Darling Ingredients (DAR -0.70%), a leading developer of sustainable ingredients, released its third-quarter earnings on Oct. 24. The report revealed significant declines in net income and total sales.
Net income totaled $16.9 million, or $0.11 per diluted share, down considerably from $125.0 million, or $0.77 per diluted share, in the same quarter last year. This decline was attributed to lower fat prices and reduced contributions from the Diamond Green Diesel joint venture. Total net sales also saw a decrease to $1.4 billion from $1.6 billion a year ago, largely due to reduced finished product pricing. Combined adjusted EBITDA for the quarter stood at $236.7 million, down from $334.3 million in 2023.
Despite these results, Darling Ingredients demonstrated an ability to adapt by using its core ingredient cash flows and dividends to manage debt, signaling a resilient stance amid market challenges.
| Metric | Q3 2024 Result | Q3 2023 Result | % Change |
|---|---|---|---|
| Net income (in millions) | $16.9 | $125.0 | -86.5% |
| Total net sales (in billions) | $1.4 | $1.6 | -12.5% |
| Combined adjusted EBITDA (in millions) | $236.7 | $334.3 | -29.2% |
Source: Darling Ingredients
Understanding Darling Ingredients
Darling Ingredients is a global leader in creating sustainable products from organic waste streams, operating across five continents. It serves industries such as pharmaceuticals, food, pet nutrition, industrial applications, and bioenergy. This diversification allows the company a broad reach to mitigate market-specific risks. The company focuses on a variety of products, including feed, food, and biofuel ingredients, contributing to its diversified revenue portfolio.
Recently, Darling Ingredients has concentrated on growth strategies involving strategic partnerships and ventures such as its Diamond Green Diesel collaboration with Valero Energy. These align with its focus on expanding capacities in renewable energy. Additionally, the introduction of sustainable specialty ingredients, like collagen, reflects its ongoing commitment to sustainability.
Quarterly Developments: Financial and Strategic Impacts
This quarter, Darling Ingredients faced a sharp decline in earnings and net sales. Net income plunged to $16.9 million in the quarter, down from $125.0 million in Q3 2023, indicating an 86.5% decrease. The decline was attributed to lower fat prices and reduced earnings from Diamond Green Diesel, which saw a lower EBITDA contribution.
The company's total net sales also decreased, amounting to $1.4 billion against $1.6 billion the previous year, a 12.5% decline. The sales dip was driven by lower finished product pricing. Combined Adjusted EBITDA fell to $236.7 million from $334.3 million, reflecting ongoing challenges in market conditions.
This performance highlights the volatility in the renewable energy segment. The Diamond Green Diesel joint venture, crucial for Darling's strategy, contributed $111.2 million in dividends during the quarter. Still, the lower adjusted EBITDA of $0.25 per gallon for Q3 affected overall results.
The company continued to invest in sustainability, commissioning a sustainable aviation fuel plant, expected to enhance margins and expand offerings.
Darling Ingredients took steps to reduce debt by $192 million, highlighting capital management. Regarding dividends, the consistent payout from Diamond Green Diesel supports financial stability despite the challenging quarter.
Looking Ahead: Prospects and Considerations
For the remainder of the fiscal year, Darling Ingredients projects a combined adjusted EBITDA between $1.15 billion to $1.175 billion, underlining expectations of stable raw material volumes, commodity volatility, and uncertain regulatory changes."
Investors should watch changes in fat pricing, regulations, and developments in sustainable ingredients. The commissioning of the sustainable aviation fuel plant and further involvement in renewable energy ventures are key elements to monitor, given their potential impacts on profitability and strategic positioning.
