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Darling Ingredients Inc  (NYSE:DAR)
Q3 2018 Earnings Conference Call
Nov. 07, 2018, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and welcome to the Darling Ingredients Incorporated Conference Call to discuss the Company's Third Quarter 2018 Financial Results. On the call today are Mr. Randall Stuewe, Chairman and Chief Executive Officer; Mr. Brad Phillips, Executive Vice President and Chief Financial Officer; and Ms. Melissa Gaither, Vice President of Investor Relations and Global Communications. After the speakers' opening remarks, there will be a question-and-answer period and instructions to ask a question will be given at that time. Today's call is being recorded.

I would now like to turn the call over to Melissa Gaither. Ms. Gaither, please go ahead.

Melissa Gaither -- Vice President of Investor Relations & Global Communications

Thank you, Danielle, and good morning everyone. Thank you for joining us to discuss Darling Ingredients' earning results for the third quarter ended September 29, 2018. To augment management's formal presentation, please refer to the Presentation section of our IR website for the earnings slide presentation.

Randall C. Stuewe, our Chairman and CEO will begin today's call with an overview of our third quarter operational and financial results, focusing on year-over-year comparisons and will discuss some of the trends impacting our business. Brad Phillips, Executive Vice President and Chief Financial Officer will then provide additional details about our financial results. Finally, Randy will conclude the prepared portion of the call with some general remarks about the business and the remainder of the year after which we'll be happy to answer your question. Please see the full disclosures on our non-US GAAP measures in both our earnings release and earnings slide presentation.

Now for the Safe Harbor statement. This conference call will contain forward-looking statements regarding Darling Ingredients' business opportunities and anticipated results of operations. Please bear in mind that forward-looking information is subject to many risks and uncertainties, and actual results may differ materially from what is projected. Many of these risks and uncertainties are described in Darling's Annual Report on the Form 10-K for the year ending December 30, 2017, our recent press release announced yesterday and our filings with the SEC. Forward-looking statements in the conference call are based on our current expectations and beliefs, and we do not take any duty to update any of the forward-looking statements made in this conference call or otherwise.

Now I'll turn the call over to Randy.

Randall Stuewe -- Chairman & Chief Executive Officer

Thanks, Melissa. Good morning, everyone, and thanks for joining us. As referenced in our press release last night, our third quarter delta has many challenges. Specifically, the third quarter was negatively influenced by our extended downtime at Diamond Green Diesel, along with an unplanned catalyst replacement. In addition, our global feed segment saw margin pressure from declining finished product prices throughout the quarter, along with our decision to revalue our plasma inventory in China due to African swine fever. Finally, as any of you are aware, we ship a significant amount of our fat and used cooking oil to Diamond Green Diesel, the extended an unplanned downtime disrupted the supply chain significantly and forced us to move, sell, and store product in non-traditional markets.

As we've discussed in the past, each penny of discount or increase results in approximately $4 million to $5 million of annual EBITDA. In this case, we had to divert nearly a one month supply. So before we review the segment details, let me make some quick comments about Diamond Green. As of October 1, post catalyst replacement in one of our reactors, the facility restarted and quickly ramped up to full capacity of 275 million gallons annually. The plant has operated well during October and we can say it produced in excess of 22 million gallons.

Our Phase III Diamond Green Diesel expansion called Super Diamond, adding a new parallel 400 million gallon plant and taking annual production to 675 million gallons of renewable diesel was approved by both Darling and Valero's Boards. Estimated cost of the facility is around $1.1 billion and this new total includes a new 60 million gallon renewable naphtha or green gasoline plant. We are clearing land as we speak, engineering and cost estimation is done, and long lead equipment will be ordered shortly. We anticipate start up in the latter half of 2021.

Now let's go on to some segment specific items. In our Feed segment, we dealt with the lower pricing environment for both fats and proteins, as our raw material formulas chased markets lower throughout the quarter. Record slaughter levels drove raw material volumes up 6.1% over last year and provide an ample supplies. Trade disruptions with China, Mexico and others further disrupted global protein values and DGD being offline with other global players for most of the quarter, clearly influenced that markets along with typical hot summer weather impacting our quality.

