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DARLING INGREDIENTS INC. (DAR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $1.42B and GAAP diluted EPS was $0.63; sequential EBITDA improved to $289.5M from $236.7M in Q3 despite lower fat prices, while year-over-year EBITDA declined from $350.9M due to pricing pressure .
  • Management introduced FY 2025 Combined Adjusted EBITDA guidance of $1.25–$1.30B and signaled a ~$400M 2025 capex plan, with a medium-term goal to reach a 2.5x bank leverage ratio; they expect stronger fat prices, tightening supply/demand for biofuels, and SAF mix to lift results .
  • Diamond Green Diesel (DGD) sold 293.8M gallons in Q4 at ~$0.40 EBITDA/gal (ex-LCM ~$0.81), paid $68.6M in Q4 dividends and an additional $86.4M in January; JV ended Q4 debt-free on distribution dates .
  • Consensus estimate comparisons from S&P Global were unavailable due to access limits; results vs. Street are not assessed in this recap (S&P Global consensus data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Sequential margin and EBITDA improvement: Combined Adjusted EBITDA rose to $289.5M in Q4 from $236.7M in Q3 as gross margin improved despite lower fat prices; CEO: “strongest quarter of the year” .
  • Strategic milestones: SAF unit at Port Arthur started up and is producing on spec; JV distributions remained robust ($68.6M in Q4, $179.8M in FY), with an $86.4M dividend in January 2025 .
  • Operating discipline and deleveraging: Debt reduced by $353.4M in 2024; preliminary bank leverage ratio improved to 3.93x; management emphasized disciplined capex and working capital .

What Went Wrong

  • Year-over-year revenue and EBITDA compression: Q4 revenue declined to $1.42B from $1.61B and Combined Adjusted EBITDA fell to $289.5M from $350.9M on lower finished product pricing and fat price headwinds .
  • DGD non-cash LCM adjustment: Q4 included a ~$118M LCM at DGD impacting JV results (DAR share noted as ~$59M net in commentary); management reiterated LCM is non-cash and often backed out by analysts .
  • Food/Feed segment pressures: Segment net sales and gross margins were lower year-over-year across Feed and Food; though sequential gross margin improved, the yoy compression reflects pricing weakness and destocking trends .

Financial Results

Consolidated Summary (chronological order: oldest → newest)

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Billions)$1.61 $1.42 $1.42
Net Income Attributable to Darling ($USD Millions)$84.5 $16.9 $101.9
Diluted EPS (GAAP) ($USD)$0.52 $0.11 $0.63
Operating Income ($USD Millions)$158.8 $60.1 $122.4
Combined Adjusted EBITDA ($USD Millions)$350.9 $236.7 $289.5

Gross Margin Trend (computed from cited totals; oldest → newest)

MetricQ4 2023Q3 2024Q4 2024
Gross Margin ($USD Millions)$436.4 $313.6 $333.8
Gross Margin (%)27.0% (436.4/1,614.1) 22.0% (313.6/1,421.9) 23.6% (333.8/1,417.7)

Segment Breakdown (Q4 yoy; oldest → newest)

SegmentQ4 2023 Net Sales ($MM)Q4 2024 Net Sales ($MM)Q4 2023 Gross Margin ($MM)Q4 2024 Gross Margin ($MM)Q4 2023 Segment Op Income ($MM)Q4 2024 Segment Op Income ($MM)Q4 2023 Segment Adj EBITDA ($MM)Q4 2024 Segment Adj EBITDA ($MM)
Feed Ingredients$1,045.6 $924.2 $290.6 $209.3 $105.8 $60.2 $213.3 $150.0
Food Ingredients$423.8 $361.7 $112.7 $93.1 $54.9 $35.7 $90.7 $64.0
Fuel Ingredients$144.6 $131.9 $33.2 $31.3 $22.7 $40.0 $26.5 $25.2
Corporate (Adj EBITDA)$(18.4) $(8.9) ————$(18.4) $(8.9)
Combined Adjusted EBITDA$350.9 $289.5 ————$350.9 $289.5

KPIs and Operational Metrics (oldest → newest)

KPIQ4 2023Q3 2024Q4 2024FY 2024 / Jan 2025
DGD Gallons Sold (Millions)—316.6 293.8 1,250.0
DGD EBITDA per Gallon ($)——$0.40 incl. LCM; $0.81 ex-LCM $0.46 FY
DGD Dividends to DAR ($USD Millions)—$111.2 $68.6 $86.4 (Jan 2025)
Cash & Equivalents ($USD Millions)$126.5 $114.8 $76.0
Total Debt ($USD Billions)$4.37 (LT debt) $4.25 total $4.0 total
Bank Leverage Ratio (x)—4.04x 3.93x
Capex ($USD Millions)—$67.4 (Q3) $73.3 (Q4) $332.5 (FY)
Yellow Grease (IL) avg, $/cwt$40.69 $37.11 $34.89 —
Palm Oil CIF Rotterdam, $/MT$928 $1,081 $1,350 —

