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Darling Ingredients: Reports Q3-2019 Results

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 2019 third quarter ended September 28, 2019.

Third Quarter 2019 Overview

  • Revenue of USD 842.0 million
  • Net income of USD 25.7 million, or USD 0.15 per GAAP diluted share
  • Combined adjusted Ebitda of USD 147.8 million (Darling’s adjusted Ebitda plus Darling’s share of Diamond Green Diesel (DGD) adjusted Ebitda as reflected on the Non-GAAP Adjusted Ebitda Reconciliation table herein.)
  • Repurchased 636,634 shares during 3rd quarter and subsequently 407,076 shares in Q4
  • Diamond Green Diesel delivered USD 1.35 Ebitda per gallon with Darling’s share of JV earnings reflected in consolidated operating income under Fuel Segment
  • YTD DGD delivering USD 1.26 Ebitda per gallon when Q1 2019 adjusted to reflect hedge accounting
  • Global slaughter remains at record levels, providing ample raw material supplies
  • Global fat pricing improved but remained stagnant as North America biodiesel industry awaiting Blenders Tax Credit (BTC)
  • Global protein pricing weaker due to excess supplies and Chinese demand destruction due to African Swine Fever (ASF)
  • Rousselot delivered improved results with stronger sales in the Health and Nutrition category
  • Diamond Green II plant construction on time and budget; Diamond Green III in engineering and cost estimating for Port Arthur, TX
  • Debt paydown of USD 33.6 million

For the third quarter of 2019, the Company reported net sales of USD 842.0 million, as compared with net sales of USD 812.6 million for the third quarter of 2018. The USD 29.4 million increase in net sales resulted from higher finished product fat prices, strong contribution from higher sales values for Food Segment collagen ingredients and higher sales volume that more than offset lower protein pricing.

Net income attributable to Darling for the three months ended September 28, 2019 was USD 25.7 million, or USD 0.15 per diluted share, compared to a net loss of USD (6.0) million, or USD (0.04) per diluted share, for the third quarter of 2018. The increase was primarily due to DGD earning USD 32 million in 2019 third quarter as compared to a USD (2.6) million loss in the 2018 third quarter due to extended downtime in the third quarter 2018 for completion of the expansion, as well as a USD 7.2 million write-down of our China blood plasma inventory in the third quarter 2018 due to the African Swine Fever (ASF) outbreak.

Under Darling’s current share repurchase authorization, the Company repurchased 636,634 shares of common stock during the third quarter. Subsequent to the close of the quarter, the Company repurchased an additional 407,076 shares, totaling USD 7.5 million. Darling has USD 180.7 million worth of shares remaining under its current authorization with purchases to 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 2019

«We reported solid third quarter results, underscored by the strength of our vertically integrated supply chain and excellent execution amid continued trade uncertainty and escalating disease disruption due to African Swine Fever,» said Randall C. Stuewe, Chairman and Chief Executive Officer of Darling Ingredients Inc. «Overall, our operating segments delivered exceptional results with improved earnings in our Feed Segment as we navigated volatile global markets. Led by our Rousselot Functional Ingredients and Health + Nutrition platform, our Food Segment is solidly positioned to capture growing global demand for collagen ingredients. In the Fuel Segment, higher sales volumes supported solid performance across operations despite the lack of the Blenders Tax Credit (BTC).

«Our Diamond Green II expansion increasing capacity to 675 million gallons of renewable diesel is progressing on schedule with expected completion in late 2021. We are also pleased to expand our relationship with Valero, our joint venture partner, as we explore advanced engineering and development cost review for a potential renewable diesel plant at Valero’s refinery in Port Arthur, TX. If approved, construction would begin in 2021, with expected operations commencing in 2024, resulting in 1.1 billion gallons of total annual production capacity at DGD,» concluded Stuewe.