What: Shares of Darling Ingredients (NYSE:DAR) were up 13% as of 11:30 a.m. Friday after the rendering and biodiesel specialist released solid third-quarter 2015 results.
So what: Quarterly revenue fell 12.8% year over year to $853.8 million, hurt primarily by lower finished product prices and the negative impact of foreign exchange rates. That said, global raw material volumes continued to rise from the same year-ago period, and analysts' consensus estimates called for an even more pronounced year-over-year decline in revenue to $841.2 million.
Meanwhile, adjusted earnings before interest, taxes, depreciation and amortization were $106.1 million, down from $117.2 million in last year's third quarter but comparable on a currency-neutral basis. Adjusted EBITDA also registered a modest sequential improvement from $105.5 million last quarter.
On the bottom line, that translated to a net loss of $9.1 million, or $0.06 per diluted share, compared to analysts' expectations for net income of $0.04 per share. However, the primary reason for this shortfall is a delay in the passage of the U.S. Biodiesel Blenders Tax Credit this year. When that happens, it will retroactively add roughly $20 million to Darling's share of income from its Diamond Green Diesel joint venture with Valero in the third quarter.
Darling Ingredients CEO Randall Stuewe explained,
Despite a difficult pricing environment, we continued to execute in the third quarter on our long term strategy of building our global platform to create sustainable feed, food and fuel ingredients for a growing world population. Our Feed segment continues to perform well, with global rendering recording strong volumes and predictable earnings. Scheduled plant turnarounds at three gelatin factories during the quarter significantly affected the Food segment earnings. The Fuel segment delivered as expected but was down sequentially due to the tough environment in the US bio-diesel industry. We remain confident that the reinstatement of the US Tax Extenders will retroactively deliver the blenders tax credit as expected.
Now what: Keep in mind Darling doesn't typically provide specific financial guidance, which makes it that much harder for analysts to accurately predict its performance in any given quarter. But as it stands, these were undeniably solid results from Darling as it focuses on improving its operational performance as industry headwinds persist. When those headwinds eventually abate, Darling should be well positioned to benefit as a result.