Darling Ingredients ((DAR)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Darling Ingredients painted a mixed picture for the company. While the core ingredients business showed robust performance, particularly in the Feed and Food segments, the renewables market and Diamond Green Diesel (DGD) faced significant challenges, impacting overall profitability. Despite a positive outlook on production tax credits, the company’s debt levels remain high.
Strong Core Ingredients Business Performance
The core ingredients business reported its strongest performance in 1.5 years, driven by robust global demand and exceptional execution across all operations. The combined adjusted EBITDA for the third quarter was $245 million, with the Global Ingredients business contributing $248 million. This highlights the strength and resilience of Darling Ingredients’ core operations.
Improvement in Feed Segment
The Feed segment demonstrated significant improvement, with EBITDA rising to $174 million from $132 million a year ago. Total sales reached $1 billion compared to $928 million last year, with gross margins relative to sales improving to 24.3% from 21.5%. This growth underscores the segment’s solid performance and favorable market conditions.
Increase in Food Segment Performance
The Food segment also saw a notable increase in performance, with EBITDA climbing to $72 million from $57 million in the third quarter of 2024. Total sales rose to $381 million from $357 million, and gross margins improved to 27.5% of sales from 23.9%. These figures reflect the segment’s strong market position and operational efficiency.
Positive Outlook on Production Tax Credits (PTC)
Darling Ingredients expressed optimism about production tax credits, expecting to generate around $300 million in PTCs in 2025. The company agreed to the sale of $125 million in PTCs during the third quarter and anticipates further sales in the fourth quarter. This positive outlook is bolstered by robust demand as potential buyers become more familiar with the credits.
Challenges in Renewables Market
The renewables market faced significant challenges, with Diamond Green Diesel (DGD) reporting a negative $3 million EBITDA for the quarter. This was impacted by a $38 million lower of cost or market expense, as well as uncertainty and delays in the RVO ruling affecting the U.S. biofuel environment.
Impact of Turnaround and Market Dynamics on DGD
A scheduled turnaround of DGD3, along with negative impacts from LIFO and LCM, resulted in a $3 million loss in EBITDA for DGD, compared to a positive $39 million in the third quarter of 2024. These factors highlight the operational and market challenges faced by the segment.
High Debt Levels
Darling Ingredients reported high debt levels, with total debt net of cash at $4.01 billion as of September 27, 2025, up from $3.97 billion at the end of 2024. This increase occurred despite contributions made to DGD and a $53 million earn-out payment related to the FASA acquisition, indicating ongoing financial pressures.
Weakness in Fuel Segment Excluding DGD
The fuel segment, excluding DGD, showed weakness with a combined adjusted EBITDA of $22 million compared to $60 million in the third quarter of 2024. This decline was primarily due to lower earnings at DGD, reflecting the challenges in the renewables market.
Forward-Looking Guidance
Darling Ingredients provided guidance for its core ingredients business, excluding the DGD segment, due to ongoing volatility in the renewables market. The company expects the core ingredients business EBITDA for the full year 2025 to range between $875 million and $900 million. This guidance reflects the strong performance of the Global Ingredients business and the anticipated positive impact of future public policy changes.
In summary, the earnings call for Darling Ingredients highlighted a strong performance in the core ingredients business, with significant improvements in both the Feed and Food segments. However, challenges in the renewables market and high debt levels pose ongoing concerns. The company’s positive outlook on production tax credits and strategic execution provide some optimism for the future.