Darling Ingredients Inc. · NYSE:DAR
Darling Ingredients — BMO Farm to Market Conference 2018
51 slides from Darling Ingredients's conference presentation, May 16, 2018
Slide 1: Darling Ingredients presenters
EXHIBIT 99.1 Randall C. Stuewe, Chairman and CEO Brad Phillips, EVP Chief Financial Officer Melissa A. Gaither, VP IR and Global Communications
Slide 2: Safe Harbor Statement
Safe Harbor Statement 2 This presentation contains “forward-looking” statements regarding the business operations and prospects of Darling Ingredients Inc., including its Diamond Green Diesel joint venture, and industry factors affecting it. These statements are identified by words such as “believe,
Slide 3: Touches the lives of families around the world every day
3 touches the lives of families around the world… every day!
Slide 4: A global presence and diverse platform
It starts with a GLOBAL presence and diverse platform… 4 200+ Operations on …in 18 Irving TX locations 5 countries headquarters in worldwide continents… USA 136+ 10,000 $3.7 billion DAR (NYSE) years in ~ employees 2017 sales publicly traded business internationally revenue since 1994
Slide 5: It continues by contributing to many products
It continues by to - - Capsules and ; Pet food 0 a Dog chews Plastic bowls
Slide 6: Animal feed ingredients and supplements
6 Animal feed ingredients Supplements for animal health
Slide 7: Everyday products using our ingredients
7 Cellular concrete Energy bar Metal mold release Sunscreen lotions Surgical sponge X-ray film coating Soaps, cleansers Antiseptics Textiles Insulin
Slide 8: Strategy: Global leader in sustainable protein and nutrient-recovered ingredients
Our strategy is to distinguish ourselves as 8 the Global Leader in the production of the highest quality sustainable protein and nutrient-recovered ingredients to a growing population. FOOD FEED FUEL To accomplish this, we will BUILD, ACQUIRE and DEVELOP businesses within geographies where we can ac
Slide 9: We see a World of Growth
We see a “World of Growth” 9 38% of sales 5% of sales 52% Ingredients produced: of sales Food, Feed & Fuel Food & Feed Food Feed 2% 3% of sales of sales Our global presence enables us to Note: Net Sales from Q1 2018 grow our FF&F business lines around the world
Slide 10: Growth investments 2016-2018
10 2016 2017 2018 Germany Blood Plant China Gelatin DGD Expansion 275mm gal China Blood- Acq. minority USA Gelatin Belgium Digester USA: USA Protein Plant (AR) France Peptan LA Protein Plant USA Protein Plant (OH) Brazil Peptan NE Protein Plant Netherlands Acquisition USA: GA Protein Plan
Slide 11: Population and wealth growth driving nutrition
With an underlying assumption … 11 As population grows, wealth is created and better nutrition evolves. Center of the plate dining becomes a staple in the global diet. Africa India Latin America Asia-Pacific Europe No. America FORECAST Source: Company, based on multiple population data reports Sourc
Slide 12: Feed conversion by animal type
12 Cattle* Pig Chicken Fish** Feed needed to gain 1 lb. of weight 6 lbs. 2.9 lbs. 1.9 lbs. 1.0 lbs. Time to 18-22 Months 6-7 Months market 1-2 Months 5-8 Months Average weight at 1-2 lbs. slaughter 3-6 lbs. 240-270 lbs. Source: 1,200-1,400 lbs. http://www.nationalrenderers.org Source: Feedstuffs * F
Slide 13: Global meat production grows at 2% annually
While global meat production grows at 2% annually 13 Global Meat Production Forecast 2018 269 million MT of meat is produced annually, growing at ~2%... (per USDA) ...generating over 109 million MT of meat by-products globally. Source: USDA and http://www.indexmundi.com/agriculture/?commodity=broile
Slide 14: Raw materials to a portfolio of diverse ingredients
Supplying raw materials to create a portfolio of 14 diverse ingredients… Processed Processed Processed 1.12 million MT 8.24 million MT 1.19 million* MT ~$1 billion ~$2 billion ~$580 million FOOD FEED FUEL company company company Note: Includes DGD Revenues Note: Processed amounts are for raw materia
Slide 15: Acquiring raw material and managing the spread
15 Where acquiring the raw material and managing the spread is key 5% 5% 70% 100% 100% 20% FEED FOOD FUEL Spread Managed Margin Spread Managed Margin Fee for Service Commodity Exposed Shared Margin Fee for Service BUSINESS DRIVERS Spread Commodity Shared Fee for Managed Exposed Margin Service Margin
Slide 16: Food segment
16 ~$1 billion FOOD FOOD company Gelatin & Hydrolyzed Collagen Peptides Argentina, Belgium, Brazil, China, France, Spain, US Strong performance & margin stability $140.0 $128.1 $130.4 $131.9 30% Food Grade Fats $120.0 25% Belgium, Germany, Netherlands $100.2 $100.0 20% $80.0 15% Natural Casings $60.
