Darling Ingredients Inc. · NYSE:DAR
Darling Ingredients — Q1 2016 Earnings Presentation
22 slides from Darling Ingredients's earnings presentation, May 12, 2016
Slide 1: First Quarter 2016 Earnings Conference Call
First Quarter 2016 Earnings Conference Call May 13, 2016 Randall C. Stuewe, Chairman and CEO John O. Muse, EVP Chief Financial Officer Exhibit 99.2
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation 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,” “coul
Slide 3: Earnings Summary
Earnings Summary Revenue declines due primarily to lower finished product pricing in the Feed Segment Overall volumes continue to be strong Profitability optics continue to improve Gross Margin improvement despite major finished product declines Business model working Gross Profit and Margin 21.70%
Slide 4: 2016 First Quarter Overview
Pro Forma Adjusted EBITDA - $99.3 million in Q1 vs. $103.1 million in Q4 Sequential improvement when Fuel normalized for blender’s tax credit Year over Year, benchmark protein and fat prices down 13-40%, Pro forma EBITDA down 3.8% International performance strong across all business units Rousselot
Slide 5: Adjusted EBITDA and Pro Forma Adjusted EBITDA
(1) Foreign currency exchange rates held constant for comparable quarters (euro/USD 1.126245 rate April 4, 2015 quarter; euro/USD 1.09344 rate January 2, 2016 three months). (2) Darling's Pro forma Adjusted EBITDA (Non-GAAP) in the above table does not include the DGD Joint Venture Adjusted EBITDA (
Slide 6: Long-Term Strategy - Delever and Grow
Continuing focus on margin management Cost efficiencies; organic growth; LCFS margin opportunities Target debt reduction of $150 million in 2016: year-end target total debt leverage ratio below 4.00 Total debt increased in Q1 because the 4.75% Euro bond was marked to the end of Q1 market FX rates Wo
Slide 7: Cash Flow Statement
Cash Flow Statement Cash Flow Statement Three Months Ended (US$ in thousands) April 2, 2016 Adjusted EBIDTA $ 98,948 Uses: Cap-Ex (53,375) Acquisitions (8,511) Proceeds from Stock Issuance 45 Stock Repurchase (5,000) Borrowings, net of repayments 4,553 Deferred Loan Costs 0 Cash Interest (10-Q) (20,
Slide 8: Balance Sheet Highlights and Debt Summary
Balance Sheet Highlights and Debt Summary Debt Summary Balance Sheet Highlights Leverage Ratios Net Debt on Balance Sheet Total Debt now adjusted to reflect deferred loan cost amortization. Total Debt includes 4.75% euro Bond and Canadian debt which is FX adjusted quarterly. (US$, in thousands) Apri
Slide 9: Feed Segment Operational Overview – Q1 2016
Feed Segment Operational Overview – Q1 2016 EBITDA Margin Feed Protein meal values dipped to decade lows before rebounding in March. Fat prices gyrated upwards during quarter and moved sharply higher late in March Pet Food premiums return with strong consumer demand Global blood volumes strong, pric
Slide 10: Historical Pricing: Jacobsen, Wall Street Journal and Thomson Reuters
Jacobsen, Wall Street Journal and Thomson Reuters Historical Pricing Yellow Grease-UCO Fat prices moving up with increased bio fuel demand Carbon Intensity premium developing Excellent global feed demand Protein pricing down over 11% from Q4 2015 Over supply of soy meal, meat and bone meal, and poul
Slide 11: Food Segment Operational Overview – Q1 2016
US$ and metric tons (millions) Q1 2015 Q2 2015 Q3 2015 Q4 2015 Total 2015 Q1 2016 Seq. % Change Revenue 270.2 283.4 269.2 272.1 $1,094.9 247.9 -8.9% Gross Margin 53.5 60.2 54.8 62.9 231.4 62.3 -1.0% Gross Margin % 19.8% 21.2% 20.4% 23.1% 21.1% 25.1% 8.8% Operating Income 10.8 15.5 11.6 23.3 61.2 21.
Slide 12: Fuel Segment Operational Overview – Q1 2016
Operational Overview – Q1 2016 Fuel Segment Does not include DGD EBITDA. EBITDA includes Blender’s Tax Credit throughout full year. *Excludes raw material processed at the DGD joint venture. EBITDA Margin * Fuel 21.9% 14.8% 23.3% Consistent quarter with normalized Blender’s Tax Credit within biofuel
Slide 13: Diamond Green Diesel (DGD)
First major turnaround successfully completed in approximately 18 days KCS Railroad declared force majeure due to flooding and caused rate curtailment of approximately 4.0 million gallons in quarter Q1 2016 EBITDA: $19.3 million entity level or $9.6 million Darling’s share Escalating fat prices with
Slide 14: Appendix – Additional Information
Appendix – Additional Information
Slide 15: Change in Net Sales
Change in Net Sales - Three Months Ended (Sequential Quarter over Quarter) Change in Net Sales - 1Q 2015 over 1Q 2016 Change in Net Sales – Three Months Ended (Sequential 4Q15 over 1Q16) Feed Ingredients Segment Rendering Sales Change in Net Sales - 4Q15 to 1Q16 Fats Proteins Other TotalRendering Us
Slide 16: Feed Segment - Historical
Has impact of inventory step-up in 1st and 2nd quarter of 2014. Exclusive of non-cash inventory step-up and Darling Ingredients International 13th week during 2014. Raw material process volumes in 2014 have been adjusted to include additional blending materials. (A) Quarters 1, 2 and 3 revenues have
Slide 17: Food Segment - Historical
Food Segment - Historical Has impact of inventory step-up in 1st and 2nd quarter in 2014. Exclusive of non-cash inventory step-up and Darling Ingredients International 13th week during 2014. Raw material process volumes for the first quarter 2014 have been adjusted to be consistent with the presenta
Slide 18: Fuel Segment - Historical
(A) Quarters 1, 2 and 3 revenues in 2014 have been adjusted for re-class between sales and cost of sales. Fuel Segment - Historical (1) Exclusive of non-cash inventory step-up and Darling Ingredients International’s 13th week in 2014. (2) Has impact of inventory step-up in 1st quarter and Darling In
Slide 19: Foreign Currency Impact
The U.S. dollar has strengthened against most of the functional currencies used by the Company’s non-domestic operations. Using actual results for fiscal year 2015 and comparing the yearly average rates to the average rates for fiscal year 2016, the impact of the strengthened dollar would result in
Slide 20: 2016 Finished Product Pricing
Jacobsen, Wall Street Journal and Thomson Reuters Historical Pricing 2016 Finished Product Pricing Feed Segment Ingredients January February March Q1 Avg. April May June Q2 Avg. Bleachable Fancy Tallow - Chicago Renderer / cwt $23.53 $27.10 $30.09 $27.07 $32.93 Yellow Grease - Illinois / cwt $19.03
Slide 21: Locations by Continent and Process
Locations by Continent and Process European categories for rendering of animal by-products: • C3 – food-grade material, for food and feed products • C2 – unfit for food or animal feed, can be used as fertilizer • C1 – must be destroyed; used to generate green energy * Note: List excludes administrat
Slide 22: Adjusted EBITDA Definition
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, depreciation and amortization) is