Darling Ingredients(US:DAR)2025-04-25 00:08Financial Data and Key Metrics Changes - In Q1 2025, combined adjusted EBITDA was $195.8 million, down from $280.1 million in Q1 2024. Adjusted EBITDA, excluding DGD, was $190 million compared to approximately $165 million in Q1 2024 [13][22] - Total net sales for Q1 2025 were $1.38 billion, a decrease from $1.42 billion in Q1 2024. Raw material volume remained stable at approximately 3.79 million metric tons [13][22] - Gross margins improved to 22.6% in Q1 2025 from 21.4% in Q1 2024 [13] Business Line Data and Key Metrics Changes Feed Ingredients Segment - Total net sales increased to $896.3 million in Q1 2025 from $889.8 million in Q1 2024. EBITDA rose to $110.6 million from $106.8 million [14] - Gross margins for the feed segment decreased slightly to 20.3% from 20.7% due to one-time items [14] Food Segment - Total sales decreased to $349.2 million in Q1 2025 from $391.3 million in Q1 2024, but EBITDA increased to $70.9 million from $61.7 million [15] - Raw material volume increased to 329,400 metric tons from 299,800 metric tons [15] Fuel Segment - Sales for the fuel segment were $135.1 million in Q1 2025, down from $139.2 million in Q1 2024. EBITDA dropped significantly to $24.2 million from $133.1 million [16][18] Market Data and Key Metrics Changes - The renewable diesel and sustainable aviation fuel markets are expected to improve due to a reduction in imported biofuels and adjustments in domestic production [11][19] - The transition from the blenders tax credit to the producers tax credit has created challenges but is anticipated to optimize tax credits in the upcoming quarters [10][17] Company Strategy and Development Direction - The company aims to continue generating cash flow, deleveraging the balance sheet, and opportunistically repurchasing shares throughout the year [4][24] - Management is optimistic about the core business's performance, expecting to achieve between $950 million and $1 billion in EBITDA for the year [24][26] Management's Comments on Operating Environment and Future Outlook - Management noted that the worst challenges related to DGD's performance are behind them, with expectations for improved margins and operational adjustments [24][26] - The company is optimistic about the sustainable aviation fuel market and anticipates a positive impact from the 45Z tax credit [10][19] Other Important Information - The company paid down $146.2 million in debt, reducing the financial leverage ratio to 3.33 times [5][20] - The effective tax rate for Q1 2025 was 4.6%, primarily due to the producer's tax credit [21] Q&A Session Summary Question: What is the value of an optimized feedstock slate for DGD? - Management indicated that DGD processes a mix of feedstocks driven by margins, including animal fat and various oils, and they are optimistic about maximizing the value of feedstocks eligible for the producer's tax credit [30][34] Question: What were the drivers for lower margins in Q1? - Management acknowledged that there were one-time items affecting margins and noted that the market dynamics have improved since March [40][41] Question: What is the expected RVO for 2026? - Management expects a common RVO of 5.25 billion gallons, which would significantly increase demand for feedstocks [59][88] Question: How does the current tariff regime impact the business? - The company views the tariff regime as a slight net positive, as it limits the availability of waste fats, supporting North American prices [103][105] Question: What are the capital allocation priorities moving forward? - The company plans to continue paying down debt and aims to reach a leverage ratio of 2.5% by the end of the year or early 2026 [112][113]