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Combined Adjusted EBITDA ($USD Billions)FY 2025N/A$1.25–$1.30 Introduced
Capex ($USD Millions)FY 2025N/A~$400 Step-up vs FY 2024 actual ($332.5)
Bank Leverage Ratio Target (x)Medium-termN/A2.5x (target) Introduced
Combined Adjusted EBITDA ($USD Billions)FY 2024$1.15–$1.175 Actual $1.08 Below prior guidance
DGD Distributions (qualitative)FY 2025N/AExpect larger than FY 2024 Introduced (qualitative)

Earnings Call Themes & Trends

TopicQ2 2024 MentionsQ3 2024 MentionsQ4 2024 Current PeriodTrend
Biofuel policy (45Z/CFPC)Uncertain regulatory environment “Supportive” evolving landscape, waste fats/oils favored Clarity and “safe harbor”; only U.S. producers eligible; low-CI feedstocks advantaged; confident in monetizing credits Positive clarity; policy tailwind strengthening
SAF commercializationPort Arthur turnaround; produce SAF later in 2024 Commissioning in progress SAF line producing on spec; considering incremental SAF capacity (Port Arthur/Norco) Ramping production; potential capacity expansion
Feedstock/fat pricingBeginning to improve Continued softness; mgmt focused on spread/cost actions Sequential gross margin improvement; early 2025 fat prices rising; import slowdown; Europe fats strong Improving pricing tailwind into 2025
RIN/LCFS credits——Tightening S&D could lift RIN/LCFS values; LCFS bank needs to be worked down post-amendments Gradual improvement expected
DGD LCM & accounting——~$118M LCM at DGD (Q4); DAR share discussed; LCM is non-cash and typically backed out Transparency; analysts back out LCM
Deleveraging & capital allocationFocus on debt reduction Reduced debt ~$192M in Q3 FY debt down $353.4M; 2025 debt reduction seen $350–$500M; 2.5x target Ongoing deleveraging
Food segment dynamicsSpecialty margins improving Destocking, margin stabilization Sequential gross margin improvement; destocking nearing end Stabilizing
RNG initiatives——First RNG pipeline injection with GreenGasUSA; leveraging wastewater streams Emerging growth vector

Management Commentary

  • “Darling Ingredients delivered its strongest quarter of the year… We started up one of the world’s largest SAF units in Port Arthur, Texas…” .
  • “Global raw material volumes remain robust and stronger fat prices in the first quarter of 2025 should provide lift… we expect 2025 to be stronger than 2024…” .
  • On 45Z: “We… are aligned in determining that it provides a clear safe harbor… confident in our ability to book the credit and fully realize its value” .
  • On strategy: focus on “disciplined capital deployment, efficient working capital management, operational excellence and margin management,” target 2.5x bank leverage ratio .

Q&A Highlights

  • 45Z positioning: DAR’s low-CI feedstocks (animal fats, U.S. UCO) and DGD’s pretreatment capability create advantaged economics; foreign biofuels excluded from CFPC eligibility .
  • LCM treatment: DGD’s LCM is non-cash; DAR records audited share; analysts commonly back it out; 2025 guide excludes LCM pickup .
  • SAF capacity: With first SAF line producing on spec, company evaluating incremental SAF capacity at Port Arthur/Norco; front-end-loaded multi-year contracting underway .
  • Credits outlook: Tightening biofuel S/D and fewer imports expected to support RIN/LCFS over 2025 as LCFS bank is worked down .
  • Distributions and deleveraging: January dividend $86.4M; 2025 distributions likely larger than 2024; debt reduction target $350–$500M in 2025 .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 revenue/EPS was not retrievable due to access limits; therefore, this report does not assess beats/misses versus estimates (S&P Global consensus data unavailable).

Key Takeaways for Investors

  • Sequential improvement: Q4 gross margin and Combined Adjusted EBITDA strengthened versus Q3 despite lower fat prices, signaling operating discipline and spread management gains .
  • 2025 setup: Regulatory clarity (45Z) and SAF commercialization should support margin trajectory; guidance implies EBITDA momentum building through the year .
  • JV economics: DGD remains a cash engine (Q4 dividends $68.6M; Jan $86.4M), but LCM can create non-cash volatility; adjust for LCM when assessing run-rate economics .
  • Balance sheet: Deleveraging is tangible (bank leverage 3.93x; debt down $353M in 2024) with a 2.5x medium-term target; capex stepping to ~$400M to fund debottlenecks and selective growth .
  • Segment pulse: Feed and Food showed sequential margin improvement; Food destocking appears to be nearing end; Fuel segment benefited from higher DGD equity income .
  • Commodity lens: Early 2025 fat price strength and higher European animal fat and palm oil benchmarks point to a better backdrop, though yoy comparisons remain pressured vs. 2023 highs .
  • Emerging RNG optionality: First RNG pipeline injection (GreenGasUSA/Dublin, GA) underscores additional decarbonization and revenue pathways from existing operations .
Note: All percentages computed from cited totals in tables.