8-K: Darling Ingredients Q3 2025: Core Business Drives Growth

Darling Ingredients Inc. reported increased net income and total net sales for Q3 2025, driven by strong core ingredients performance despite a significant decline in its Fuel segment.

Summary

• Net income for the third quarter of 2025 was $19.4 million, or $0.12 per GAAP diluted share, compared to $16.9 million, or $0.11 per diluted share, for Q3 2024.
• Total net sales for Q3 2025 reached $1.6 billion, an increase from $1.4 billion for the same period a year ago.
• Combined Adjusted EBITDA for Q3 2025 was $244.9 million, up from $236.7 million for Q3 2024.
• For the nine months ended September 27, 2025, net sales were $4.4 billion, compared to $4.3 billion in 2024.
• Nine-month net income for 2025 was $5.9 million, or $0.04 per diluted share, a significant decrease from $177.0 million, or $1.10 per diluted share, for the first nine months of 2024, primarily due to lower earnings at Diamond Green Diesel (DGD).
• DGD sold 250 million gallons of renewable fuel during Q3 2025, resulting in a negative ($0.02) EBITDA per gallon to Darling Ingredients, net of discount and broker fees related to production tax credits (PTC).
• Darling Ingredients agreed on the sale of $125 million of its 2025 PTCs, with payment expected in the fourth quarter, and anticipates selling another $125-175 million in PTC credits by the end of 2025.
• As of September 27, 2025, cash and cash equivalents stood at $91.5 million, with $1.17 billion available under its committed revolving credit agreement.
• Total debt outstanding, net of cash and cash equivalents, was $4.01 billion as of September 27, 2025, with a preliminary leverage ratio of 3.65X.
• Capital expenditures were $90.1 million for Q3 2025 and $224.0 million for the first nine months.
• The company will now provide financial guidance exclusively for its core ingredients business, estimating core ingredients (all segments excluding DGD) Adjusted EBITDA to be approximately $875-900 million for full year 2025.

Sentiment

Score: 5

Explanation: While the core ingredients business showed strong performance and growth in Q3, the significant underperformance of the Diamond Green Diesel joint venture and the Fuel segment, particularly on a year-to-date basis, weighs heavily on overall results. The negative EBITDA per gallon for DGD in Q3 and the withdrawal of comprehensive financial guidance indicate ongoing challenges and uncertainty in the renewable fuels market, despite anticipated PTC sales and a stronger Q4 for DGD.

Positives

• Net income increased by 14.8% to $19.4 million in Q3 2025 from $16.9 million in Q3 2024.
• Total net sales grew by 10.0% to $1.6 billion in Q3 2025 from $1.4 billion in Q3 2024.
• Combined Adjusted EBITDA increased by 3.5% to $244.9 million in Q3 2025 from $236.7 million in Q3 2024.
• The core ingredients business (Feed and Food segments) continues to build momentum, driven by strong fundamentals across all segments.
• Feed Segment sales and margins increased both quarter-over-quarter and year-over-year, supported by strong global demand and disciplined execution.
• Robust demand for domestic fats, bolstered by 'America First' policy and U.S. energy dominance, contributed to improved Feed segment revenue and margin performance.
• Global rendering business, particularly in Brazil, Canada, and Europe, demonstrated stronger year-over-year performance.
• Export protein demand in the Feed segment is showing signs of recovery with slightly firmer pricing trends.
• Food Segment achieved consistent quarter-over-quarter sales and year-over-year growth, reflecting increased demand for collagen.
• The Food business remains resilient and is anticipated to rebound in coming months as global collagen demand continues to strengthen.
• The company agreed on the sale of $125 million of its 2025 Production Tax Credits (PTCs), with an anticipation of selling another $125-175 million by year-end 2025.
• Revolver availability of $1.17 billion as of September 27, 2025, indicates strong liquidity.
• The preliminary leverage ratio improved to 3.65X as of September 27, 2025, from 3.93X at December 28, 2024.

Negatives

• Nine-month net income for 2025 significantly decreased by 96.7% to $5.9 million from $177.0 million in 2024, primarily due to lower earnings at Diamond Green Diesel (DGD).
• Nine-month Combined Adjusted EBITDA decreased by 12.7% to $690.2 million in 2025 from $790.4 million in 2024.
• DGD's Q3 2025 performance resulted in a negative ($0.02) EBITDA per gallon to Darling Ingredients, net of discount and broker fees related to PTC, compared to a positive $0.25 per gallon in Q3 2024.
• The Fuel segment's Combined Adjusted EBITDA decreased significantly by 63.8% to $21.6 million in Q3 2025 from $59.7 million in Q3 2024.
• Year-to-date, the Fuel segment's Combined Adjusted EBITDA decreased by 63.0% to $107.1 million in 2025 from $289.6 million in 2024.
• Lower volumes at DGD 3 due to turnaround impacted higher-margin Sustainable Aviation Fuel (SAF) sales in Q3.
• DGD results include a $37.8 million Lower of Cost or Market (LCM) inventory valuation adjustment expense at the entity level in Q3 2025.
• The Corporate segment's Adjusted EBITDA showed an 82.8% increase in negative contribution in Q3 2025, reaching ($22.3) million compared to ($12.2) million in Q3 2024.
• Tariff-related volume softness was observed in the Food segment late in Q3.
• The company will now provide financial guidance exclusively for its core ingredients business, indicating ongoing complexity and uncertainty surrounding public policy and its impact on the Fuel segment.

