.
We believe this issue is now behind us. In addition, the mild and wet weather that has impacted the wider North American agricultural sector has had a negative impact on Wolf Trax micronutrient sales.
The average selling price for our SOP products was up 19% from $616 per ton in the first quarter of 2014 to $730 a ton this quarter. This includes the benefit of the $50 per ton price increase we introduced at the beginning of 2015.
When combined with our micronutrient portfolio, our average selling price for all plant nutrition products was $759 a ton, up from $719 in the sequential quarter. Our ability to increase and hold price is allowing us to mitigate the higher cost we currently face, producing SOP at our Ogden facility.
All-in, plant nutrition costs were approximately $468 per ton compared to $394 last year. Two items contributed to this increase.
First, we have the cost of producing Wolf Trax products this quarter, which were not in the year-ago period, but the biggest driver of the higher cost was the increased use of purchase potassium feedstock including KCL for our production process. While more expensive, this production route allows us to make a similar amount of SOP even with the lower pond-based feedstock harvest last fall due to the poor solar evaporation season.
Given the current price of KCL versus the price we can obtain for SOP, this decision makes sense for us economically and we are able to profitably satisfy customer demand. We do expect an additional step-up in per-unit costs in the second quarter as we were still selling some lower cost 2014 inventory in the first quarter of 2015.
Before turning to the outlook, I have a couple of corporate items to mention. SG&A expense increased $3.2 million from the first quarter of 2014.
This is the last quarter that we're comparing our SG&A expenses to a pre-Wolf Trax result, and this represented the majority of the increase. Remember that Wolf Trax products have a much higher selling price, but require more marketing and technical research to support the sales.
Our tax rate was 27%, in line with guidance. In the first quarter, we spent about $42 million on capital expenditures, as we execute the investment plan that Fran outlined.
This compares with $20 million in the same period of 2014. We have a robust plan of capital investment that peaks over the next two years before returning to more normalized levels in 2017 and 2018.
We have a laser focus on delivering these projects on budget and on track from an execution perspective. As they are large projects, some of the spending can shift between years and we will continue to provide updates as we progress.
On page 11, we've outlined some of the factors impacting on near-term outlook. Looking first at the salt business, we expect second quarter sales volumes to range from 1.1 million tons to 1.5 million tons with an average selling price similar to the year-ago period.
We do expect our operating margin to expand meaningfully from the 5.7% we reported in 2014. Last year, our second quarter salt costs were impacted by downtime at the Goderich mine and lower production in the UK, which we do not expect to have in 2015.
In our plant nutrition business, in Q2, we expect to sell between 80,000 tons and 90,000 tons. We have reduced our full-year volume expectation slightly due to the compaction shortfall in the first quarter that Fran mentioned.
In addition, we are focused on optimizing the product sales mix in plant nutrition in favor of compacted product to the degree possible, which allows us to maximize the margin from our available capacity. On slide 12, you can see our present guidance for the second quarter and the full year.
We have made some very minor adjustments to full-year plant nutrition volumes as I mentioned. Turning to the last slide, let me end with a brief summary.
Results in Q1 were very strong with EBITDA and margins up 22% and 6 points respectively on revenue that was down 7%. Both segments are performing extremely well with solid earnings and margin growth.
Going forward, we will maintain our disciplined approach to capital allocation and a relentless focus on margin improvement. And finally, we are reaffirming our full-year EPS guidance range of $5.10 to $5.60.
With that, I'll turn the call over to the operator, Alicia, for some questions. Thank you.
Operator
Thank you. We'll go first to Chris Parkinson of Credit Suisse.
Christopher S. Parkinson - Credit Suisse Securities (USA) LLC (Broker)
Perfect. Thank you.
Given your commentary about the normalization of inventories in your key markets, but the likelihood of lower inventories in some North East markets, could you quantify any potential opportunity you have in these? Or going forward, should it be more as the status quo?
Francis J. Malecha - President, Chief Executive Officer & Director
Sure. This is Fran.
I think it is going to be an interesting bid season coming up and if you look at kind of the average winter as we've described and some of the variability that was in it, it was probably slightly below average in the West and above average in the East. So we would expect as the bid season starts, that on average our served area is probably at normal inventory levels.
But there will be a pull, I think, across the North American producers for more demand in the East and may give us an opportunity to pick up some market share in the western side of our served area, which is really the best business and we talk about being more freight logical to improve our margins. So I would say that we're thinking it's going to be average, but optimistic that we may end up with a bit better result.
Christopher S. Parkinson - Credit Suisse Securities (USA) LLC (Broker)
Perfect. Thank you.
