8-K: Darling Ingredients Reports Net Loss in Q1 2025 Amid Biofuel Industry Challenges, Reaffirms Full-Year EBITDA Guidance

Darling Ingredients reported a net loss for Q1 2025 due to lower earnings at Diamond Green Diesel, but the core business performed well, and the company reaffirmed its full-year Combined Adjusted EBITDA guidance.

Summary

• Darling Ingredients reported a net loss of $(26.2) million, or $(0.16) per diluted share, for the first quarter of 2025, compared to a net income of $81.2 million, or $0.50 per diluted share, for the first quarter of 2024.
• Total net sales for the first quarter of 2025 were $1.38 billion, compared to $1.42 billion for the same period a year ago.
• Combined Adjusted EBITDA for the first quarter of 2025 was $195.8 million, compared to $280.1 million for the same period in 2024.
• The company received $129.5 million in cash dividends from Diamond Green Diesel (DGD) during the first quarter of 2025.
• Darling Ingredients repurchased approximately 1 million shares of its common stock during the first quarter of 2025 for approximately $35 million.
• As of March 29, 2025, the company had $81.5 million in cash and cash equivalents and $1.27 billion available under its committed revolving credit agreement.
• Total debt outstanding as of March 29, 2025, was $3.9 billion, with a preliminary leverage ratio of 3.33X.
• Capital expenditures for the first quarter of 2025 were $63.0 million.
• The company anticipates its core business will generate approximately $950 million to $1 billion EBITDA for fiscal year 2025.
• Darling Ingredients reaffirms its full-year 2025 Combined Adjusted EBITDA guidance of $1.25 to $1.30 billion.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company reported a net loss and lower EBITDA, it reaffirmed its full-year guidance and highlighted positive aspects of its core business and improving margins in the biofuel sector. The outlook is cautiously optimistic.

Positives

• Darling Ingredients' core business performed well, demonstrating stability and positive cash flow despite challenges in the biofuel industry.
• Margins in the biofuel environment have started to improve.
• The company expects its core business to continue performing well, generating cash and allowing for debt reduction and share repurchases.
• The company received $129.5 million in cash dividends from Diamond Green Diesel.
• The company anticipates the core business will generate approximately $950 million to $1 billion EBITDA for fiscal year 2025.
• The company reaffirms its full-year 2025 Combined Adjusted EBITDA guidance of $1.25 to $1.30 billion.
• Collagen peptides have regained strength, and demand for Darling Ingredients' library of collagen products is strong.
• Nextida GC, a new collagen peptide that targets post-meal glucose spike, is gaining momentum.
• The company anticipates continued performance improvement throughout the year in the food segment.
• Interest in sustainable aviation fuel is strong, and premium and volumes meet expectations.
• DGD is positioned as the lowest cost and highest quality producer.

Negatives

• Darling Ingredients reported a net loss of $(26.2) million in Q1 2025, compared to a net income of $81.2 million in Q1 2024.
• Total net sales decreased to $1.38 billion from $1.42 billion year-over-year, reflecting lower finished product pricing.
• Combined Adjusted EBITDA decreased to $195.8 million from $280.1 million year-over-year.
• DGD sold 219.1 million gallons of renewable fuels for the first quarter of 2025 at an average of $0.06 per gallon EBITDA, after broker and discount fees.
• Equity in net loss of Diamond Green Diesel was $(30.523) million.

Risks

• The biofuel industry faces broader challenges, impacting Darling Ingredients' earnings.
• The company is subject to 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.
• 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).

Future Outlook

Darling Ingredients anticipates its core business will generate approximately $950 million to $1 billion EBITDA for fiscal year 2025 and reaffirms its full-year 2025 Combined Adjusted EBITDA guidance of $1.25 to $1.30 billion.

Management Comments

• Despite the broader challenges faced by the biofuel industry during the first quarter of 2025, Darling Ingredients' core business performed well, resulting in overall positive cash flow and demonstrating stability in an otherwise volatile business environment, said Randall C. Stuewe, Chairman and Chief Executive Officer.
• While the biofuel environment continues to adjust, margins have started to improve.
• The positive narrative surrounding renewable fuels public policy is encouraging, which is also driving strong market demand for domestic fats.
• We expect our core business to continue to perform well, generating cash and allowing us to continue to de-lever the balance sheet and opportunistically repurchase shares.
• Darling Ingredients carries great momentum, driven by our strong core business, Stuewe said.
• We are confident in our ability to navigate challenges and capitalize on opportunities, ensuring continued growth and success.

Industry Context

The announcement highlights the challenges faced by the biofuel industry, particularly impacting Diamond Green Diesel's performance, while also noting the increasing demand for waste fats and rising prices driven by renewable fuels public policy and strong market demand for domestic fats.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or comparable companies beyond the general statement that management believes Adjusted EBITDA and Combined Adjusted EBITDA are useful in evaluating the Company's operating performance compared to that of other companies in its industry.
• Without more specific data, a detailed comparison is not possible.

Stakeholder Impact

• Shareholders will be impacted by the net loss and decreased EBITDA, but may be reassured by the reaffirmed full-year guidance and share repurchase program.
• Employees may be affected by the company's efforts to navigate challenges and capitalize on opportunities.
• Customers may see changes in pricing and product availability based on market conditions and government policies.
• Suppliers may be impacted by the company's raw material processing volumes and pricing.
• Creditors will be interested in the company's debt reduction efforts and leverage ratio.

Next Steps

• The company will continue to de-lever the balance sheet and opportunistically repurchase shares.
• The company will operate to maximize margins while the market awaits clarity on RVO and California LCFS.
• The company will host a conference call at 9 a.m. Eastern Time (8 a.m. Central Time) on April 24, 2025, to discuss first quarter 2025 financial results.

Key Dates

Keywords

Darling Ingredients, financial results, EBITDA, Diamond Green Diesel, renewable fuels, biofuel, net sales, net loss, share repurchase, debt reduction, collagen peptides, sustainability