As mentioned earlier, earnings were also negatively impacted by a $7 million inventory writedown in China for African swine fever and our blood plasma business. While the true extent of ASF in China is still relatively unknown, we have instituted strict bio-security protocols in our facilities and we'll continue to service our customers.

Traditionally we see a seasonally stronger fourth quarter where protein and prices improve a colder weather and fat prices should move higher with DGD back online at its expanded rate. As we look to the fourth quarter, we also expect fat prices in the EU to strengthen when those markets address the cheap Argentinean biodiesel flooding their market and other bio players come back online.

On November 29, we will celebrate the grand opening of Phase I of EnviroFlight, the largest and most sophisticated automated black soldier fly larvae production facility in North America, if not the world. Construction is nearing completion on the first phase of our potential four phase project. We expect Phase I to produce about 900 metric tons of new protein annually for the global market.

Now let's move to the Food segment. Food segment results improved sequentially and delivered consistent results year-over-year with much improved performance from Rousselot, our global collagen and gelatin platform. Globally, we continue to see growing demand for Peptan, our specialty collagen product. We are on the leading edge of innovation and continue to work with customers to develop new applications for this higher margin nutrition and health focus product. Our two new Peptan plants in Brazil and France are expected to come online during the first and early second quarter 2019.

Our edible fats business delivered slightly lower earnings as it chased the global oils down, namely palm oil, lower impacting our refining spread. CTH, our casings business also reported lower earnings due to a lower sales price and lower volumes in China. Overall, the Food segment should have a modestly improved fourth quarter.

Now let's turn to the Fuel segment. Strong volumes supported consistent performance across Europe. Ecoson, our bioenergy business leveraged strong demand and higher production capacity from both our new Belgium biogas digester and the return of our Netherlands facility to full capacity after being curtailed last year. Rendac, our European disposal rendering business contributed stable earnings on strong volumes in both the Netherlands and Belgium.

North American biodiesel results moderated in Canada due to lower RIN pricing and the absence of the Blenders Tax Credit. However, we remain confident that the Blenders Tax Credit, even in light of election results last night will be reinstated for 2018, most likely late in fourth quarter, which in case if it is reinstated should add about $8 million to $9 million of earnings to the Fuel segment and approximately $80 million to the Diamond Green Diesel joint venture.

As mentioned earlier, Diamond Green Diesel is now operating at new capacity of 275 million gallons per year. With DGD back online, we expect to produce 65 million to 70 million gallons of renewable diesel in the fourth quarter and anticipate delivering over our targeted $1.25 per gallon EBITDA margin on that volume. Spot margins even remain more attractive around $1.35 a gallon as we discussed and we are seeing LCFS markets continue to open well beyond California into Scandinavia, Switzerland and other European markets.

As also announced in the earnings release, our Board approved an increase in the Company's previously announced share repurchase program from a $100 million to $200 million and extended the term of the program for an additional year out to August 2020 to be exercised depending on market conditions.

With that, I'll now turn it over to Brad to discuss a little more highlights of the number and then come back before Q&A. Thanks, Brad.

Brad Phillips -- Executive Vice President & Chief Financial Officer

Thanks, Randy. For the third quarter 2018, we reported consolidated net sales of $812.6 million, a decrease of 13.2% compared to the 2017 period. This was primarily driven by lower finished product pricing in the extended downtime at Diamond Green Diesel, the deconsolidation of the Company's Best Hides subsidiary in 2018, billed freight recorded in cost of sales in 2018 as compared to net sales in 2017 and the divestiture of our industrial residuals business earlier this year.

We posted a net loss in Q3 of $6 million or negative $0.04 per diluted share compared to net income of $7.8 million or $0.05 per diluted share for the 2017 third quarter. The net loss reflects significantly weaker prices for our finished products, specifically in the Feed segment, the writedown of our China blood plasma as a result of the ASF outbreak, and reduced production and higher expenses at Diamond Green Diesel.

