8-K: Darling Ingredients Reports Lower Q4 and Fiscal Year 2024 Results Amid Pricing Pressures

Darling Ingredients reports a decrease in net sales and adjusted EBITDA for Q4 and fiscal year 2024, despite operational improvements and SAF unit startup.

Summary

• Darling Ingredients reported net income of $101.9 million, or $0.63 per diluted share, for the fourth quarter of 2024, compared to $84.5 million, or $0.52 per diluted share, for the fourth quarter of 2023.
• Total net sales for the fourth quarter of 2024 were $1.4 billion, down from $1.6 billion in the same period last year, due to lower finished product pricing.
• For fiscal year 2024, net sales were $5.7 billion, compared to $6.8 billion in 2023.
• Net income for fiscal year 2024 was $278.9 million, or $1.73 per diluted share, compared to $647.7 million, or $3.99 per diluted share, for fiscal year 2023.
• Combined Adjusted EBITDA for the fourth quarter of 2024 was $289.5 million, compared to $350.9 million for the same period in 2023.
• For fiscal year 2024, Combined Adjusted EBITDA totaled $1.08 billion, compared to $1.61 billion for the same period in 2023.
• The company received $68.6 million in cash dividends from Diamond Green Diesel (DGD) during the fourth quarter of 2024, and $179.8 million for the full year.
• DGD sold 293.8 million gallons of renewable diesel in Q4 2024 at an average of $0.40 per gallon EBITDA, and 1.25 billion gallons for the full year at an average of $0.46 per gallon EBITDA.
• As of December 28, 2024, Darling Ingredients had $76.0 million in cash and cash equivalents, and $1.16 billion available under its committed revolving credit agreement.
• Total debt outstanding as of December 28, 2024, was $4.0 billion, with a preliminary leverage ratio of 3.93X.
• Capital expenditures were $73.3 million for the fourth quarter 2024, and $332.5 million for the year.
• The company expects 2025 to be stronger than 2024, with guidance of $1.25 to $1.30 billion Combined Adjusted EBITDA.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the financial results are down compared to the previous year, the company highlights operational improvements, the startup of a SAF unit, and a positive outlook for 2025.

Positives

• The company achieved gross margin improvement in Q4 2024 compared to Q3 2024, despite lower fat prices.
• The company started up a sustainable aviation fuel (SAF) unit in Port Arthur, Texas, which is now debt free.
• Several acquisitions were integrated around the world, positioning the company well for future growth.
• Global raw material volumes remain robust.
• Stronger fat prices are expected in the first quarter of 2025.
• The Clean Fuel Production Credit should provide greater certainty to the value of domestic feedstocks.
• The company has $1.16 billion available under its committed revolving credit agreement.

Negatives

• Total net sales decreased to $1.4 billion for Q4 2024, compared to $1.6 billion for the same period a year ago, reflecting lower finished product pricing.
• Net sales for fiscal year 2024 were $5.7 billion, compared to $6.8 billion for the same period in 2023.
• Net income for fiscal year 2024 was $278.9 million, or $1.73 per diluted share, as compared to $647.7 million, or $3.99 per diluted share, for fiscal year 2023.
• Combined Adjusted EBITDA for the fourth quarter of 2024 was $289.5 million, compared to $350.9 million for the same period in 2023.
• Combined Adjusted EBITDA for fiscal year 2024 totaled $1.08 billion, as compared to $1.61 billion for the same period in 2023.

Risks

• The company faces risks related to reduced demands or prices for biofuels, biogases or renewable electricity.
• Global demands for grain and oilseed commodities can impact the cost of feed and selling prices.
• Reductions in raw material volumes could occur due to weak margins in the meat production industry or government regulations.
• Changes to government policies relating to renewable fuels and greenhouse gas emissions could adversely affect prices, margins or markets.
• The company faces risks associated with the DGD Joint Venture, including possible unanticipated operating disruptions and a decline in margins.
• Risks and uncertainties relating to international sales and operations, including imposition of tariffs, quotas, trade barriers and other trade protections by 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.

Future Outlook

The company expects 2025 to be stronger than 2024, with guidance of $1.25 to $1.30 billion Combined Adjusted EBITDA, gaining momentum throughout the year as DGD turnarounds are completed and SAF sales command a larger percentage of the mix.

Management Comments

• 'Darling Ingredients delivered its strongest quarter of the year, and delivered some notable milestones,' said Randall C. Stuewe, Chairman and Chief Executive Officer.
• 'We started up one of the worlds largest sustainable aviation fuel (SAF) units in Port Arthur, Texas, which is now debt free, and the joint venture delivered meaningful dividends throughout the year.'
• 'We integrated several acquisitions around the world that position the company well for future growth adapting to global market dynamics.'
• Global raw material volumes remain robust and stronger fat prices in the first quarter of 2025 should provide lift as pending tariffs and the Clean Fuel Production Credit provide greater certainty to the value of domestic feedstocks, Stuewe said.

Industry Context

Darling Ingredients operates in the animal agriculture and food industries, transforming by-products into valuable ingredients. The company's performance is influenced by factors such as global demand for grain and oilseed commodities, government policies related to renewable fuels, and the occurrence of diseases associated with animal origin.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• However, the company's focus on renewable diesel and sustainable aviation fuel aligns with the broader industry trend towards sustainable energy sources.
• Comparable companies in the renewable energy space include Renewable Energy Group (REGI) and Neste, while competitors in the rendering and animal feed ingredients market include companies like Tyson Foods and Pilgrim's Pride.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net sales and adjusted EBITDA.
• Employees may be affected by any potential cost-cutting measures or restructuring efforts.
• Customers may benefit from the company's focus on operational excellence and sustainable products.
• Suppliers may be impacted by changes in raw material volumes or pricing.
• Creditors should note the company's debt levels and leverage ratio.

Next Steps

• The company will host a conference call on February 6, 2025, to discuss the financial results and provide additional details regarding its 2025 outlook.
• The company will provide updates on its 2025 guidance as the year progresses.

Key Dates

Keywords

Darling Ingredients, financial results, Q4 2024, fiscal year 2024, net sales, EBITDA, Diamond Green Diesel, renewable diesel, SAF, sustainable aviation fuel, feed ingredients, food ingredients, fuel ingredients