Darling Ingredients Inc. · NYSE:DAR
Darling Ingredients — Darling International — Investor Presentation (March 2011)
37 slides from Darling Ingredients's investor presentation, Mar 30, 2011
Slide 1: America's leading provider of rendering, recycling and recovery solutions
Exhibit 99.1 America’s leading provider of rendering, recycling and recovery solutions to the nation’s food industry …converting waste streams into sustainable feed and fuel ingredients.”
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements regarding the business operations of Darling and the industry in which it operates. These statements are identified by words such as “may,” “will,” “expect,” “believe,” “intend,” “anticipate,” “should,” “estimate,” “con
Slide 3: America's Leading Provider of Rendering, Recycling and Recovery Solutions
WE are America’s Leading Provider of Rendering, Recycling and Recovery Solutions to the Nation’s Food Industry Founded in 1882 and headquartered in Dallas, TX Approximately 3,300 employees Listed on the NYSE (DAR) LARGEST renderer with over 130 locations nationwide in 42 states LARGEST bakery waste
Slide 4: Our Platform
Our Platform Rendering Cooking Oil Removal Cooking of non-edible meat products (beef, pork, Collection and processing of spent cooking oil to poultry) into usable ingredients produce ingredients for animal feed or bio-fuel Key Suppliers End Products Key Suppliers End Products o Slaughter houses o An
Slide 5: Rendering…. Our Core Business
Rendering…. Our Core Business Rendering Industry Rendering Industry Growth Drivers Animal and food by-product recycling industry is Raw material volumes expected to increase “mission critical” in the food supply chain o Meat production to feed the world Most efficient and environmentally sound dispo
Slide 6: What Does Rendering Do?
What Does Rendering Do? Kills pathogenic organisms Average o Pathogens Jacobsen that may threaten Index human and Prices animal health thrive(at onthe specified perishable delivery organic point) materials Protects the environment Recycles nutrients: o For use in animal feed and in fertilizer o Prev
Slide 7: What's Available to the Rendering Industry to Recycle?
What’s Available to the Rendering Industry to Recycle? Average Jacobsen Wastes generatedIndex by the Prices meat and (atfood processing the specified industries delivery point) Amount Source (million pounds) On-farm and pre-slaughter 3,702.4 Inedible byproducts removed at slaughter 39,047.6 Downstre
Slide 8: Source and Potential Volumes of Animal Byproducts Available for Rendering
Source and Potential Volumes of Animal Byproducts Available for Rendering We estimate 40-50% of tonnage is available to non-integrated rendering companies Weights in million pounds Farm & pre-slaughter Slaughter Meat processing Grocery store Specie losses 1 losses 2 losses 3,4 losses 4 Total Beef 1,
Slide 9: Rendering: Producing Sustainable Green Ingredients for Feed and Fuel
Rendering: Producing Sustainable Green Ingredients for Feed and Fuel Rendering Animal Fats Animal Proteins Hides Finished Renewable Pet Animal Hog Poultry Pet Soap Leather Products Fuels Food Feed Feed Feed Food Component Linoleic Oleic Stearic Shoes Glycerine Fertilizer Garment By-Products Acid Aci
Slide 10: Restaurant Services: Producing Sustainable Green Ingredients for Feed and Fuel
Restaurant Services: Producing Sustainable Green Ingredients for Feed and Fuel Recovery of Used Cooking Oil Chemical Industrial Energy uses uses Finished Animal Renewable Products Feed Fuels Lubricants Rubber Boiler fuel Textiles Plastics Biodiesel Plastics Tires Green diesel Cleaners Lubricants 10
Slide 11: Bakery Waste Recycling
Bakery Waste Recycling Bakery Industry Commercial Baking Growth Drivers $351 billion U.S. bakery industry provides billions of 5-10% of “scrape” rate and growing pounds of inedible bakery waste each year Additional food safety regulations and traceability Service wholesale baking, snacks, cookies an
Slide 12: Bakery: Producing Sustainable Green Ingredients for Feed
