• Revenue: $1.4 billion for Q4 2024, down from $1.6 billion in Q4 2023.
• Net Income: $101.9 million for Q4 2024, up from $84.5 million in Q4 2023.
• Earnings Per Share (EPS): $0.63 per diluted share for Q4 2024, compared to $0.52 in Q4 2023.
• Operating Income: $122.4 million for Q4 2024, down from $158.8 million in Q4 2023.
• Net Sales for Fiscal Year 2024: $5.7 billion, compared to $6.8 billion in 2023.
• Net Income for Fiscal Year 2024: $278.9 million, compared to $647.7 million in 2023.
• Gross Margin Improvement (Feed Segment): Increased from 21.5% in Q3 to 22.6% in Q4 2024.
• Gross Margin Improvement (Food Segment): Increased from 23.9% in Q3 to 25.7% in Q4 2024.
• Debt Reduction: Paid down $353 million in fiscal year 2024, reducing total debt to $4 billion.
• Adjusted EBITDA: $289.5 million for Q4 2024.
• Cash Dividends from Diamond Green Diesel: $68.6 million in Q4 2024, $179.8 million for the full fiscal year.
• Capital Expenditures: $73.3 million in Q4 2024, $332.5 million for fiscal year 2024.
• Income Tax Benefit: $25.5 million for Q4 2024, primarily due to biofuel tax incentives.

• Warning! GuruFocus has detected 6 Warning Sign with DAR.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Darling Ingredients Inc (NYSE:DAR) delivered its strongest quarter of the year in 2024, with a focus on effective margin management and CapEx stewardship.
• The company paid down $353 million in debt, reducing its financial leverage ratio to 3.68 times.
• Darling Ingredients received $179.8 million in dividends from Diamond Green Diesel and successfully started up the largest sustainable aviation fuel unit in the world under budget and ahead of schedule.
• The company achieved a significant improvement in global safety records, marking an all-time record for their global team.
• The regulatory environment is improving, with clarity on the 45Z clean fuel production tax credit, providing a positive outlook for future operations.

Negative Points

• Net sales for the fourth quarter of 2024 were $1.4 billion, a decrease from $1.6 billion in the fourth quarter of 2023.
• Operating income decreased by $36.4 million to $122.4 million for the fourth quarter of 2024 compared to the same period in 2023.
• The company experienced a lower gross margin due to significantly lower fat prices, impacting overall financial performance.
• Net income for fiscal year 2024 was $278.9 million, a significant drop from $647.7 million in fiscal 2023.
• The company faced challenges with foreign currency losses, which offset some of the benefits from lower interest expenses and increased property insurance recoveries.

Q & A Highlights

Q: How does the 45Z tax credit benefit Darling Ingredients, and what makes it advantageous for the company? A: Robert Day, Chief Strategy Officer, explained that the 45Z tax credit is beneficial because it is a CI score-adjusted tax credit eligible only for US biofuel producers. Darling Ingredients produces the lowest CI score feedstocks, such as global animal fats and US used cooking oil, making it well-positioned to benefit. Diamond Green Diesel, a joint venture, also stands to gain due to its ability to process low CI score feedstocks.

Q: Can you elaborate on the strategic shift towards producing more Sustainable Aviation Fuel (SAF) versus Renewable Diesel (RD)? A: Matt Jansen, Chief Operating Officer, North America, stated that Darling Ingredients is exploring opportunities to increase SAF capacity following the successful start-up of their first SAF line. The company is considering expanding SAF production either at the existing Port Arthur facility or elsewhere, driven by the growing demand and successful initial operations.

Q: What is the outlook for the dividend from the Diamond Green Diesel joint venture in 2025? A: Brad Phillips, Chief Financial Officer, indicated that the joint venture is debt-free, which should lead to increased distributions. The company expects distributions in 2025 to be greater than in 2024, supported by strong momentum and the monetization of PTC credits.

Q: How is the company addressing the challenges and opportunities presented by the 45Z tax credit from a macro perspective? A: Robert Day noted that the 45Z tax credit introduces complexity in compliance and certification, which may challenge some companies. However, Darling Ingredients and Diamond Green Diesel are well-prepared to navigate these challenges, which could lead to lower biofuel production and increased RIN and LCFS credit values.

Q: What are the company's plans for capital expenditures in 2025, and how does it compare to 2024? A: Randall Stuewe, CEO, stated that capital expenditures are expected to increase to approximately $400 million in 2025, up from $333 million in 2024. This increase includes growth CapEx for debottlenecking and greenfield projects, with a focus on maintaining financial discipline and supporting future growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.