Darling Ingredients: Reports Q2-2018 Financial 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 2018 second quarter ended June 30, 2018. Overview:

• Revenue of USD 846.6 million
• Net income/(loss) of USD (30.4) million, or USD (0.18) per GAAP diluted share
• Adjusted Ebitda of USD 115.1 million
• Debt paydown of USD 44.0 million
• Global raw material volumes up 4.0 percent
• Argentina gelatin facility closed and profitable sales volumes relocated
• Exited TRS «Industrial Residuals Business» while retaining Used Cooking Oil (UCO) business
• Diamond Green Diesel (DGD) results reflect expansion and turnaround in process
• DGD JV issued USD 25 million partner dividend
• Euro bonds refinanced, lowering borrowing cost and extending maturity

Second quarter 2018 of USD 846.6 million, compared to USD 894.9 million for 2Q17. Net sales reduction reflects the reclass of billed freight per new revenue standard. Net loss of USD (30.4) million, or USD (0.18) per diluted share, compared to net income of USD 9.1 million, or USD 0.05 per diluted share, for 2Q17. The net loss reflects debt extinguishment costs of USD 23.5 million, a loss of USD 15.5 million from the sale of Terra Renewal Services subsidiary, and USD 15.0 million of restructuring charges due to Argentina gelatin plant closure. Excluding these items, adjusted net income for 2Q18 was USD 17.7 million, or USD 0.11 cents per share.

Comments on the Second Quarter 2018

«Operationally we had a solid second quarter. Performance improved sequentially and year-over-year, and we took strategic actions to strengthen our portfolio and position the company for future growth,» said Randall C. Stuewe, Chairman and CEO of Darling Ingredients Inc. «Strong slaughter activity drove global tonnage up 4.0 percent, and our expansion projects and recent acquisitions contributed as expected. The feed segment delivered improved results across our geographies.

«Food segment results reflect the Argentina gelatin plant closure due to ongoing macroeconomic headwinds and redeployment of production to our other gelatin locations. The facility represented approximately 3 percent of Food segment sales, and we are now filling orders for most high-margin customers from other Rousselot facilities. This strategic realignment will optimize our gelatin assets and better leverage our existing Rousselot system. In the Fuel segment, operational efficiencies and favorable pricing generated consistent performance when adjusted for the 2017 BTC received in 1Q. We remain optimistic the BTC will once again be made retroactive for 2018.

«DGD, our 50/50 JV with Valero to produce a premium low-carbon fuel additive, completed construction on the 275-million-gallon expansion and should be online mid-August. Spot margins remain attractive, and we look forward to the significant contribution this facility is expected to bring,» concluded Stuewe.

Operational Update by Segment

• Feed Ingredients – Ebitda USD 84.1 million flat; Revenue USD 498.8 million (down 9.2 percent); Margin USD 128.0 million (up 0.9 percent). Raw material processed up 5.4 percent.
• Food Ingredients – Ebitda USD 14.7 million (down 50.0 percent,) or USD 29.7 million (up 1.4 percent) when adjusted for restructuring charges of USD 15.0 million; Revenue USD 276.7 million flat; Margin USD 51.9 million (down 7.3 percent). Raw material processed consistent.
• Fuel Ingredients – Ebitda USD 13.6 million (up 37.8 percent); Revenue USD 71.1 million (up 5.5 percent); Margin USD 13.7 million (up 7.9 percent). Raw material processed down 6.9 percent.
• Diamond Green Diesel JV – Ebitda USD 1.05 Ebitda per gallon without the BTC.