Darling Ingredients Inc. Reports Fourth Quarter and Fiscal Year 2022 Results

February 27, 2023

MediaNews

Darling Ingredients Inc. (NYSE: DAR) today reported net income of $156.6 million, or $0.96 per diluted share for fourth quarter 2022, compared to net income of $155.8 million, or $0.94 per diluted share, for fourth quarter 2021. The company also reported net sales of $1.8 billion for the fourth quarter of 2022, as compared with net sales of $1.3 billion for the same period a year ago.

 

Fiscal Year 2022 Highlights

  • Generated net income of $737.7 million, or $4.49 per GAAP diluted share
  • Delivered record combined adjusted EBITDA of $1.541 billion
  • Started up third renewable diesel plant, making Diamond Green Diesel North America's largest renewable diesel producer at 1.2 billion gallons a year
  • Grew global footprint with three strategic acquisitions, strengthening company's vertical integration for renewable diesel production
  • Record Food Segment results driven by growth of hydrolyzed collagen business
  • Repurchased $125.5 million of common stock

For the 2022 fiscal year, Darling Ingredients reported net income of $737.7 million, or $4.49 per diluted share, as compared to $650.9 million, or $3.90 per diluted share for 2021.

 

Net sales for fiscal year 2022 were $6.5 billion, as compared with net sales of $4.7 billion in 2021.

 

Combined adjusted EBITDA for the fourth quarter 2022 was $413.0 million, compared to $306.8 million for the same period in 2021. Fiscal year 2022 combined adjusted EBITDA was $1.541 billion, compared to $1.235 billion for full year 2021.

 

Diamond Green Diesel (DGD) sold a record 754 million gallons of renewable diesel for fiscal year 2022, at an average $1.18 EBITDA per gallon.

DGD began operations at its Port Arthur, Texas, plant in the fourth quarter of 2022, bringing DGD's total renewable diesel capacity to 1.2 billion gallons per year. On Jan. 31, 2023, the company announced approval of a new sustainable aviation fuel project at Port Arthur, Texas.

 

"For the fifth consecutive year, Darling Ingredients has delivered superior earnings growth driven by our market presence, vertical integration and diverse, but synergistic segments," said Randall C. Stuewe, Darling Ingredients Chairman and Chief Executive Officer. "We are well positioned to execute and integrate the investments we have made in our four growth areas: the core rendering business, collagen peptides, green energy in Europe and soon sustainable aviation fuel at Diamond Green Diesel. Our value proposition is simple, we eliminate waste from the meat industry and upcycle those products to their highest value. Darling is not just participating in the circular economy, we are the circular economy."

 

These acquisitions are key to our vertical integration, company strength and strong market position.

 

The company's significant business highlights in 2022 include:

 

Acquired  Op de Beeck, a leading organic waste processing company in Belgium, growing the company's European green energy business;Acquired Valley Proteins, strengthening the core business by adding 18 rendering plants in the southern, southeast and mid-Atlantic regions in the U.S.;Entered into the rendering business in Brazil with the acquisition of FASA Group, adding 14 plants and 1.3 million metric tons of processing;Started up DGD Port Arthur, Texas, plant, bringing the joint venture's renewable diesel production to 1.2 billion gallons per year;Entered into a definitive agreement to purchase Gelnex in Brazil to grow the company's food business through increased collagen production;Entered into a definitive agreement to purchase Miropasz, providing the company with access to additional poultry rendering in Poland, Europe's largest poultry provider; andSigned onto the Science-Based Target initiative, continuing to set a high level for sustainability and advancing the company's 2050 net-zero goal.

 

Under the company's share repurchase program, the company repurchased approximately 336,000 shares of common stock during the fourth quarter of 2022 for a total of approximately $22.5 million, bringing the total common stock repurchased for 2022 to approximately 1.9 million shares for a total of approximately $125.5 million.

 

As of Dec. 31, 2022, Darling Ingredients had $127.0 million in cash and cash equivalents, and $1.3 billion available under its committed revolving credit agreement. Total debt outstanding as of Dec. 31, 2022, was $3.4 billion. The leverage ratio as measured by the company's bank covenant was 2.54X as of Dec. 31, 2022. Capital expenditures were $134.1 million for the fourth quarter and $391.3 million for fiscal year 2022.

The company expects continued growth, and sets guidance for fiscal year 2023 at $1.80-$1.85 billion combined adjusted EBITDA.

 

View the Q4 2022 Quarterly Results PDF

 

About Darling Ingredients

Darling Ingredients Inc. (NYSE: DAR) is the largest publicly traded company turning edible by-products and food waste into sustainable products and a leading producer of renewable energy. Recognized as a sustainability leader, the company operates more than 260 facilities in over 15 countries and repurposes approximately 15% of the world's meat industry waste streams into value-added products, such as green energy, renewable diesel, collagen, fertilizer, animal proteins and meals, and pet food ingredients. To learn more, visit darlingii.com. Follow us on LinkedIn.

