Darling Ingredients Inc. · NYSE:DAR
Darling Ingredients — BMO Farm to Market Conference 2016
45 slides from Darling Ingredients's conference presentation, May 18, 2016
Slide 1: BMO Farm to Market Conference May 18-19, 2016
BMO Farm to Market Conference May 18-19, 2016 Exhibit 99.1
Slide 2: Forward-looking statements
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,” “could,” “may,” “will,” “sh
Slide 3: The beginning... 1882
The beginning…..1882 Darling & Company was founded in Chicago in 1882 by Ira Darling, in partnership with the Swift family, to meet the needs of the growing meat-packing industry Soap & Fertilizer
Slide 4: Followed by years of USA growth - 1962
Followed by 80 years of USA growth - 1962 Incorporated in the state of Delaware in 1962, name was changed to Darling-Delaware Inc. Soap & Fertilizer Fertilizer & Feed
Slide 5: That has never stopped... 1993
That has never stopped... 1993 Developed our corporate mission statement to reflect our unique position, best-in-class service and ‘green’ expertise to our supplier network: “North America’s oldest, largest and most innovative recycling solutions company serving the food industry.” Company changed n
Slide 6: Creating the only global platform
Creating the only global platform Southeastern Maintenance & Construction 2003 2006 2008 2010 2016 Tuck-In Acquisitions Platform Acquisitions / Investments 2011 2012 2013 2014 J&R Rendering National By-Products Grease Collection & Trap Servicing Assets 2015 2009 2007 Bosland Netherlands Custom Blend
Slide 7: Population growth and wealth creation drive meat demand
...better nutrition evolves and meat becomes a staple in the global diet With population growth and wealth creation... Source: Food & Agriculture Organization of the United Nations; Organization for Economic Competitionand Development (forecast) Global Population Growth Source: Company, based on var
Slide 8: Global meat production, global and growing
258 million tonnes, Global and Growing…… Global meat production 2015-16 per USDA 13.7 m MT 14.3 m MT 22.3 m MT North America 14.8 m MT 5.2 m MT 17.8 m MT South America 2.7 m MT .5 m MT 2.1 m MT Asia/Australia 7.7 m MT 23.4 m MT 10.6 m MT Europe 6.7 m MT 54.9 m MT China 13.4 m MT 258 million mt, Glob
Slide 9: Producing ~100 million mt of by-products globally
34% SWINE By-products 66% Meat 40% POULTRY By-products 60% Meat 42% BEEF By-products 58% Meat Producing ~100 million mt of by-products globally Out of the 258 million mt of meat produced globally, Darling Ingredients – the global leader in converting meat protein by-products into sustainable ingredi
Slide 10: Creating a diversified and unique portfolio
Creating a diversified and unique portfolio Processed 1.07 million metric tons of raw material in 2015. Processed 1.17 million metric tons of raw material in 2015. Processed 7.45 million metric tons of raw material in 2015. Restaurant Services
Slide 11: A business model of identified and managed risk
A business model of identified and managed risk Fixed/Projected Margin US Rendering – 80-85% Canada Rendering – 100% Europe C3 Rendering – 100% Edible Fats – 100% Gelatin – 100% CTH – 100% Shared Margins Restaurant Services – 35% Poultry Meal Pet Food – 100% Fee For Service Environmental Services (T
Slide 12: With predictable margins and spreads
With predictable margins and spreads FEED FOOD FUEL Commodity Prices Corn, Palm Oil Soybean Meal Raw Mat Availability Beef Pork Chicken Currency Euro RMB CAD REAL Global Business Influencers EBITDA Margin Adjusted EBITDA (1) Has impact of inventory step-up in 1st and 2nd quarter of 2014 Fuel Segment
Slide 13: Our business segments: Food, Feed, Fuel
FOOD FEED FUEL Our business segments
Slide 14: Food Segment - Ingredients for living
