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Compass Minerals shares fall after downgrade

LOS ANGELES (AP) -- Shares of Compass Minerals International Inc. fell Thursday after the company reported that sales of highway deicing products declined in the fourth quarter from a year earlier because of mild weather so far this winter.

KeyBanc Capital Markets analysts downgraded the stock, saying low snowfall levels and carrying costs of unsold inventory pose a risk to earnings for the company.

THE SPARK: Compass said that highway deicing sales volume totaled about 2.3 million tons in the last three months of 2012, down from 2.7 million tons in the same period of 2011. The company attributed the decline to customers having a high carry-over of deicing products after a mild 2011-2012 winter and more mild weather so far this winter.

All told, the company's deicing, consumer and industrial sales declined 15 percent during the fourth quarter from a year earlier. Compass noted that winter weather returned to its markets at the end of last month.

Still, analysts Ivan Marcuse and Andrew Dunn cut the company to "Hold" from "Buy," saying they anticipate that, until snowfall returns to more normal levels, Compass' salt inventory costs will boost operating expenses for the company.

THE BIG PICTURE: Compass Minerals, based in Overland Park, Kan., produces minerals, including salt, magnesium chloride and specialty fertilizers, among other products. It provides deicing salt to customers in North America and the United Kingdom.

THE ANALYSIS: The KeyBanc analysts noted that snowfall so far this winter remains about 22 percent below the 10-year average.

Lower volumes means Compass has to hold onto its inventory for a longer time, which should increase unit operating costs in the first quarter, even if snowfall returns to more normal levels, the analysts wrote.

In addition, the analysts said Compass may face pricing pressure on its fertilizer business going forward, citing a decline in recent months in the price of potash-based fertilizer.

The analysts noted that, if the mild winter weather persists, they don't see a catalyst that will move Compass' shares higher.

THE SHARES: Down $2.20, or 2.9 percent, to $74.01 in afternoon trading. Over the past 52 weeks, the stock has traded between $68.22 and $81.13.