Darling Ingredients Inc. will host a conference call to discuss the Company's fourth quarter and fiscal year 2022 financial results at 9 a.m. Eastern Time (8 a.m. Central Time) on Tuesday, Feb. 28, 2023. To listen to the conference call, participants calling from within North America should dial 1-844-868-8847, international participants should dial 1-412-317-6593, and ask to be connected to the Darling Ingredients Inc. call. Please call approximately ten minutes before the start of the call to ensure that you are connected.

 

The call will also be available as a live audio webcast that can be accessed on the Company website at http://ir.darlingii.com. Beginning one hour after its completion, a replay of the call can be accessed through March 7, 2023, by dialing 1-877-344-7529 (U.S. callers), 1-855-669-9658 (Canada) and 1-412-317-0088 (international callers). The access code for the replay is 6860343. The conference call will also be archived on the Company's website.

 

Use of Non-GAAP Financial Measures:

Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity and is not intended to be a presentation in accordance with GAAP. Adjusted EBITDA is presented here not as an alternative to net income, but rather as a measure of the Company's operating performance. Since EBITDA (generally, net income plus interest expense, taxes, depreciation and amortization) is not calculated identically by all companies, this presentation may not be comparable to EBITDA or Adjusted EBITDA presentations disclosed by other companies. Adjusted EBITDA is calculated in this presentation and represents, for any relevant period, net income/(loss) plus depreciation and amortization, goodwill and long-lived asset impairment, interest expense, income tax provision, other income/(expense) and equity in net (income)/loss of unconsolidated subsidiaries. Management believes that Adjusted EBITDA is useful in evaluating the Company's operating performance compared to that of other companies in its industry because the calculation of Adjusted EBITDA generally eliminates the effects of financing, income taxes and certain non-cash and other items that may vary for different companies for reasons unrelated to overall operating performance.

 

Pro forma Adjusted EBITDA to Foreign Currency is not a recognized accounting measurement under GAAP. The Company evaluates the impact of foreign currency on its adjusted EBITDA. DGD Joint Venture Adjusted EBITDA (Darling's share) is not reflected in the Adjusted EBITDA or the Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP).

 

The Company's management uses Adjusted EBITDA as a measure to evaluate performance and for other discretionary purposes. In addition to the foregoing, management also uses or will use Adjusted EBITDA to measure compliance with certain financial covenants under the Company's Senior Secured Credit Facilities, 6.0% Notes, 5.25% Notes and 3.625% Notes that were outstanding at December 31, 2022. However, the amounts shown in this presentation for Adjusted EBITDA differ from the amounts calculated under similarly titled definitions in the Company's Senior Secured Credit Facilities, 6.0% Notes, 5.25% Notes and 3.625% Notes, as those definitions permit further adjustments to reflect certain other non-recurring costs, non-cash charges and cash dividends from the DGD Joint Venture.

 

Additionally, the Company evaluates the impact of foreign exchange impact on operating cash flow, which is defined as segment operating income (loss) plus depreciation and amortization.

 

Information reconciling forward-looking combined adjusted EBITDA to net income is unavailable to the Company without unreasonable effort. The Company is not able to provide reconciliations of combined adjusted EBITDA to net income because certain items required for such reconciliations are outside of the Company's control and/or cannot be reasonably predicted, such as the impact of volatile commodity prices on the Company's operations, impact of foreign currency exchange fluctuations, depreciation and amortization and the provision for income taxes. Preparation of such reconciliations for Darling Ingredients Inc. and the Company's joint venture, Diamond Green Diesel, would require a forward-looking balance sheet, statement of operations and statement of cash flows, prepared in accordance with GAAP for each entity, and such forward-looking financial statements are unavailable to the Company without unreasonable effort. The Company provides a range for its combined adjusted EBITDA outlook that it believes will be achieved; however, it cannot accurately predict all the components of the combined adjusted EBITDA calculation.

 

EBITDA per gallon is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income or equity in income of Diamond Green Diesel, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity and is not intended to be a presentation in accordance with GAAP. EBITDA per gallon is presented here not as an alternative to net income or equity in income of Diamond Green Diesel, but rather as a measure of Diamond Green Diesel's operating performance. Since EBITDA per gallon (generally, net income plus interest expense, taxes, depreciation and amortization divided by total gallons sold) is not calculated identically by all companies, this presentation may not be comparable to EBITDA per gallon presentations disclosed by other companies. Management believes that EBITDA per gallon is useful in evaluating Diamond Green Diesel's operating performance compared to that of other companies in its industry because the calculation of EBITDA per gallon generally eliminates the effects of financing, income taxes and certain non-cash and other items presented on a per gallon basis that may vary for different companies for reasons unrelated to overall operating performance.