Risks

• Existing and unknown future limitations on the ability of the Company's direct and indirect subsidiaries to make their cash flow available to the Company for payments on indebtedness or other purposes.
• Reduced demands or prices for biofuels, biogases, or renewable electricity.
• Global demands for grain and oilseed commodities, which have exhibited volatility, and can impact the cost of feed for cattle, hogs, and poultry, thus affecting available rendering feedstock and selling prices for the Company's products.
• Reductions in raw material volumes available to the Company due to weak margins in the meat production industry as a result of higher feed costs, reduced consumer demand, reduced volume due to government regulations affecting animal production or other factors, reduced volume from food service establishments, or otherwise.
• Reduced demand for animal feed.
• Reduced finished product prices, including a decline in fat, used cooking oil, protein, or collagen (including, without limitation, collagen peptides and gelatin) finished product prices.
• Changes to government policies around the world relating to renewable fuels and greenhouse gas (GHG) emissions that adversely affect prices, margins, or markets (including for the DGD Joint Venture), including programs like renewable fuel standards, low carbon fuel standards (LCFS), renewable fuel mandates, and tax credits for biofuels, or loss or diminishment of tax credits due to failure to satisfy any eligibility requirements, including, without limitation, in relation to the blender tax credit or the Clean Fuels Production Credit (CFPC).
• Climate-related adverse results, including with respect to the Company's climate goals, targets, or commitments.
• Possible product recall resulting from developments relating to the discovery of unauthorized adulterations to food or food additives or products which do not meet specifications, contract requirements, or regulatory standards.
• The occurrence of 2009 H1N1 flu (initially known as Swine Flu), highly pathogenic strains of avian influenza (collectively known as Bird Flu), severe acute respiratory syndrome (SARS), bovine spongiform encephalopathy (or BSE), porcine epidemic diarrhea (PED), or other diseases associated with animal origin in the U.S. or elsewhere, such as the outbreak of African Swine Fever in China and elsewhere.
• The occurrence of pandemics, epidemics, or disease outbreaks, such as the COVID-19 outbreak.
• Unanticipated costs and/or reductions in raw material volumes related to the Company's compliance with the existing or unforeseen new U.S. or foreign regulations (including new or modified animal feed, Bird Flu, SARS, PED, BSE, or ASF or similar or unanticipated regulations) affecting the industries in which the Company operates or its value-added products.
• Risks associated with the DGD Joint Venture, including possible unanticipated operating disruptions and a decline in margins on the products produced by the DGD Joint Venture.
• Risks and uncertainties relating to international sales and operations, including imposition of tariffs, quotas, trade barriers, and other trade protections by the U.S. or foreign countries.
• Tax changes, such as global minimum tax measures, or issues related to administration, guidance, and/or regulations associated with biofuel policies, including CFPC, and risks associated with the qualification and sale of such credits.
• Difficulties or a significant disruption (including, without limitation, due to cyber-attack) in the Company's information systems, networks, or the confidentiality, availability, or integrity of our data or failure to implement new systems and software successfully.
• Risks relating to possible third-party claims of intellectual property infringement.
• Increased contributions to the Company's pension and benefit plans, including multiemployer and employer-sponsored defined benefit pension plans as required by legislation, regulation, or other applicable U.S. or foreign law or resulting from a U.S. mass withdrawal event.
• Bad debt write-offs.
• Loss of or failure to obtain necessary permits and registrations.
• Continued or escalated conflict in the Middle East, North Korea, Ukraine, or elsewhere, including the Russia-Ukraine war and ongoing or emerging conflicts in the Middle East.
• Uncertainty regarding the exit of the U.K. from the European Union.
• Uncertainty regarding any administration changes in the U.S. or elsewhere around the world, including, without limitation, impacts to trade, tariffs, and/or policies impacting the Company (such as biofuel policies and mandates).
• Unfavorable export or import markets.
• Volatile prices for natural gas and diesel fuel, inflation rates, climate conditions, currency exchange fluctuations, general performance of the U.S. and global economies, disturbances in world financial, credit, commodities, and stock markets, and any decline in consumer confidence and discretionary spending, including the inability of consumers and companies to obtain credit due to lack of liquidity in the financial markets.
• Future profitability may be affected by the Company's ability to grow its business, which faces competition from companies that may have substantially greater resources than the Company.
• The Company's announced share repurchase program may be suspended or discontinued at any time and purchases of shares under the program are subject to market conditions and other factors, which are likely to change from time to time.