And just a quick follow-up. Given your commentary about the plant nutrition business, in the past, it's my understanding that the California drought hasn't really affected everything.
But given the intensity and the, let's say, the intensified scrutiny on the agricultural water usage although hasn't been curtailed yet, are you hearing anything different from customers even versus last year?
Francis J. Malecha - President, Chief Executive Officer & Director
I mean at this point, we really aren't hearing a different story than a year ago. The groundwater quality, we think, is decreasing, so the chlorides are increasing and that's a benefit for our SOP product, which doesn't have the chloride.
I think some crops are coming out of production and those are largely crops like rice, corn, and cotton that can be grown in areas outside of California, and more permanent crops are going in, things like almonds were – they are primarily grown in California. So that's a benefit to our business.
And the longer – I think as we talked over the course of the last number of calls, the longer the drought grows, the more uncertain it is I think for everybody. So we'd love to see some increase in both the rainfall and snowpack and get back to a more normal situation out there.
But at this point, we aren't seeing a negative from the California drought.
Operator
We'll go next to Ivan Marcuse from KeyBanc.
Ivan M. Marcuse - KeyBanc Capital Markets, Inc.
All right. Thanks for taking my questions.
The first one is on the 3% impact to margins in the salt business from the higher costs. Was that just for – was that a first quarter or was that for the full winter or what's the timeframe?
Matthew J. Foulston - Chief Financial Officer
That's just the first quarter answer, Ivan.
Ivan M. Marcuse - KeyBanc Capital Markets, Inc.
Okay. And that was all in the salt segment, right.
Matthew J. Foulston - Chief Financial Officer
Yes.
Ivan M. Marcuse - KeyBanc Capital Markets, Inc.
Got you. And then second follow-up question I have is, on your projects that you outlined and relative to your 2018 goals, how much is each of those two projects responsible for the $90 million improvement in salt and $60 million to $70 million improvement in plant nutrition?
Francis J. Malecha - President, Chief Executive Officer & Director
I think the Goderich continuous mining program, that's all cost savings. And I think as we described in the past, there would be about a total of $16 million of cost savings in the salt business over the plan and the Goderich mining would be roughly about half of that.
On the plant nutrition side, that increase in the Ogden capacity takes us up from – we're making about 400,000 tons today of – combination of pond-based and KCL takes us to 550,000 tons, and that will be about 325,000 tons of pond-based and about 225,000 tons of KCL at the time. So we're expecting the majority of the increase in plant nutrition to come from that expansion.
Operator
We'll go next to David Begleiter from Deutsche Bank.
David I. Begleiter - Deutsche Bank Securities, Inc.
Thank you. Fran, looking at the upcoming bid season from a pricing perspective, given the volatility you've seen in energy prices and the average inventories right now, would you expect pricing to trend to normalized levels of maybe 2%, 3% or what could be a more reasonable expectation?
Francis J. Malecha - President, Chief Executive Officer & Director
It's just too early for us to comment on the pricing. We are just getting into the bid season with some of the major states underway or to be underway shortly and from a competitive standpoint, it's just difficult for us to comment specifically on our thoughts until we get deeper into the season here and we usually report on that kind of mid-summer or closer to the next earnings call.
But I think if you look at history, coming off of a very severe winter and significant price increase, as we look back over the last 15 years or so, there is usually a carryon effect that we see in the pricing. Will that happen this year?
We hope so. Obviously as I talked earlier, there is going to be a pull to the East and we'll just have to see kind of how that takes out for us in our served market.
But we're optimistic that it would be, I would say, a more normal pricing coming off last year. And last year, there was quite a disparity of pricing from the start of the year to the end of the year.
So we'd expect some consolidation around the middle as we kind of go through the bid season.
David I. Begleiter - Deutsche Bank Securities, Inc.
And Fran, just on salt production costs, looking longer term in 2016 and 2017, how would you expect those production costs to decline on a per-ton basis given some of the unusuals in 2015?
Matthew J. Foulston - Chief Financial Officer
This is Matthew. I think obviously the unusuals in the first quarter of this year, we expect to behind us.
Both mines are running at capacity now and very smoothly, and we do anticipate that through the balance of the year. And then I think the next big step function is really around the investment in the continuous mining, which will allow us to have a much less labor intensive mining operation there.
So I think that's going to be the next step function down. I don't think we've actually quantified that in the past in terms of a per-ton number, but that will be the next step down for sure.
Operator
We'll go next to Joel Jackson of BMO Capital Markets.
Joel D. Jackson - BMO Capital Markets (Canada)
Hi. Good morning.