SG&A was $67.4 million for the 2018 third quarter, which was substantially lower than the $82.2 million for the 2017 third quarter. The decrease was primarily due to two business interruption settlements that provided a gain of $8.4 million on a consolidated -- on a combined basis, as well as lower performance based compensation expense and a general decrease in overall SG&A expenses.

Depreciation and amortization expense increased $1.6 million in the third quarter of 2018 to $78.8 million as compared to the same period in 2017. The increase is primarily due to the increase in capital expenditures made for organic growth projects in 2017 and 2018.

Interest expense was $20.1 million during the three months ended September 29, 2018, compared to $22.5 million during the previous year quarter. The decrease of $2.4 million was primarily due to a decrease in the interest rate on the Company's EUR515 million senior notes to 3.625% from 4.75% from the refinancing completed earlier this year and a decrease in the amortization of deferred loan cost as compared to 2017.

Now I'll address our tax expense for the quarter. The Company reported an income tax benefit of $1.4 million for the three months ended September 29, 2018. The effective tax rate is 21.5%, which differ slightly from the federal statutory rate of 21%, primarily due to the relative mix of earnings among jurisdictions with different tax rates, including foreign withholding taxes and state income taxes, losses that provided no tax benefit and discrete items.

The Company's effective tax rate excluding the impact of certain losses that provided no tax benefit and other third quarter discrete items is 28.8% for the three months ended September 29, 2018. The Company also paid a $11.5 million of income taxes in the third quarter. For 2018, we are projecting an effective tax rate of 25% including our 50% of Diamond Green Diesel's 2017 biofuel tax refund. If the biofuel tax incentive is reenacted for fiscal 2018 before the end of this year, the effective tax rate is projected to be 15%. Finally, we are projecting cash taxes of approximately $5 million for the remainder of fiscal 2018.

The Company reported an equity in net loss of unconsolidated subsidiaries for the 2018 third quarter of negative $2.8 million as compared to income of 7.7 million for the 2017 third quarter. The decline is due to the extended downtime at the Diamond Green Diesel joint venture.

Moving to our balance sheet. Our cash position ended the quarter at $81.5 million. Our leverage ratio for the third quarter 2018 was 3.37 times, which was improved from the 3.56 times in the third quarter 2017. Our liquidity remain strong with approximately $954 million available under our revolving credit facility. We made additional improvements in working capital in the third quarter over the second quarter, but working capital remains higher than year-end 2017 levels, primarily due to continued elevated inventories.

Debt payments for 2018 will be less than originally targeted, primarily due to the acquisitions executed this year, as well as the extended downtime at Diamond Green Diesel. However, we do anticipate a dividend from Diamond Green in the fourth quarter of 2018. CapEx for the first nine months of 2018 totaled $213.7 million compared to $196.4 million for the 2017 nine-month period.

With that, I'll turn it back over to you Randy.

Randall Stuewe -- Chairman & Chief Executive Officer

Hey, thanks, Brad. It is at these times that our world of growth strategy demonstrates its value. From our vantage point, and as we witnessed shifting global trade, changing dietary trends and expanded energy markets around the world, we are well positioned to leverage our multi-continent portfolio of businesses to adapt to an evolving demand and capitalize on growth opportunities.

To that end, on October 5, we acquired substantially all the assets of Triple-T Foods, a wet pet food ingredient operation. This acquisition is immediately accretive and is an excellent strategic fit with our growing specialty pet food ingredients portfolio in Nebraska and Kentucky. Triple-T has a legacy of providing high quality proteins to leading pet food companies and we look forward to building on that reputation.

Additionally, I'm pleased to announce that we just closed on an agreement to acquire an edible fat processing plant in Poland. While the small acquisition, it continues to build out our footprint in Poland's rapidly growing meat sector. And finally, we just signed an asset purchase agreement to acquire a feed mill in California. This facility will immediately be converted to an organic fertilizer production facility and will be another step in growing our North America Nature Safe brand on the West Coast.