 

Cautionary Statements Regarding Forward-Looking Information:

This media release contains "forward-looking" statements regarding the business operations and prospects of Darling Ingredients Inc. and industry factors affecting it. These statements are identified by words such as "believe," "anticipate," "expect," "estimate," "intend," "guidance," "could," "may," "will," "should," "planned," "potential," "continue," "momentum," and other words referring to events that may occur in the future. These statements reflect Darling Ingredient's current view of future events and are based on its assessment of, and are subject to, a variety of risks and uncertainties beyond its control, each of which could cause actual results to differ materially from those indicated in the forward-looking statements. These factors include, among others, existing and unknown future limitations on the ability of the Company's direct and indirect subsidiaries to make their cash flow available to the Company for payments on the Company's indebtedness or other purposes; global demands for bio-fuels and grain and oilseed commodities, which have exhibited volatility, and can impact the cost of feed for cattle, hogs and poultry, thus affecting available rendering feedstock and selling prices for the Company's products; reductions in raw material volumes available to the Company due to weak margins in the meat production industry as a result of higher feed costs, reduced consumer demand or other factors, reduced volume from food service establishments, or otherwise; reduced demand for animal feed; reduced finished product prices, including a decline in fat and used cooking oil finished product prices; changes to worldwide government policies relating to renewable fuels and greenhouse gas("GHG") emissions that adversely affect programs like the U.S. government's renewable fuel standard, low carbon fuel standards ("LCFS") and tax credits for biofuels both in the United States and abroad; possible product recall resulting from developments relating to the discovery of unauthorized adulterations to food or food additives; the occurrence of 2009 H1N1 flu (initially known as "Swine Flu"), Highly pathogenic strains of avian influenza (collectively known as "Bird Flu"), severe acute respiratory syndrome ("SARS"), bovine spongiform encephalopathy (or "BSE"), porcine epidemic diarrhea ("PED") or other diseases associated with animal origin in the United States or elsewhere, such as the outbreak of African Swine Fever ("ASF") in China and elsewhere; the occurrence of pandemics, epidemics or disease outbreaks, such as the current COVID-19 outbreak; unanticipated costs and/or reductions in raw material volumes related to the Company's compliance with the existing or unforeseen new U.S. or foreign (including, without limitation, China) regulations (including new or modified animal feed, Bird Flu, SARS, PED, BSE, ASF or similar or unanticipated regulations) affecting the industries in which the Company operates or its value added products; risks associated with the DGD Joint Venture, including possible unanticipated operating disruptions, a decline in margins on the products produced by the DGD Joint Venture, and issues relating to the announced SAF upgrade project; failure to close on strategic acquisitions; risks and uncertainties relating to international sales and operations, including imposition of tariffs, quotas, trade barriers and other trade protections imposed by foreign countries; difficulties or a significant disruption in our information systems or failure to implement new systems and software successfully, risks relating to possible third party claims of intellectual property infringement; increased contributions to the Company's pension and benefit plans, including multiemployer and employer-sponsored defined benefit pension plans as required by legislation, regulation or other applicable U.S. or foreign law or resulting from a U.S. mass withdrawal event; bad debt write-offs; loss of or failure to obtain necessary permits and registrations; continued or escalated conflict in the Middle East, North Korea, Ukraine or elsewhere; uncertainty regarding the exit of the U.K. from the European Union; and/or unfavorable export or import markets. These factors, coupled with volatile prices for natural gas and diesel fuel, inflation rates, climate conditions, currency exchange fluctuations, general performance of the U.S. and global economies, disturbances in world financial, credit, commodities and stock markets, and any decline in consumer confidence and discretionary spending, including the inability of consumers and companies to obtain credit due to lack of liquidity in the financial markets, among others, could cause actual results to vary materially from the forward looking statements included in this release or negatively impact the Company's results of operations. Among other things, future profitability may be affected by the Company's ability to grow its business, which faces competition from companies that may have substantially greater resources than the Company. The Company's announced share repurchase program may be suspended or discontinued at any time and purchases of shares under the program are subject to market conditions and other factors, which are likely to change from time to time. Other risks and uncertainties regarding Darling Ingredients Inc., its business and the industries in which it operates are referenced from time to time in the Company's filings with the Securities and Exchange Commission. Darling Ingredients Inc. is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

 

Darling Ingredients Contacts

Investors:

Suann Guthrie

VP, Investor Relations, Sustainability & Communications

(469) 214-8202; suann.guthrie@darlingii.com

 

Media:

Jillian Fleming

Director, Global Communications

(972) 541-7115; jillian.fleming@darlingii.com