How do you want us to model some of your salt volume guidance. If you take the midpoint, your Q2 would be basically the least amount of salt sales you've ever done in a Q2 pretty much, since you've been a public company.
If you take the midpoint of your full-year guidance still at 12 million tons to 12 million tons. It would be for the second half of the year, probably the strongest second half you've ever done before.
Can you tell us – give us a little more guidance?
Matthew J. Foulston - Chief Financial Officer
Yeah, I think that's a good question, Joel. And generally, we think of these ranges more as goalposts and they do give us some commercial flexibility between the quarters.
I think maybe a different way to comment this is, if you think about us reaffirming the full year, I think it's sending a signal that we think Q2 is actually going to be pretty strong. There are some other factors moving around in here.
Chemical is going to be down in Q2 and it's actually going to be up quite significantly in the second half. So that's giving us a slightly different tenor to the normal year.
If we do end up Q2 around the high end of our guidance and the second half of the year is average, we'll be at the bottom end of our range. And I think as Fran mentioned earlier, with this very intense weather season that we're coming off on the East Coast, we're hoping to pick up a little more of our business in our core area, as people travel less West Woods and it may actually help us penetrate further East.
So there could be some share opportunities in the second half of the year which will get us right into the middle of that full-year range.
Joel D. Jackson - BMO Capital Markets (Canada)
Okay. So just following on that, what is Goderich capacity right now, there's been a lot of things going on there in terms of equipment and some of the shaft relining?
And then, what would the capacity be in 2017-2018 post the relining?
Francis J. Malecha - President, Chief Executive Officer & Director
Okay. We're running in that 7.5 million ton to 8 million ton range at capacity today.
So I would say 8 million tons is the high end of our current capacity. Then once we complete the shaft relining, which will be complete in early 2017 and in place to produce for the 2017-2018 winter, our production capacity will be closer to 9 million tons, so at least an additional million tons of capacity.
Operator
We'll go next to Jeff Zekauskas of JPMorgan.
Jeffrey J. Zekauskas - JPMorgan Securities LLC
Thanks very much. Could you review again the reasons why volume in consumer and industrial was down so much in the quarter?
Francis J. Malecha - President, Chief Executive Officer & Director
I think it was primarily just a reduction in the deicing side of the business. If you go back to the prior winter, we had a heavier – lighter fourth quarter and then on the retail side kind of they loaded up and served the real harsh winter really in the first quarter.
What we saw this winter was maybe a load up in the fourth quarter so last quarter and a lighter first quarter despite a reason like good snow events through the winter. So that's really the main difference on the volume on the package side.
Jeffrey J. Zekauskas - JPMorgan Securities LLC
Okay. And I think on slide six, you laid out of your capital plans, and I think you have these dotted lines around some of the plans, which I guess I understand that you haven't fully resolved to spend the money.
And if that's correct, what are the probabilities that you will spend the money? Are they greater than 50% or less than 50% or how do you assess that?
Francis J. Malecha - President, Chief Executive Officer & Director
I think historically, we have found return projects to improve our assets and create capacity become more efficient over time. And so we're basically in that chart saying that we're going to continue to look for those opportunities; and if they're there and the investments meet our hurdle rates, we will proceed with those, but I would say that as we look at the capital that's going into our major facilities today, Goderich and Ogden, some of that's MOB and some of that's investment capital, and I would expect that those opportunities are going to become less and less.
We have other assets that may have capabilities for things like continuous mining and as we look at Cote Blanche, maybe there's opportunities there. So to put a percentage on it, I would say probably a little less than 50% versus over 50%, but we're going to keep on looking for ways to invest capital in our business and earn kind of the high teens of returns on those projects that the business is delivering today.
Operator
We'll go next to Bob Koort of Goldman Sachs.
Robert A. Koort - Goldman Sachs & Co.
Thank you very much. Fran, I was wondering could you talk about what you've seen historically on the consumer and industrial pricing dynamics when you've seen such a nice move in highway deicing?
Would that normally lead to some uplift in the subsequent periods for consumer and industrial?
Francis J. Malecha - President, Chief Executive Officer & Director
I mean we have seen a price increase through last year on the consumer and industrial side on deicing. The non-deicing has been essentially flat both in terms of volume and in terms of price.
So I think we probably need some different type of a game changer on the non-deicing side and we're looking at ways that we can – and also earlier we talked about the capital investments, so we are looking at ways that we could convert our rock salt mechanically to some of these non-deicing products and significantly change the cost side of those products, which would help the profitability there. But I would say generally, the deicing business we'll take the price increase and if the winter is there, the non-deicing is pretty flat.