Bakery: Producing Sustainable Green Ingredients for Feed Raw Dough, Baked Goods, Snack Items Dried and Standardized Packaging is burned for fuel Cookie Meal 12
Slide 13: Environmental Services
Environmental Services #1 Grease Trap Maintenance and Cleaning Service Operates in 35 major markets Significant synergies with our rendering and grease plants (low cost wastewater disposal) Approximately 33,000 customers with ample customer bundling opportunities Municipalities are driving increased
Slide 14: Grease Trap Maintenance
Grease Trap Maintenance Wastewater is collected from Food Service Establishments Solids are filtered Solid waste is Land filled Brown grease is recovered Animal Feed Fuel 14
Slide 15: A Platform of Value and Opportunity
A Platform of Value and Opportunity Positive Industry #1 Platform Across Fundamentals 1 2 the Food Recycling Spectrum Strong Financial Attractive Business Performance & Cash 6 3 Model with Solid Flow Generation Risk Management Green Diesel Growth and Margin 5 4 Joint Venture Expansion Opportunities
Slide 16: Inputs Key Driver – Animal Production
Inputs Key Driver – 1 Positive Industry Fundamentals Animal Production U.S. Animal Agriculture Annual U.S. Protein Production (million pounds) Processing Volume 33 million cattle 50,000 1970– 2009 CAGR: 3.8% (49% of live weight not used for human food) 40,000 110 million hogs (44% not used for human
Slide 17: Inputs Key Driver – Commodity Momentum
Inputs Key Driver – 1 Positive Industry Fundamentals Commodity Momentum While the agriculture complex is near historical o Biomass-based Diesel (BMD) cannot be less than 1 highs, it is not supply-constrained but is demand- billion gallon/year beginning 2012 driven by global BIOFUEL mandates and stro
Slide 18: Corn Prices: Firm for the Future
Corn Prices: “Firm for the Future” 1 Positive Industry Fundamentals CBOT Corn Chart - 1980 thru Present ---------Billions of annual bushels--------- CORN NON-ETHANOL SURPLUS 2008 Commodity SUPPLY DEMAND NO ETHANOL Speculation Run 99/00 9.4 9.0 0.4 U.S. Drought 1995/1996 00/01 9.9 9.2 0.7 Prod: 7.374
Slide 19: Darling's National Platform
Darling’s National Platform – 2 #1 Platform Across the Food Recycling Spectrum A superior Platform to Assist Customers Nationwide Network of over 130 facilities from coast to coast Breadth to service national accounts Footprint that allows Darling to grow organically and acquisitively Darling Intern
Slide 20: Diverse Raw Material Suppliers
#1 Platform Across 2 the Food Recycling Diverse Raw Material Suppliers Spectrum The collection, processing and pricing of raw materials is key to Darling’s success Diverse mix of beef, pork and poultry raw materials and the largest recycler of bakery waste and cooking oil Darling collects raw materi
Slide 21: Strong Rationale for Griffin Acquisition
Strong Rationale for 2 #1 Platform Across the Food Recycling Griffin Acquisition Spectrum Strategic Rationale Balances Raw Material Sources Completed missing link in national footprint Darling 2009 Griffin 2009 Poultry Beef/Pork 11% 10% Diversification of raw materials supply Cooking Oil Acquired le
Slide 22: Attractive Business Model
Attractive Business 3 Model with Solid Attractive Business Model Risk Management Key Metrics Raw material “Formula” basis: fixed margin processing relationship with suppliers procurement “Non-formula” basis: suppliers either paid a fixed price, not paid, or charged for the expense of collection Raw
Slide 23: Built-In Margin and Risk Management Tools
Built-In Margin and 3 Attractive Business Model with Solid Risk Management Tools Risk Management Darling Procurement Darling Formula Pricing Example Industry has evolved to a shared risk Indicative Formula Terms procurement model Product Finished price Total yield Animal Fats $30.00cwt 26% Pricing p
Slide 24: Growth and EBITDA Expansion Opportunities
Growth and Margin 4 Growth and EBITDA Expansion Expansion Opportunities Growth and EBITDA Expansion Opportunities National footprint will provide customer growth opportunities and potential margin expansion Value-adding of product streams and new waste inputs Meaningful synergy opportunity Bakery bu