Slide 17: Feed segment: nutrients for growth
FEED segment – Nutrients for growth 17 ~$2 billion FEED FEED Fats company Canada, Belgium, Germany, Netherlands, Poland, USA Proteins Strong performance & margin stability Canada, Belgium, Germany, Netherlands, Poland, USA $400.0 30% $351.3 $316.5 $297.1 25% UCO Services $300.0 $282.3 Canada, USA 20
Slide 18: Fuel segment: energy for today's world
FUEL segment – Energy for today’s world 18 ~$580 million FUEL FUEL company Note: Includes DGD Revenues Strong performance & margin stability Green Energy $70.0 50% $57.8 $57.6 Netherlands, Belgium, Germany $60.0 $49.2 40% $50.0 $43.9 $40.0 30% Green Electricity $30.0 20% Netherlands 23.4% $20.0 19.2
Slide 19: Strong financial performance and predictable margins from core segments
Creating strong financial performance & 19 predictable margins from our core segments Soybean Meal DAR - Consolidated Core Business $/ton $600.00 $477.66 $444.6 $400.00 $342.89 $331.41 $313.70 $200.00 2014 2015 2016 2017 Palm Oil (RBD) US Gulf $/cwt. 50.00 39.94 35.35 36.63 40.00 32.15 30.00 20.00 2
Slide 20: #1 producer of low carbon feedstocks in North America
20 #1 Producer of Low Carbon Feedstocks in North America Transforming animal fats and used cooking oils to clean-burning renewable fuel Diamond Green Diesel is a 50/50 joint venture between Darling Ingredients and Valero Energy Corp. Regular DGD Renewable Diesel Low-Sulfur Diesel DGD reduces greenho
Slide 21: DGD average EBITDA per gallon
21 2014-2017 Average EBITDA = $1.25 per gallon $1.29 $1.13 $1.08 $1.54 $1.281 $1.25 $2.25 $1.19 ----------w/ Blenders Tax Credit (BTC)----------- w/o BTC w/o BTC w/ BTC Gallons- Millions EBITDA- Millions Percentage of DGD sales to LCFS Markets EBITDA per gallon 0% 0% 49% 94% 100% 2014 2015 2016 2017
Slide 22: DGD EBITDA actual and projected
22 2014-2017 Average EBITDA = $1.25 per gallon $1.29 $1.13 $1.08 $1.54 $1.281 $1.25 $2.25 $1.25 $2.25 700 $618.8 600 $1.19 500 $427.5 400 $343.8 275 275 300 $246.8 $237.5 190 190 $163.3 157 $177.0 161 $174.4 161 200 126 100 33.4 $39.7 0 2014 Full Yr 2015 Full Yr 2016 Full Yr 2017 Full Yr 2018 Q1 201
Slide 23: California driving expansion of global LCF market
23 California is driving the expansion of global LCF market California Average Spot price Carbon Price in May 2018 Carbon Reduction Mandate – State of CA $1.54 25.00% 20.00% $.88 18.75% 20.00% 16.25%17.30% 15.00% $.99 13.75% 12.50% 15.00% 11.25% 10.00% $.51 8.80% 7.50% 10.00% 6.30% 5.00% 5.00% 3.50%
Slide 24: Expanding DGD capacity by 2021
24 Encouraging us to expand the capacity of DGD by 2021 • Final cost estimate and detailed engineering funded DGD JV in Final Engineering for phase three • 28 acre site adjacent to expansion to 600 million current DGD facility gallons • Additional rail access • Water access • Decision time – this fa
Slide 25: Transforming DAR and providing a World of Growth
Transforming DAR and providing a “World of Growth” 25 Darling Ingredients Core Business DGD Cash Generation @ 275 million gallons Estimated FCF ($ in millions) ($ in millions) 3 Year Avg $343.8 EBITDA: 3-Year Average (2015-2017) $431.1 $237.5 $343.8 Capex: 3-Year Average (2015-2017) Maintenance Cape
Slide 26: Renewable diesel avoided GHG emissions