Robert A. Koort - Goldman Sachs & Co.
Got it. And when you go to the bid season this year, I mean you give those bids on a delivered basis, obviously some of your logistics costs have started to trend down.
Would you expect some of that to get passed through or is that something you can retain?
Francis J. Malecha - President, Chief Executive Officer & Director
We'd like to retain obviously all we can and that really is the competitive dynamic of the bids. And as we look at pricing and where we earn our margins, sometimes it's hard to say is this coming from, we're holding onto those declines in fuel costs or freight costs or what have you, but we expect the market to be disciplined and hope that in that case, that we're able to retain that benefit.
Robert A. Koort - Goldman Sachs & Co.
And lastly, if I might quickly, your slide five showing the SOP, MOP gap is really quite remarkable. I'm wondering if you could just give us an update on what you see on any competitive threats out there?
And secondly, is it feasible, I know I was looking at Intrepid who is an MOP producer and their margins are – at least in the quarter, it's a seasonally slow quarter, I guess, were at third of what you get in SOP. Is there any risk that some of these MOP guys could actually start to do some conversions to SOP?
Francis J. Malecha - President, Chief Executive Officer & Director
There's – I mean obviously the pricing here has gotten to a point where I think we are seeing some more SOP production from the Mannheim process that could come online profitably. Most of that is happening offshore, primarily in Asia and we have seen a slight uptick in exports to countries other than the U.S.
of SOP over the past few months. But we haven't seen any activity nor heard of any projects in North America.
So I think there is, obviously at these kind of price levels, maybe that threat's increasing somewhat and we're probably not, I would say, significantly bullish on pricing from here unless we'd see a rise in MOP and it doesn't appear that's going to happen this year, from here to the end of the year. So, I think our benefits in the business are going to be – there may be some limited price opportunity, but really over the course of the next probably 18 months comes on the cost side as we assume we have a normal harvest, which we'll start to use in the backend of this year, that will significantly impact and lower our costs, our pond-based costs into next year.
And then with the capital that we've been putting into Ogden in the expansion capital, we do expect to get a benefit from the yield of our pond-based production and that should bode well for our cash cost in 2017 and beyond. So I think we're well positioned to compete.
We're taking advantage of that opportunity in the market today. And if there is some increased production out there, I would expect it to compete more for kind of the standard type business offshore more so than the higher quality compacted or granular product in North America.
We've been working hard with our customer base, extracting the value that SOP brings and doing things with Protassium+ and that we think will separate us a bit from the competition that is out there today or that could come on in the future.
Operator
We'll go next to Joel Jackson of BMO Capital Markets.
Joel D. Jackson - BMO Capital Markets (Canada)
Thanks. I just had a follow-up question.
You had a presentation from December that showed that 2016 CapEx would be about $150 million. Your update today says about $250 million.
It seems like, it could be a pull forward of CapEx from years after 2016, into 2016 or can you talk about of what's going on there, please?
Francis J. Malecha - President, Chief Executive Officer & Director
Yeah, I think we've been consistent in how we've described the capital, Joel. I think you may have been looking at a chart back then for 2016 that didn't include any investment capital.
That would have just been the MOB, whether it's going – would have been the normal kind of ongoing MOB of about $75 million a year, plus kind of the one-time, which would have been mainly the shaft relining at Goderich at that time. And I think what we've talked about is roughly about $250 million in 2015, $250 million in 2016 and then getting down to more normal levels in 2017.
And as we have – as Matthew talked, as we've kind of been working through and starting these larger projects, we're going to see slightly less in 2015 and a bit of that that would probably hit the first part of 2017, but the projects haven't grown in capital and the timing is within a quarter of kind of what we have been talking about. So no difference kind of in the overall numbers from what we've been talking about for the last couple of quarters.
Joel D. Jackson - BMO Capital Markets (Canada)
So in that presentation, you showed $75 million of average sustaining capital, about $75 million of special sustaining and no payback capital, so now the $250 million is adding – so the $100 million delta to that is payback capital?
Francis J. Malecha - President, Chief Executive Officer & Director
That's roughly – that's correct. Yeah.
Joel D. Jackson - BMO Capital Markets (Canada)
Okay. Thank you.
Operator
And at this time, we have no further questions. I would like to turn the call back over to Theresa for any closing or additional comments.
Theresa L. Womble - Director-Investor Relations
Thank you, Alicia. We appreciate your interest in Compass Minerals today.
Feel free to contact the Investor Relations department with any follow-up questions you may have. Have a great day.
Operator
That does conclude today's conference. We thank you for your participation.