On July 25, 2024, Darling Ingredients Inc (DAR, Financial) released its 8-K filing for the second quarter of 2024. The company reported a net income of $78.9 million, or $0.49 per diluted share, and net sales of $1.5 billion. These results fell short of analyst estimates, which projected earnings per share (EPS) of $0.51 and revenue of $1.54 billion.
Company Overview
Darling Ingredients Inc develops and manufactures sustainable ingredients for customers in the pharmaceutical, food, pet food, fuel, and fertilizer industries. The company collects and transforms all aspects of animal by-product streams into ingredients, including gelatin, fats, proteins, pet food ingredients, and fertilizers. Additionally, Darling recovers and converts used cooking oil and bakery remnants into feed and fuel ingredients. The company operates through three primary business segments: feed ingredients, food ingredients, and fuel ingredients, with the majority of its revenue derived from customers in North America.
Performance and Challenges
Darling Ingredients Inc faced significant challenges in the second quarter of 2024, primarily due to a sharp year-over-year decline in fat prices and lower earnings within its Diamond Green Diesel (DGD) segment. The company reported a net income of $78.9 million, or $0.49 per diluted share, compared to $252.4 million, or $1.55 per diluted share, in the same period last year. Net sales also decreased to $1.5 billion from $1.8 billion in Q2 2023.
Chairman and CEO Randall C. Stuewe commented,
“Despite a deflationary commodity market and an uncertain regulatory environment during the second quarter, our specialty ingredients business showed sequential improvement as it made the necessary changes to improve margins and earnings. DGD had a good quarter, while the Port Arthur facility completed a major turnaround as we prepare to produce sustainable aviation fuel later this year.”
Financial Achievements
Despite the challenges, Darling Ingredients Inc achieved several financial milestones. The company repurchased $29.2 million of common stock and received $77.1 million in cash dividends from Diamond Green Diesel on July 18, 2024. Combined adjusted EBITDA for the second quarter was $273.6 million, compared to $508.3 million for the same period in 2023. On a year-to-date basis, combined adjusted EBITDA totaled $553.7 million, down from $926.7 million in the first half of 2023.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Net Sales | $1.5 billion | $1.8 billion |
| Net Income | $78.9 million | $252.4 million |
| EPS | $0.49 | $1.55 |
| Combined Adjusted EBITDA | $273.6 million | $508.3 million |
Income Statement Highlights
For the six months ended June 29, 2024, Darling Ingredients reported net sales of $2.9 billion, compared to $3.5 billion for the same period in 2023. Net income for the first half of 2024 was $160.0 million, or $0.99 per diluted share, down from $438.2 million, or $2.69 per diluted share, in the first half of 2023. The company’s DGD segment sold 311.5 million gallons of renewable diesel in Q2 2024 at an average of $0.49 per gallon EBITDA.
Balance Sheet and Cash Flow
As of June 29, 2024, Darling Ingredients had $121.6 million in cash and cash equivalents and $814.4 million available under its committed revolving credit agreement. Total debt outstanding was $4.4 billion, with a projected leverage ratio of 4.24X. Capital expenditures were $98.0 million for Q2 2024 and $191.7 million for the first six months of 2024.
Analysis
Darling Ingredients Inc's performance in Q2 2024 reflects the broader challenges faced by the consumer packaged goods industry, particularly in a deflationary commodity market. The decline in fat prices and lower earnings from the DGD segment significantly impacted the company's financial results. However, the company's strategic initiatives, such as stock repurchases and the upcoming production of sustainable aviation fuel, indicate a focus on long-term growth and margin improvement.
Investors should monitor the company's efforts to pay down debt and improve margins through cost-cutting measures, as well as the potential recovery in fat prices, which could positively impact future earnings.
Explore the complete 8-K earnings release (here) from Darling Ingredients Inc for further details.