As we enter the fourth quarter, we see a lot of positive momentum. Diamond Green Diesel and its higher capacity level should help that markets and protein prices will see a boost with seasonal increase in feed demand. Volumes in October globally were once again very strong. Our global collagen business remain strong and we are seeing increasing contributions from our specialty products. We expect to finish the year on strong footing and see good momentum into 2019 as we build a premium diversified portfolio of Feed, Food and Fuel Ingredients.

Additionally, we're excited to see the progress being made on our commitment to corporate social responsibility disclosure. Our sustainability committee elected to elevate our sustainability reporting by adopting the Sustainability Accounting Standards Board or SASB framework as a structure for our CSR reporting. Going forward, we will report on Darling's impact on our three key pillars clean air and water, safe food and feed, and communities and workplaces.

We don't have time today to talk in depth about the great work our teams are doing, but we'll share regular KPI updates on our websites, as well as success stories that highlight our commitment to social responsibility. As always, I'd like to thank our shareholders, employees and customers for believing in the long-term Darling story.

With that, Danielle, let's go ahead and open it up to questions.

Questions and Answers:

Operator

We will now begin the question-and-answer session. (Operator Instructions) The first question comes from Ken Zaslow of Bank of Montreal. Please go ahead.

Kenneth Zaslow -- Bank of Montreal -- Analyst

Good morning, everyone.

Randall Stuewe -- Chairman & Chief Executive Officer

Good morning, Ken.

Brad Phillips -- Executive Vice President & Chief Financial Officer

Good morning, Ken.

Kenneth Zaslow -- Bank of Montreal -- Analyst

I've a couple of questions. One is, over the last 12 and 24 months, how many shares have you guys purchased? Can you remind us how many shares you guys have purchased?

Brad Phillips -- Executive Vice President & Chief Financial Officer

We have repurchased $10.9 million -- $10.9 million

Kenneth Zaslow -- Bank of Montreal -- Analyst

This new program that you have, how is that going to defer and will you accelerate it from the current levels?

Randall Stuewe -- Chairman & Chief Executive Officer

You know Ken, what the Board has opted to do, we put out our strategy long term as we move forward to continue to build out supply of fat around the world to support our low carbon fuel initiative, which is our expansion of Diamond Green Diesel. And as we roll down on our investment day, we wanted to add flexibility to our portfolio here and we view acquiring back or purchasing back our stock is one of the options for deploying capital as we go forward. As we said, we'll do that if the market warrants it. We're not going to give any more detail about that today, but it is very much a tool within our arsenal that the Board has authorized now as we go forward.

Kenneth Zaslow -- Bank of Montreal -- Analyst

Okay. My second question is on the acquisition strategy, how much have you spent on acquisition and what do you expect the return to be and help us out with that?

Randall Stuewe -- Chairman & Chief Executive Officer

You know, this year, I want to say that we've spent will be around $110 million to-date. In addition to Greenfield Capital build out, that capital as we've made promises to people is being deployed at a 15% to 20% return.

Kenneth Zaslow -- Bank of Montreal -- Analyst

And then my last question is, the election -- obviously, the mid-term election yesterday, I think the word you said is, in spite of, but or not the exact terminology, but --

Randall Stuewe -- Chairman & Chief Executive Officer

In light of.

Kenneth Zaslow -- Bank of Montreal -- Analyst

In light of, OK. Yeah, because -- do you view the election is positive or negative or neutral. It just seems like it would be a positive, maybe I'm missing something?

Randall Stuewe -- Chairman & Chief Executive Officer

No, we share that. I don't see really the impact on what we're trying to do here and you know specifically to the Blenders Tax Credit was my comment and I still feel the momentum is there to once again move that forward in at least a multi-year fashion is the signals we're getting out of DC.

Kenneth Zaslow -- Bank of Montreal -- Analyst

Great. I'll leave it there. Thank you .

Operator

The next question comes from Heather Jones of Vertical Group. Please go ahead.

Heather Jones -- Vertical Group -- Analyst

Good morning. Thanks for taking the question. So just a quick detail on Blenders Tax Credit, you are not -- you are expecting to be at least for '18 and '19 or could you elaborate on how many years you're expecting?

