Darling Ingredients Delivers Strong Q4 Results, Expects Growth in 2025

Darling Ingredients Inc. (NYSE: DAR) reported strong financial results for the fourth quarter of 2024, driven by operational excellence and margin management. The company delivered its strongest quarter of the year, with notable milestones including the start-up of a large-scale sustainable aviation fuel (SAF) unit and meaningful dividends from its joint venture. For the quarter ended December 28, 2024, net income totaled $101.9 million or $0.63 per diluted share, compared to net income of $84.5 million or $0.52 per diluted share in the same period in 2023. Total net sales were $1.4 billion, reflecting lower finished product pricing.

Darling Ingredients' focus on operational excellence resulted in gross margin improvement in the fourth quarter of 2024 compared to the third quarter of 2024, despite lower fat prices. This improvement was achieved through lower restructuring and asset impairment charges, a favorable change in fair value of contingent consideration, and lower depreciation and amortization expense. Operating income decreased by $36.4 million to $122.4 million for the fourth quarter of 2024, primarily due to a lower gross margin from significantly lower fat prices, which was substantially offset by lower selling, general, and administrative expenses (SG&A).

For fiscal year 2024, net income was $278.9 million or $1.73 per diluted share, compared to net income of $647.7 million or $3.99 per diluted share in 2023. Net sales for fiscal year 2024 were $5.7 billion, compared to net sales of $6.8 billion in 2023. Operating income decreased by $481.5 million to $468.2 million for fiscal year 2024, primarily due to a lower gross margin in global ingredients and lower earnings from Diamond Green Diesel (DGD), somewhat offset by lower SG&A, lower restructuring and asset impairment charges, and a favorable change in fair value of contingent consideration.

Darling Ingredients' strategic focus on operational excellence and margin management has contributed significantly to its financial performance in the fourth quarter of 2024 and fiscal year 2024. The company's ability to improve gross margins despite lower fat prices and manage costs effectively has allowed it to maintain profitability despite lower sales and operating income. As the market continues to work through the details on the clean fuel production tax credit, Darling Ingredients expects its ingredient prices and rims to adjust and solidify throughout the year. This, combined with the completion of DGD turnarounds and the increasing percentage of SAF sales in its mix, should drive growth in 2025.

Darling Ingredients' unique position as the world's largest producer of waste fats and vertically integrated renewable producer allows it to capitalize on market opportunities and drive growth in 2025. With regulatory clarity on US biofuel policies such as 45Z and California's low carbon fuel standard, the market is stabilizing. This is advantageous for Darling Ingredients' core ingredients business, as it is the largest producer of waste fats in the world and the only truly vertically integrated renewable producer. The sharp decline in foreign biofuel imports and early signs of capacity rationalization in the domestic biodiesel and renewable diesel production indicate a more balanced supply and demand environment for 2025. This allows Darling Ingredients to better manage its inventory and pricing strategies.

In conclusion, Darling Ingredients' strong financial performance in the fourth quarter of 2024 and fiscal year 2024 is a testament to the company's strategic focus on operational excellence and margin management. As the market continues to stabilize and grow, Darling Ingredients is well-positioned to capitalize on market opportunities and drive growth in 2025. Investors should consider Darling Ingredients as a strong investment option in the consumer defensive sector, particularly in the packaged foods industry.