Future Outlook

The company anticipates selling an additional $125-175 million in Production Tax Credits by the end of 2025. Due to ongoing complexity and uncertainty surrounding public policy and its impact on the Fuel segment, financial guidance will now be provided exclusively for the core ingredients business, with an estimated Adjusted EBITDA of approximately $875-900 million for full year 2025. Higher volumes are expected in the fourth quarter for the Fuel segment as DGD 2 and 3 facilities are running, positioning the segment for an improved finish to the year. The Food business is also anticipated to rebound in the coming months as global collagen demand continues to strengthen.

Management Comments

• "Our core ingredients business continues to build momentum, driven by strong fundamentals across all segments." Randall C. Stuewe, Chairman and Chief Executive Officer.
• "We are on the heels of public policy developments that we expect to play out in our favor – reinforcing our unmatched position in the industry and our focus on delivering long-term value to shareholders." Randall C. Stuewe, Chairman and Chief Executive Officer.

Industry Context

The renewable fuels industry, particularly the Diamond Green Diesel joint venture, is significantly influenced by evolving public policy, including renewable fuel standards, low carbon fuel standards, and various tax credits. The filing indicates a substantial RIN oversupply in 2025, partly attributed to past Small Refinery Exemptions (SREs) and carryforward deficits. Future policy changes, such as the 50% reallocation of SREs in 2026 and 2027, are projected to absorb this RIN surplus by the end of 2026, potentially leading to incremental increases in feedstock and farm product prices in 2026 and significant increases in 2027. Meanwhile, the company's core ingredients business benefits from strong global demand and supportive 'America First' policies for domestic fats. The global collagen market, a key component of the Food segment, is also showing signs of strengthening demand.

Comparison to Industry Standards

• The company explicitly states that its calculation of DGD Adjusted EBITDA and EBITDA per gallon may not be comparable to presentations disclosed by other companies, as these non-GAAP measures are not calculated identically across the industry.
• The filing references Bloomberg Intelligence for RVO/RIN Supply & Demand scenarios and Argus for D4/D6 RIN values, and Wall Street Journal/Thomson Reuters for various commodity prices (e.g., Yellow Grease, Used Cooking Oil, Soybean Oil, Palm Oil, Soy Meal), providing context for market conditions but not direct comparisons to specific competitor performance metrics.

Stakeholder Impact

• Shareholders: Mixed results with strong core business but significant underperformance in the Fuel segment, impacting year-to-date net income and EBITDA. Potential for future value from PTC sales and expected rebound in Fuel and Food segments.
• Customers: Continued strong demand for core ingredients, but tariff-related volume softness in the Food segment could indicate some customer impact. DGD's lower volumes due to turnaround may affect renewable fuel customers.
• Suppliers: Raw material volumes could be affected by weak margins in meat production or new regulations, impacting suppliers to the Feed and Food segments.
• Creditors: The improved preliminary leverage ratio and significant revolver availability indicate healthy liquidity, which is positive for creditors.

Next Steps

• Hold a conference call and webcast on October 23, 2025, to discuss the third quarter 2025 financial results.
• Anticipate selling another $125-175 million in Production Tax Credits by the end of 2025.
• Expect higher volumes in Q4 for the Fuel segment with DGD 2 and 3 facilities running.
• Monitor public policy developments that management expects to play out in the company's favor.
• Anticipate the Food business to rebound in coming months as global collagen demand continues to strengthen.

Key Dates

Recommendation

While the core ingredients business demonstrates robust growth and resilience, the substantial underperformance and ongoing policy uncertainties within the high-growth Fuel segment (Diamond Green Diesel) present a significant drag on overall profitability and future outlook. The positive Q3 net income and sales growth are overshadowed by the sharp year-to-date declines in net income and EBITDA, primarily due to DGD. The company's decision to limit future guidance to core ingredients reflects this volatility. Investors should hold to observe if the Fuel segment can stabilize and if the anticipated PTC sales and Q4 rebound materialize, while the core business continues its strong performance.

Keywords

Darling Ingredients, DAR, Q3 2025 Earnings, Financial Results, Renewable Fuels, Diamond Green Diesel, DGD, Production Tax Credits, PTC, Feed Ingredients, Food Ingredients, Fuel Ingredients, Rendering, Collagen, Sustainable Aviation Fuel, SAF, EBITDA, Net Sales, Net Income, Leverage Ratio, SEC Filing, 8-K