John Bullock -- Executive Vice President of North America Specialty Businesses & Chief Strategy Officer

Yeah, Heather, this is John Bullock. I think '18 and '19 is probably logical. I know that the industry is requesting a longer-term potentially up to five years. Typically in the past, we've seen this issue go in the December and they usually go just reset button on the existing Blenders Tax Credit for either a year or two-year type of the timeframe. There might be enough push at this point in time to make it a longer term program, potentially three to five years and we would certainly help the Congress would evaluate that alternative, but I think it's -- two to five years is probably a pretty good range estimate on what will happen.

Heather Jones -- Vertical Group -- Analyst

Okay, thank you. The Food segment, Randy, you mentioned that it would be modestly improved in Q4. Are you referring to year-on-year or sequentially?

Randall Stuewe -- Chairman & Chief Executive Officer

I was referring more to that sequentially here.

Heather Jones -- Vertical Group -- Analyst

Okay.

Randall Stuewe -- Chairman & Chief Executive Officer

Typically we just see -- we just see better demand in the fourth quarter.

Heather Jones -- Vertical Group -- Analyst

Okay. Then on the Feed segment. So when I look at -- when I look at quoted fat prices, quoted meal prices, they've been this weak before, and yet, this is one of the weakest quarters we've ever seen in Feed. So my thought is and I just was wondering if you could affirm this or give greater details. It sounds like that you had to place a fair amount of your fat at -- for lack of a better word, you had to dump some of it during the quarter because of issues that Diamond Green and so that you're replacing product well at prices well below quoted markets. So I was wondering if you could elaborate on that and when you expect Diamond Green to be back in the market meaningfully buying fats to start helping support that market?

Randall Stuewe -- Chairman & Chief Executive Officer

Yeah. Those are very, very fair questions. Now that's a large segment, fairly complicated, but to simplify it down to everybody. The protein prices although were lower and lots of volume there and we were just having to move protein to non-traditional markets, the real driver of the performance of that segment. If you look at Q1 versus Q3, most of that difference is the plasma writedown in China, but at the end of the day, the difference between Q2 and Q3 is, remember, Diamond Green was really down June, July, and then most -- on reduced rates in August, in the second half of August, and the first half of September. So all in all, we were down about 90 days.

When you think about the business in a simple sense here, every penny of discount that we had to take is worth, you know $4 million to $5 million of EBITDA annually. And so, we produce in North America somewhere between 160 million and 170 million gallons a month. And so we were down three months, and it just really that last month, when the disruption there forced us to move product, additional freight, additional demerge, additional tank storage and discounting, you know, you can say I would estimate to the tune somewhere between $10 million and $14 million that we moved product around the country and try to get it out of non-traditional markets.

The challenges Diamond Green Diesel has been operating at capacity, and it's in its old form of 160 million gallons for multiple years. We've raised the price or the caloric equivalent above the caloric equivalent. So we had to buy our way back into non-traditional markets and you said it well, we dumped it, somewhere around $0.03 a pound below non-traditional markets to get it move. Unfortunately, this is a sell it or smell it business if you want to look at it that way, we carry little storage if any at any of our factories and it just really backed up on us and that's what flowed through the P&L.

Heather Jones -- Vertical Group -- Analyst

Thank you for that clarity. My final question is just a detail-ish one. So we've heard for some time that every penny is $4 million to $5 million in annual EBITDA, but at your Analyst Day, you mentioned $10 million. So my --

Randall Stuewe -- Chairman & Chief Executive Officer

That's global.

Heather Jones -- Vertical Group -- Analyst

So the $4 million to $5 million is just US?

Randall Stuewe -- Chairman & Chief Executive Officer

Right.

Heather Jones -- Vertical Group -- Analyst

Okay, perfect. Thank you so much.

Randall Stuewe -- Chairman & Chief Executive Officer

You bet.

Operator

The next question comes from Adam Samuelson of Goldman Sachs. Please go ahead.

