DARLING INGREDIENTS INC. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Core ingredients business delivered strongest performance in 1.5 years fueled by robust global demand and execution. Renewables market faces short-term uncertainty but momentum is building.
• Feed Ingredients segment: Global rendering volumes margins up sequentially and year-over-year, driven by strong demand for fats and proteins. U.S. demand for domestic fats boosted by agriculture and energy policy; global rendering business in Brazil, Canada and Europe stronger year-over-year; export protein demand showing signs of recovery but tariff implications impacted value-added poultry protein products.
• Food segment: Performance steady quarter-over-quarter; sales dipped slightly due to tariff volatility but offset with strong raw material sourcing and margin management; repeat orders for Nextida Glucose Control product and early studies on new formulations promising, on track to launch new Nextida product in back half of 2026.
• Fuel segment: Renewables market faces headwinds with higher feedstock costs, lower RINs and LCFS pricing; DGD3 turnaround led to reduced volumes; approaching rollout of public policy aimed at strengthening American agriculture and energy leadership.

Segment Performance

• Feed Ingredients segment: Global rendering volumes margins were up sequentially and year-over-year. EBITDA improved to $174 million from $132 million in Q3 2024. Total sales were $1 billion vs $928 million in Q3 2024. Feed raw material volumes were approximately 3.2 million tons vs 3.1 million tons. Gross margins relative to sales improved to 24.3% vs 21.5% in 2024.
• Food segment: Total sales for Q3 2025 were $381 million, higher than $357 million in Q3 2024. Gross margins for the segment were 27.5% of sales compared to 23.9% in 2024. Raw material volumes increased to 314,000 metric tons vs 306,000. EBITDA for Q3 2025 was $72 million vs $57 million in 2024.
• Fuel segment: Darling's share of DGD EBITDA was negative $3 million in Q3 2025 vs positive $39 million in Q3 2024. Non-DGD fuel segment sales were $154 million in Q3 2025 vs $137 million in 2024, but volumes were affected by animal disease in Europe. Combined adjusted EBITDA for the fuel segment was $22 million in Q3 2025 vs $60 million in Q3 2024.

Guidance

• For the full year 2025, expect core ingredients business EBITDA, excluding DGD, to be in the range of $875 million to $900 million.

Risks

• Renewable energy market uncertainty due to delays in renewable volume obligation ruling, small refinery exemptions, SRE reallocations impacting biofuel environment.
• Uncertainty and delays in RVO enforcement dates negatively impacting biofuel market in U.S.
• Tariff implications affecting value-added poultry protein products serving global pet food and aquaculture customers.
• California LCFS credit value stable at weak levels with uncertainty around triggers for higher values.

Question and Answer

Q: Maybe just to start out, you gave some helpful scenario analysis for RIN balances and how that might proceed over the next couple of years in the earnings presentation. I wondered about what you think the most likely time line is that we might start to get clarity on some of these outstanding regulatory items, the RVO, the exemptions and then the reallocation.

A: Thanks, Tom. This is Bob. Obviously, a difficult question to answer. As everyone is aware, the government has shut down. At the same time, we've heard that the RVO is considered an essential process. We have people there at the EPA that are working on this. So we're optimistic based on that view and the things that we're hearing, we expect sometime in the month of December to have the comment period closed or the EPA to submit to the Office of Management and Budget their proposal and to have something approved by the end of the year. But like I said, that's amid a lot of things going on, but that's our view.

Q: It looks like your RIN supply and demand table in the slides calls for significant biomass-based diesel feed imports through 2027. As a coastal operator, DGD may import feed and receive the RINs penalty on those gallons but could you maybe walk through the benefits to RINs policy protectionism on the feed side and maybe explain how that nets out within your U.S. fuel and feed businesses?

A: Yes. Thanks, Conor. This is Bob. If I don't answer your question directly, let me know. I think the first thing I would say is, it's still not totally clear how the EPA is going to treat foreign feedstocks. That's a part of this process. As to whether foreign feedstocks are needed to meet the production and the obligations. It's going to depend on a lot of things. We do have a lot of crop -- crops and crop oils in the United States and overall North America that could be used as feedstock for biofuels. So until some of the rules around what -- if there are penalties for foreign feedstocks and how some of the crop oils are going to be treated, it's really hard to answer that question. I will say that I think when you look at overall supply and demand for fats and oils in North America and you include biofuels and food and this picture and this proposed RVO from the than probably some foreign feedstocks will be required to meet that mandate. And we're just not clear yet on how that will be accommodated.