Irving / TX. (di) Darling Ingredients Inc., a global developer and producer of sustainable natural ingredients from edible and inedible bio-nutrients, creating a wide range of ingredients and customized specialty solutions for customers in the pharmaceutical, food, pet food, feed, industrial, fuel, bioenergy, and fertilizer industries, announced financial results for the 2018 third quarter ended September 29, 2018.
Third Quarter 2018 Overview
- Revenue of USD 812.6 million
- Net loss of USD (6.0) million, or USD (0.04) per GAAP diluted share
- Adjusted Ebitda of USD 97.0 million
- Debt paydown of USD 12.0 million
- Diamond Green Diesel (DGD) extended downtime strongly influenced results with higher costs and lower volumes
- Record slaughter volumes creating ample supplies of fats and proteins
- DGD extended downtime pressured fat selling prices
- Trade dispute with China pressuring global trade flows of animal proteins
- Food segment stabilized, Fuel segment delivered improved results without Blenders Tax Credit (BTC)
- DGD expansion on line early October and at name plate capacity of 275 million gallons annually
- DGD JV approved Super Diamond Phase III Expansion to 675 million total gallons annually plus additional renewable Naphtha gallons
For the third quarter of 2018, the Company reported net sales of USD 812.6 million, as compared with net sales of USD 936.3 million for the third quarter of 2017. The USD 123.7 million reduction in net sales resulted mainly from lower finished product pricing and extended DGD downtime, 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 the Company’s industrial residuals business in May 2018. Net loss attributable to Darling for the three months ended September 29, 2018 was USD (6.0) million, or USD (0.04) per diluted share, compared to a net income of USD 7.8 million, or USD 0.05 per diluted share, for the third quarter of 2017. The net loss for the third quarter 2018 reflects lower finished product selling prices and an increase in cost of sales from inventory write downs of approximately USD 7.2 million in China relating to lower market values due to the African Swine Fever (ASF) outbreak.
The Darling Ingredients Board also approved an increase in the Company’s previously announced share repurchase program from USD 100 million to USD 200 million and extended the term of the program for an additional year to August 13, 2020, to be exercised depending on market conditions. The repurchases may be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market. Repurchases may occur over the authorized period unless extended or shortened by the Board of Directors.
Comments on the Third Quarter 2018
«We clearly delivered lower than expected results in third quarter. Extended downtime at DGD largely influenced our financial results and reshuffling our supply chain for fats and used cooking oil impacted our feed segment results. Additionally, trade disputes with China, record global grain stocks and a stronger U.S. dollar weighed on our finished product pricing,» said Randall C. Stuewe, Chairman and Chief Executive Officer of Darling Ingredients Inc. «The silver lining is we had record raw material volumes globally and now DGD is fully operational, and we expect to produce 65-70 million gallons of renewable diesel in the fourth quarter with spot margins in excess of USD 1.25 per gallon.»
«Feed segment results were largely impacted by a lower pricing environment and the deflationary lag in our U.S. raw material formulas combined with an inventory write down of Chinese plasma related to ASF. Food segment results improved sequentially and delivered consistent year-over-year results with solid performance from our Rousselot collagen platform and higher sales volumes in China,» stated Stuewe.
«In the Fuel segment, strong volumes supported improved performance across Europe and offset slightly weaker results in North American biodiesel due to lower RIN pricing and the absence of the Blenders Tax Credit (BTC). We remain optimistic that the BTC will re-instate late in the fourth quarter 2018.»
«We continue to act on our World of Growth strategy to grow our core business and closed on the acquisition of Arkansas-based Triple – T Foods in early October. The acquisition, which includes both cold storage and a wet pet food operation, further expands our premium protein business in the growing specialty pet food industry. We are also excited to announce board approval for the Phase III Super Diamond expansion to 675 million annual gallons of renewable diesel with the construction of a second independent parallel plant. Additionally, the project will include the construction of a new renewable Naphtha, or green gasoline, plant and improved logistics capability. The estimated cost for the entire project is approximately USD 1.1 billion with completion expected in the fourth quarter of 2021. This capital cost is expected to be funded from cash generated by DGD’s operations. Margins remain attractive, and we look forward to meeting the increased demands for sustainable low carbon fuel and capturing higher LCFS margins from our increased capacity,» concluded Stuewe.