Darling Ingredients (DAR) Q3 Earnings call transcript Oct 24, 2024
2min read In the recent third-quarter earnings call, Darling Ingredients Inc. showcased its resilience in the face of sluggish global ingredient demand and a difficult renewable diesel market, reporting flat sequential performance with adequate cash and dividends from Diamond Green Diesel. The company's core ingredients performance remained stable, with a focus on widening margins, managing capital expenditures, and reducing SG&A expenses.
Strategic Focus on Core Business and Global Assets
Despite the challenging market conditions, Darling Ingredients reported a combined adjusted EBITDA of $236.7 million, reflecting sequentially steady finished product pricing and a challenging renewable diesel market. The company's global asset base performed well, with a slight increase in feed gross margin percentage sequentially, attributed to the hard work and dedication of the operations team. This focus on operational excellence and spread management is a testament to Darling's commitment to cost control programs.
Expansion into Sustainable Aviation Fuel (SAF) and Specialty Ingredients
Looking forward, Darling Ingredients remains optimistic about 2025, with the expectation of regulatory clarity on the California low carbon fuel standard program and the federal tax credit known as 45Q, paving the way for greater growth and improved margins at Diamond Green Diesel. The company is also positioning itself for increased success in the Specialty Ingredients business, with the launch of innovative collagen solutions and a strong focus on decarbonization initiatives that favor the use of waste fats and oils.
Financial Performance and Outlook
The financial performance for the third quarter of 2024 showed a net income of $16.9 million or $0.11 per diluted share, with total net sales at $1.4 billion. Operating income decreased to $60.1 million, primarily due to a decline in gross margin and Diamond Green Diesel earnings. However, the company remains optimistic about the outlook for 2025, projecting an effective tax rate of negative 5% and cash taxes of approximately $15 million for the remainder of the year.
Addressing Challenges and Opportunities
During the call, executives addressed key concerns, including the challenges faced by the Renewable Diesel market and the global feedstock situation. They also discussed the potential for shuttering capacity in the biodiesel sector and the impact of European markets on RD exports. The company's strategy for addressing these challenges includes a focus on operational improvements, strategic feedstock management, and the pursuit of new opportunities in sustainable aviation fuel and specialty ingredients.
Conclusion
Darling Ingredients Inc.'s third-quarter earnings call highlighted the company's strategic focus on operational excellence, market positioning, and a positive outlook for 2025. With a strong focus on sustainability, decarbonization, and innovative product development, Darling is well-positioned to navigate the challenges of the current market and capitalize on the opportunities ahead. As the company continues to navigate the complexities of the global ingredient market and the renewable diesel sector, investors and stakeholders will be watching closely for updates on regulatory clarity, operational performance, and strategic initiatives.
