Please ensure Javascript is enabled for purposes of website accessibility

Darling Ingredients, Inc. Is Gaining Momentum

By Steve Symington – May 14, 2016 at 10:56AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The rendering and biodiesel company fell short on the bottom line this quarter but sees stronger days ahead.

Darling Ingredients (DAR -0.20%) announced first-quarter 2016 results Thursday after the market close. And in contrast to last quarter's jaw-dropping 30% post-earnings pop, shares of the rendering and biodiesel specialist initially fell as much as 5.7% early Friday before recovering to close down a modest 1.6%, as earnings technically fell short of expectations. But before we get there, let's take a closer look at what Darling achieved in its most recent quarter, ended April 2.

Darling Ingredients results: The raw numbers


Q1 2016 Actuals

Q1 2015 Actuals

Growth (YOY)


$779.6 million

$874.7 million


Net Income

$1.1 million

$0.1 million






Data source: Darling Ingredients.

What happened with Darling Ingredients this quarter?

  • Year-over-year revenue declines were driven by weaker selling prices for fats and protein within feed Ingredients, as well as the continued negative impact of foreign currency exchange.
  • Keeping in mind that Darling didn't provide specific financial guidance, net income technically fell short of Wall Street's estimates for $0.11 per share.
  • Adjusted earnings before interest, taxes, depreciation, and amortization climbed 0.7% year over year, to $98.9 million, driven by increased earnings from food and fuel Ingredients, and higher raw-material volumes in feed Ingredients, which were only partially offset by lower finished product prices and foreign exchange.
  • Feed ingredients net sales fell 13% year over year, to $476.2 million, while operating income declined 60.8%, to $13.9 million.
    • Declines were once again driven by lower finished-product prices for proteins, fats, and used cooking oil, this time given record-setting global grain production and higher volumes from the slaughter industry, which together drove supply above demand.
    • Fat and protein prices have increased since then and should benefit earnings for the feed ingredients segment in Q2.
  • At food ingredients, net sales declined 8.2%, to $247.9 million, while operating income more than doubled, to $21.9 million.
    • Operating income growth was once again driven by improved performance in the gelatin business and normalized margins within European edible fats.
  • Fuel ingredients net sales fell 2.6%, to $55.6 million, while operating income rose $3.6 million to $6.1 million, excluding contributions from Darling's Diamond Green Diesel joint venture with Valero Energy.
    • Operating income growth was driven by higher sales volumes and improved operating performances at Ecoson and Rendac, including improved margins at the Canadian biodiesel facility from the reinstatement of the blenders tax credit for this year.
  • Diamond Green Diesel produced 159 million gallons of renewable diesel in all of fiscal 2015.
    • EBITDA came to $19.3 million, bringing Darling's share to $9.6 million.
    • Earnings were pressured by higher fat prices, volatile heating-oil prices, and stagnant renewable identification numbers.
    • The results also include 18 days of downtime for scheduled plant maintenance and a force majeure the Kansas City Southern railroad declared because of flooding that curtailed production rate by 4 million gallons.
    • Darling and Valero each received a dividend of $25 million in April.
    • A major expansion was announced and will be completed in Q4 of 2017, which will increase output more than 70%, to 275 million gallons annually.
    • A total of $54.7 million in debt was paid down subsequent to the end of the quarter, bringing total current debt for the joint venture to $89.9 million.

What management had to say 

Darling CEO Randall Stuewe stated:

Sequentially, our segments showed nice consistency in light of very volatile markets around the globe. Most notably, our food segment delivered solidly, with Rousselot and Sonac [Darling's gelatin and sustainable-ingredients brands] delivering consistent earnings. In the feed segment, we saw our global rendering businesses once again adjust to falling protein prices during the quarter, but volume increases and strengthening fat prices partially offset the headwinds. Our fuel segment, when normalized for the blender's tax credit, showed a very consistent performance. Looking forward, we have seen both protein and fat prices significantly strengthen late in the quarter and we should see our feed segment realize the benefit in the second quarter. Our model is clearly working, and we are picking up momentum once again.

(Emphasis mine.)

Looking forward

Those optimistic comments follow what management described three months ago as a previous sharp rebound in prices for fats, proteins, and pet-food ingredients. Of course, it's difficult to predict how long that rebound will last, given volatility in Darling Ingredients' core markets. But as it stands, it appears Darling remains perfectly positioned to make the most of these markets when they inevitably return to normal. 

In the end, with Darling stock still trading only slightly higher than where it stood this time one year ago (and this even after last quarter's bounce), I think investors should be happy with the company's performance and direction today.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Darling Ingredients. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Darling Ingredients Inc. Stock Quote
Darling Ingredients Inc.
$66.42 (-0.20%) $0.13
Valero Energy Corporation Stock Quote
Valero Energy Corporation
$101.17 (3.35%) $3.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.