Adam Samuelson -- Goldman Sachs -- Analyst

Thanks. Good morning everyone. Maybe just first, Randy, make sure I understand on the bridge that you just gave on the Feed segment on the quarter. So kind of $10 million to $14 million from lower fat realizations given the Diamond Green downtime plus there was $7 million or so of inventory writedown in China on the plasma inventory. So ex Diamond Green downtime and -- China, you would have been up a little bit on the -- at the EBITDA level quarter-on-quarter even with lower protein prices, is that the right way to think about it?

Randall Stuewe -- Chairman & Chief Executive Officer

Yeah, I mean, it would have been modestly similar quarter-to-quarter because of -- at the end of the day, I mean fat prices were up on the index up about 7.7%, protein prices were down, and we make a little more money on the fat than we do the protein as we've said in the past. And so, yeah, I mean, that's a fair way of looking at it.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay. All right. That's helpful. And then just Diamond Green in the quarter, I know operationally there are lot of challenges from a margin realization, kind of, what was the extra cost that was put into the system from the unplanned downtime and kind of the fixed cost under absorption that drove the margins, help quantify that piece a little bit?

John Bullock -- Executive Vice President of North America Specialty Businesses & Chief Strategy Officer

Yeah, this is John Bullock. I mean, obviously the big issue there, we had some extra catalyst expense little over $5 million as we had to replace that catalyst. The rest of it is essentially some additional expenses associated with a little bit of extra work around the turnaround that we had to do to replace the catalyst. But most of it is just lack of volume going to the facility and that drives our per gallon cost out extremely high. And so, once we get to return to producing like we are now, then our cost go right back in the line. It was a cost issue, driven by both some additional cost associated with the catalyst issue and the lack of production, because we simply were not up in operational enough days in the quarter.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay. And then a last one from me, just on -- if you think about 2019 in the base business, little over $100 million year-to-date deployed in the M&As in Greenfield Capital. I mean, is -- were the -- talk about the earnings expectations of -- from those acquisitions and kind of what the base kind of contribution from kind of those total growth investments would expected to be in '19 as we roll forward?

Randall Stuewe -- Chairman & Chief Executive Officer

Yeah, I mean, from the from Triple-T, Kruger, and then the organic feed business, I mean we are targeting somewhere contribution there of $15 million to $20 million of new EBITDA annual run rate next year off of those -- off of the approximately $100 million of additional growth capital that's being deployed, that will be staged over the year as Grapeland, Texas doesn't really come up until mid -- mid-first quarter and that will be a ramp up with the poultry supplier as they bring online.

The new Wahoo facility has been now delayed a little bit as Costco's factory in Nebraska is not going to complete as early as we thought it would, and then several other projects that are out there. As we've talked about the two big ones or the Peptan spray dryer complexes and -- or hide (ph) Peptan down in Brazil and then in Angouleme, France, those should be online March-April of next year and then have pretty nice run rates off of those, which would be very similar to our normal capital return.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay. Appreciate the color. I'll pass it on. Thanks.

Operator

The next question comes from Craig Irwin of ROTH Capital Partners. Please go ahead.

Craig Irwin -- ROTH Capital Partners -- Analyst

Good morning and thanks for taking my questions. So Randy, if we're in the camp that we're going to see a 5 year to 7 year reinstatement of BTC with a tail on it and we're firm believers of that, it's going to have an impact on fats prices, right. Can you maybe discuss for us your Darling supply to Valero whether or not this is actually going to impact pricing of fats, potentially to the joint venture? And then, what do you think the impact would be for core fats in your rendering operations, is this likely to drive up profitability given that a lot of third-party guys buy from other vendors and from you, if you could frame this out.

John Bullock -- Executive Vice President of North America Specialty Businesses & Chief Strategy Officer

This is John Bullock. Yeah, I mean, obviously with Diamond Green Diesel now on the line at an expanded capacity and an excellent LCFS demand, we anticipate that fat prices are going to go higher and we do believe that that will have a benefit, I think as we've consistently said into our non-biofuel businesses. So we should see an improvement in profitability in those businesses as we move to the next couple of years. I'm not sure what the rest of the question, I don't know I quite understood the rest of the question, but we do see fat prices is moving higher.