Slide 25: Focus on Premium and Value Added Products
Focus on Premium and Value Growth and Margin 4 Expansion Added Products Opportunities Strategic Focus on Premium and Value-Added Products Griffin’s Focus on Value-Add and Branding of Ingredients Opportunity to move more of Darling’s products into Griffin’s premium/value-added products 57% Differenti
Slide 26: Synergy….delivery of value
Growth and Margin 4 Expansion Synergy….delivery of value Opportunities While limited overlap exists geographically, there is still significant opportunity to capture synergies over time Routing improvements (Florida, Georgia, Indiana, Ohio and Texas in 2011) o Closure of transfer stations & some sma
Slide 27: A proven track record of growth…
Growth and Margin 4 Expansion A proven track record of growth… Opportunities Since 2003, Darling has acquired and integrated 10 companies investing over $1.1 Billion Oct 2005 July 2007 Dec 2008 Dec 2009 Southeastern Ace Grease Service J&R Rendering, Inc. Maintenance & Sanimax USA KC metro NYC metro
Slide 28: Focus on Growing the Business…
Growth and Margin 4 Expansion Focus on Growing the Business… Opportunities Growing the Bakery Business Growing Rendering & Grease Collection Leader in the bakery waste business Darling is the leader in both rendering o Geographic opportunity to build or buy and grease collection o Traceability and n
Slide 29: A Potential Game Changer…… Green Diesel Joint Venture
A Potential Game Changer…… 5 Green Diesel Low quality animal fats to hydrocarbon Joint Venture Proposed 50/50 JV with Valero subject to DOE Loan Located adjacent to Valero’s St. Charles Refinery Creates a new market for Darling’s feed stocks Represents significant margin opportunity Creates a natura
Slide 30: What is Diamond Green Diesel?
5 Green Diesel What is Diamond Green Diesel? Joint Venture Joint Venture between Darling International & Valero Energy Corporation Ownership: 50/50 Management: Valero employees reporting to/directed by Joint Venture Board Annual Renewable Diesel 136.7 million Annual 9,300 Barrel Per Day gallons Anim
Slide 31: Diamond Green Diesel – What are the Drivers of Profitability?
Diamond Green Diesel – 5 Green Diesel Joint Venture What are the Drivers of Profitability? RFS2 requires a MINIMUM of 1 billion gallons of Biomass-based Diesel be blended annually in U.S. diesel pool Renewable Fuel Only two products can fulfill Biomass-based Diesel mandate – they are Standard Renewa
Slide 32: Why Darling is Investing
5 Green Diesel Why Darling is Investing Joint Venture Annual Average Price / Gallon $5.00 $4.50 $4.04 $4.00 $3.33 $3.50 $3.12 $3.20 $2.81 $2.76 $3.00 $2.50 $2.25 $1.89 $1.96 $1.81 $2.46 $2.00 $2.32 $1.99 $1.93 $1.50 $1.00 $1.39 $1.44 $1.36 $1.23 $0.95 $1.06 $0.50 $0.00 2001 2002 2003 2004 2005 2006
Slide 33: The ultimate built-in hedge!
The ultimate built-in hedge! As corn gets cheaper, traditionally fat is cheaper and our earnings are impacted. Assuming petroleum pricing remains stable to higher… Cheaper Corn = Greater Earnings in the “green diesel” plant. 33
Slide 34: Overview of St. Charles Refinery Green Diesel Location
Overview of St. Charles Refinery 5 Green Diesel Joint Venture Green Diesel Location 34
Slide 35: Historical Financials
Strong Financial Performance & 6 Historical Financials Cash Flow Generation Revenue (US$ millions) EBITDA (US$ millions) $1143 $1489 $1123 $1340 $213 $308 $190 $237 1 Capex (US$ millions) EBITDA - Capex (US$ millions) $35 $71 $69 $61 $178 $237 $121 $176 Source: Company Management 1 Griffin capex inc
Slide 36: Pro Forma: Balance Sheet
Strong Financial Performance & 6 Pro Forma: Balance Sheet Cash Flow Generation Balance Sheet as of January 2011 (US $ in millions) Darling Combined Pro Forma 1/01/2011 Equity Adjustments Pro Forma Cash and cash equivalents $19.2 $19.2 Restricted cash 0.4 0.4 Accounts receivables, net 103.7 103.7 Inv
Slide 37: The Original Recycling Company…. Q&A
The Original RECYCLING COMPANY…. Sustaining Innovating Renewing Q&A
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