26 ENERGY RENEWABLE DIESEL AVOIDED GHG EMISSIONS METRICS PRODUCTION FROM FOSSIL FUEL CONSUMPTION (Used) CONTRIBUTION (Produced) (Bio) Energy Production Energy Consumption 161 million gallons 1.9 million MT CO2e (Bio) Fuel Production 2017 production Mln metric tons fewer GHG emissions GHG Raw Materia
Slide 27: GHG emission footprint metrics
27 GHG EMISSION NET CARBON FOSSIL FUEL RAW MATERIAL FOOTPRINT METRICS EMISSIONS CARBON CAPTURE CONSUMPTION (Used) CONTRIBUTION (Produced) (Bio) Energy Production Energy Consumption 1.7 Mln metric tonnes 5.3 Mln metric tonnes 3.6 Mln metric tonnes (Bio) Fuel CO e emissions 2 CO2e emissions CO2e emiss
Slide 28: Water contribution metrics
28 WATER NET WATER FRESH WATER WATER CONTRIBUTION METRICS CONSUMPTION PRODUCTION CONSUMPTION (Used) CONTRIBUTION (Produced) (Bio) Energy Production Energy Consumption 1.53 Bln gallons 1.54 Bln gallons 97 Mln gallons (Bio) Fuel 5.8 Mln cubic meters 5.9 Mln cubic meters Production 366 K cubic meters m
Slide 29: Continuing our journey
For 136 years, we have touched the lives of many and 29 will continue our journey by…. • Relying on our core values of Entrepreneurship, Transparency and Integrity • Believing in center of the plate dining & meat production growth • Structuring our business model to generate predictable cash returns
Slide 30: DAR: a global growth platform for generations to come
30 DAR— A GLOBAL GROWTH Touching PLATFORM your life FOR every day GENERATIONS TO COME Creating sustainable food, feed and fuel ingredients for a growing population
Slide 31: Financials
FINANCIALS — ta Koes — naps se ft DARLING INGREDIENTS
Slide 32: Consolidated Earnings Overview
Consolidated Earnings 32 Total Total Q1 Q2 Q3 Q4 Total Q1 Q1 2018 Overview US$ (millions) except per share price 2015 2016 2017 2017 2017 2017 2017 2018 • Harsh winter weather in N. America impacted Revenue $ 3,391.3 $ 3,391.9 $ 878.5 $ 894.9 $ 936.3 $ 952.6 $ 3,662.3 $ 875.4 performance Gross Margi
Slide 33: Adjusted EBITDA
Adjusted EBITDA 33 Adjusted EBITDA and Pro Forma Adjusted EBITDA Three Months Ended - Year over Year (US$ in thousands) March 31, April 1, 2018 2017 Net income attributable to Darling $ 97,305 $ 5,829 Depreciation and amortization 78,619 71,114 Interest expense 23,124 21,680 Income tax expense 3,712
Slide 34: Balance Sheet Highlights and Debt Summary
Balance Sheet Highlights and Debt Summary 34 Balance Sheet Highlights Debt Summary (US$, in thousands) March 31, 2018 (US$, in thousands) March 31, 2018 Amended Credit Agreement Cash (includes restricted cash of $142) $ 123,011 Accounts receivable 413,659 Revolving Credit Facility $ 55,374 Total Inv
Slide 35: Food Segment
Food Segment 35 US$ and metric tons Q1 Q2 Q3 Q4 Total Q1 (millions) 2017 2017 2017 2017 2017 2018 Adj. EBITDA Bridge Q1-2017 to Q1-2018 (millions) Revenue (1) $266.2 $278.4 $298.9 $313.5 $1,157.0 $305.5 40 $8.9 $31.9 ($5.9) $4.3 $32.4 Gross Margin 56.8 56.0 60.2 63.6 236.6 56.3 30 $28.1 Gross Margin
Slide 36: Feed Segment
Feed Segment 36 US$ and metric tons Q1 Q2 Q3 Q4 Total Q1 (millions) 2017 2017 2017 2017 2017 2018 Adj. EBITDA Bridge Q1-2017 to Q1-2018 (millions) Revenue $552.6 $549.1 $575.5 $562.3 $2,239.5 $485.8 $75.2 ($66.7) Gross Margin 120.0 126.9 126.0 122.0 494.9 116.7 80 $66.5 $2.0 $68.5 Gross Margin % 21.