Randall Stuewe -- Chairman & Chief Executive Officer

Yeah, I'll take it from there a little bit, Craig. I mean, at the end of the day, we're going to -- the marketplace has not seen the new 115 million gallon expansion that we added to Diamond Green Diesel, that's another 1 billion pounds, that's another 6% to 8% of US supply that's now going to be diverted to Diamond Green Diesel along with -- I think there is some other demand that's happening there, some co-processing going on in the Northwest, United States now, and all in all, there is just a little bit more fact going into the markets now that should absorb the excess here. I mean, if you look back over the last five years, we moved from caloric value to a 3% to 5% premium to caloric value, and I think it's safe to say as we go forward here that we're going to move that on up a couple more cents, I suspect, as we run fuller and fuller both here and over in Europe.

And then, when we bring Super Diamond on, I think that's anyone's bat (ph) has to how that all sorts out, but you probably won't see that impact until mid to late 2021 when we start buying there, but that 675 million gallons, I mean, you're about 6 billion pounds year one out of every 2.5 to 3 pounds of North American fat have to end up in a half square mile in New Orleans.

So I suspect it will make a pretty nice Harvard case study one day as to what dislocation of what markets happens and what the ultimate price of fat. It's driven by carbon intensity as you know, and we've been very, very clear about that. There's a lot of fat in the world to use, whether it's palm oil, soybean oil, canola oil, sunflower oil, but it doesn't have the carbon intensity scores that the waste fats and greases and the distillers corn oil has. So I think overall, clearly, we will chase that product in and if there's any other competition that comes out there, they will too and the impact will be to drive that price up.

Craig Irwin -- ROTH Capital Partners -- Analyst

Great, thank you for that. My second question is about the low carbon fuel standard. So I know this wasn't the cleanest quarter as far as being able to parse the impacts on the P&L, but it appears that you actually -- you did a better job capturing LCFS in Diamond Green in the quarter, you know, you saw the benefit of some of the positive movements which we've seen on LCF credit. Can you comment about mix going to California and where you see this mix heading over the next couple of quarters?

John Bullock -- Executive Vice President of North America Specialty Businesses & Chief Strategy Officer

Yeah, this is John Bullock. Yeah, we would move 100% of our product today to the low carbon fuel standard markets, whether it be California or the rest of the world and I think that's probably an under-reported part of this story. This story is just not California, there are tremendous LCFS markets around the world and we moved some product to a lot of those markets today. We continue to get a greater percentage of the LCFS, each and every single year as we contract our renewable diesel and that's going to continue now for the next couple of years.

So we are receiving a greater share of the LCFS as we go forward. Our carbon intensity scores over time have been coming down, so that increases the value of the product that we sell out of Diamond Green Diesel as well. So we see the demand is extremely robust. For the next several years, we could sell a lot more products that we can make. We're actually limiting customers on how much they can take.

Craig Irwin -- ROTH Capital Partners -- Analyst

Great. Thanks again for taking my questions.

Randall Stuewe -- Chairman & Chief Executive Officer

Thanks, Craig.

Operator

This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Stuewe for closing remarks.

Randall Stuewe -- Chairman & Chief Executive Officer

Thanks, Danielle. Thanks again everyone for joining us. I hope everyone enjoys the upcoming holiday season and we look forward to reporting our fourth quarter and year-end performance early next year in March. Have a great day.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 34 minutes

Call participants:

Melissa Gaither -- Vice President of Investor Relations & Global Communications

Randall Stuewe -- Chairman & Chief Executive Officer

Brad Phillips -- Executive Vice President & Chief Financial Officer

Kenneth Zaslow -- Bank of Montreal -- Analyst

Heather Jones -- Vertical Group -- Analyst

John Bullock -- Executive Vice President of North America Specialty Businesses & Chief Strategy Officer

Adam Samuelson -- Goldman Sachs -- Analyst

Craig Irwin -- ROTH Capital Partners -- Analyst

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