DARLING INGREDIENTS INC. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Overall: Saw early signs of momentum, delivered positive earnings, maintained capital discipline, completed refinancing, and announced joint venture Nextida. Combined adjusted EBITDA was $249.5 million.
• Feed Segment: Global rendering volumes steady, margin expansion, fat prices favorable, but protein prices pressured.
• Food Segment: Signed non-binding term sheet for Nextida, advancing scientific validation for glucose control product, growing sales volumes.
• Fuel Segment: Renewable fuel environment challenging, DGD-1 offline, DGD-3 turnaround in Q3, RVO framework positive for long-term demand.

Segment Performance

• Feed Segment: Second quarter 2025 net sales were $936.5 million (vs $934.1 million in 2024). Feed raw material volumes were approximately 3.1 million metric tons. Gross margins improved to 22.9% (vs 21.0% in 2024 Q2). Year-to-date sales were $1.83 billion (vs $1.82 billion in 2024).
• Food Segment: Second quarter 2025 net sales were $386.1 million (vs $378.8 million in 2024). Gross margins were 26.9% (unchanged from 2024 Q2). Year-to-date net sales were $772.2 million (vs $683.2 million in 2024). Raw material volumes increased.
• Fuel Segment: Second quarter 2025 Darling's share of DGD EBITDA was approximately $42.6 million (vs approximately $76.6 million in 2024 Q2). Total Fuel Segment sales were $158.8 million (vs $142.3 million in 2024 Q2). Combined adjusted EBITDA for Fuel Segment was $61.3 million (vs $96.8 million in 2024 Q2).

Guidance

• Full year combined adjusted EBITDA expected in the range of $1.05 billion to $1.1 billion.
• Sequential improvement expected across segments, with rising fat prices supporting Feed Segment.
• DGD-3 scheduled for turnaround in Q3, positioning for full utilization in 2026.

Risks

• Regulatory environment remains a headwind, uncertainty around small refinery exemptions, RIN recoveries, and SREs. Volatility in protein prices and tariff issues.

Question and Answer

Q: Talk about policy benefits for Darling from revised RVO and feedstock policies A: Matt Jansen and Bob Day discussed domestic-oriented market shift, drop in imported raw materials, and support for U.S. fat values.

Q: Explanation of UCO pricing impact A: Robert W. Day and Randall C. Stuewe explained lag effect in rising raw material procurement market affecting margins.

Q: Nextida JV synergy and growth A: Bob Day discussed complementary geographic spread, extraction capacity, and potential revenue growth.

Q: Biofuels industry utilization and RINs A: Robert W. Day and Matt Jansen talked about capacity utilization, RIN value expectations, and impact of RVO