Slide 37: Fuel Segment
37 Fuel Segment (Does not include Diamond Green Diesel JV) US$ and metric tons Q1 Q2 Q3 Q4 Total Q1 (millions) 2017 2017 2017 2017 2017 2018 Adj. EBITDA Bridge Q1-2017 to Q1-2018 (millions) Revenue $59.7 $67.4 $61.9 $76.8 $265.8 $84.1 Gross Margin 13.7 12.7 7.6 21.4 55.4 24.2 80 $25.6 Gross Margin %
Slide 38: DGD - Entity Level
38 DGD - ENTITY LEVEL ➢ DGD JV Long term debt of $53.7M has been paid off, total cash of exploring phase $41.0M at March 31, 2018 plus $160.4M of blenders tax credit (BTC) receivable expected Q2 2018 three expansion to 600 million ➢ Entity EBITDA of $1.19 per gallon on 33.4M gallons of gallons sales
Slide 39: Executing World of Growth Strategy
39 Executing World of Growth Strategy: Financial: New Facilities Under Construction: • U.S. Tax Cuts and Jobs Act plus European tax reform adds $88.9 mm, or $0.53 to EPS • Bovine Blood Processing – Mering, Germany Q1-2018 • Ecoson Digester– Denderleuuw, Belgium Q2 2018 • Blenders Tax Credit passed r
Slide 40: Appendix
40 Appendix Creating sustainable food, feed and fuel ingredients for a growing population
Slide 41: Food Segment - Historical
Food Segment - Historical 41 US$ and metric tons Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 (millions) 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2018 Revenue (1) $246.6 $270.5 $260.2 $278.4 $1,055.7 $266.2 $278.4 $298.9 $313.5 $1,157.0 $305.5 Gross Margin 62.4 57.9 50.7 56.6 227.6 56.8 56.0 60.2
Slide 42: Feed Segment - Historical
42 US$ and metric tons Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 (millions) 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2018 Revenue $476.2 $543.0 $531.4 $538.5 $2,089.1 $552.6 $549.1 $575.5 $562.3 $2,239.5 $485.8 Gross Margin 103.5 126.8 117.8 116.2 464.3 120.0 126.9 126.0 122.0 494.9 116.7 Gros
Slide 43: Feed Ingredients Segment - Net Sales
Feed Ingredients Segment – Net Sales 43 Change in Net Sales – Year over Year Three Months Ended April 1, 2017 over March 31, 2018 Rendering Sales Change in Net Sales - 1Q17 to 1Q18 Total Used Fats Proteins Other (1) Rendering Cooking Oil Bakery Other (2) Total Net Sales Three Months Ended April 1, 2
Slide 44: Historical and finished product pricing
Jacobsen, Wall Street Journal and Thomson Reuters 44 Historical Pricing 2018 Finished Product Pricing 2018 Average Jacobsen Prices (USD) Feed Segment Ingredients January February March Q1 Avg. April QTR. Over QTR. Year Over Year Bleachable Fancy Tallow - Chicago Renderer / cwt $26.60 $25.57 $26.20 $
Slide 45: Fuel Segment - Historical
Fuel Segment - Historical 45 US$ and metric tons Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 (millions) 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2018 Revenue $55.6 $62.3 $60.4 $68.8 $247.1 $59.7 $67.4 $61.9 $76.8 $265.8 $84.1 Gross Margin 14.9 15.6 14.2 19.9 64.6 13.7 12.7 7.6 21.4 55.4 24.2 Gro
Slide 46: Collagen - most abundant protein in the body
Collagen – most abundant protein in the body 46 COLLAGEN DISTRIBUTION IN HUMAN BODY (by weight ration of dry mass) 75% Skin Tendons 85% Tendinous 6% Bones 90% muscles (organic bone mass) 70% Joint cartilage 70% Ligaments (c) Collagen molecules Collagen is a triple (triple helices) (b) helix of chain
Slide 47: Peptan collagen peptides for a healthy lifestyle
Peptan®, collagen peptides for a healthy lifestyle 47 Peptan® is the world’s leading collagen peptides brand BONE & JOINT HEALTHY ® AGING HEALTH • Peptan is a natural, bioactive protein, backed by clinical studies, with proven health benefits • Ingredient of choice for manufacturers’ creation of inn
Slide 48: Global collagen peptides market
Global collagen peptides market 48 The market for collagen Collagen Peptides peptides is projected Market Size to grow at a CAGR of 7.1% Trend, 2012-2019 to exceed $820 million by 2019 ($Million) (acc. to MarketandMarkets, 2015) North America is estimated Collagen Peptides as the biggest market toda
Slide 49: Innovative growth: Intrexon joint venture
Innovative growth: Intrexon joint venture 49 “Bugs feed the world” – Our Joint Venture with Intrexon Corporation (April 2016) Black soldier fly larvae provides a high-performance family of ingredients ideal for chickens, exotics, pets, aquaculture and young animals. TINY INSECT, BIG ADVANTAGE o Larv
Slide 50: Locations by continent and process
Locations by continent and process 50 Process USA Canada Europe China S. America Australia Total: Feed Ingredients Segment Rendering - (C3 By-products & UCO) 35 5 18 58 Transfer Stations 54 54 Protein Blending 4 4 Bakery 10 10 Used Cooking Oil (processing only) 8 1 9 Pet Food 3 1 4 Environmental Ser
Slide 51: Non-U.S. GAAP Measures
Non-U.S. GAAP Measures 51 Adjusted EBITDA is presented here not as an alternative to net income, but rather as a measure of the Company’s operating performance and is not intended to be a presentation in accordance with GAAP. Since EBITDA (generally, net income plus interest expenses, taxes, depreci
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