A producer of crude porcine heparin Sonac food-grade fat has processing facilities in Germany & the Netherlands Laru & Vada brands are Europe’s largest producers of high-quality edible fats for baking and frying fu Leading global supplier of gelatin and hydrolyzed collagen 13 production facilities s
Slide 15: Rousselot - A global leader
Rousselot — A Global leader 13 plant, 4 continent system Producing and marketing gelatin globally Pharma and food focused system Market projected to grow 2-3% per year Rousselot Gelatin Production
Slide 16: Edible Fats
Edible Fats Sonac is the largest producer of edible animal fats in Europe Processing, refinement and packaging of pork and goose fat Schmalz (spreadable fat for breads, frying, baking) Producer of high-quality frying oils and fats for human consumption
Slide 17: A rapidly growing market - collagen peptides
A Rapidly Growing Market – Collagen peptides for a healthy lifestyle Enhances skin texture and tone One of the world’s leading collagen peptides brand Produced at dedicated Rousselot factories in France and Brazil; sold globally Unique bioactive protein: Sports nutrition/health supplements Promotes
Slide 18: Growing our Food Ingredients Segment
Film coating Growing our Food Ingredients Segment Dubuque Iowa expansion Wenzhou China expansion CTH sheep casing sorting workshop in China Gelatin expansions in China Fish Peptan Halal dedicated production Canadian edible animal fats 2015 2016 - 2017 Pill coatings Confectionaries Binding agents Gel
Slide 19: Feed Segment - Nutrients for growth
Feed Segment - Nutrients for growth Converting commercial bakery and snack food residuals into Cookie Meal®, a high-energy corn replacement for animal feed (poultry and aquaculture) Leaders in North America Used cooking oil removal, for animal feed and biofuel production 1 billion pounds collected a
Slide 20: Growing our Feed Ingredient Segment
Growing our Feed Ingredient Segment …focused on serving the growing Pet and Aqua demand Completed 2 new wet and frozen pet food plants in Nebraska & Kentucky (US) Completed expansion of our Zhejiang blood plant…now China’s largest Global Pet Industry 4% annual growth in 2015; by 2019 - $91 billion •
Slide 21: New USA Plants - Pet and Aqua Grade Production
New USA Plants— Pet and Aqua Grade Production Arkansas Rendering Ohio Rendering Paducah, KY Ravenna, NE
Slide 22: Growing our Global Blood Business
Changchun Siping Zhejiang Qionglai Luohe Maquoketa Bad Bramstedt Usnice Spilamberto Maryborough Bovine Porcine Mixed Maryborough Qionglai Siping Luohe Usnice Bad Bramstedt Loenen Maquoketa Loenen Growing our Global Blood Business Recently expanded Zhejiang to China’s largest blood plant Approved pla
Slide 23: New Blood Plants - China
New Blood Plants – China Zhejiang Qionglai
Slide 24: Fuel Segment - Energy for today's world
Collect animal fats and used cooking oils from restaurants, supermarkets, hospitality and other food industry customers Recycled material converted into biodiesel DAR PRO Bioenergy – 1st plant built in USA Rothsay Biodiesel - 1st plant built in Canada End Markets Renewable fuels Biofuels Green elect
Slide 25: Diamond Green Diesel
Diamond Green Diesel…..a true gem of an ingredient 50/50 JV with Valero The low cost producer of biomass-based diesel to US market Initial cost to build PP&E $380mm for 137mm gallons Expanded production to 160mm gallons, 2014 Providing outstanding returns for DAR and Valero shareholders True multi f
Slide 26: DGD provides a hedge on commodity exposure
DGD provides a “hedge” on the commodity exposure of Darling’s USA fats $16.5 $12.30 $25.29 $31.50 $88.5 $81.6 2013 2015 2014 2012 YG/UCO Price $37.31/cwt 2013 YG/UCO Price $34.57/cwt 2014 YG/UCO Price $28.95/cwt 2015 YG/UCO Price $21.95/cwt .0274 x 4.55 mm = $(12.30) $.0562 x 4.55 mm = $(25.29) $.07
Slide 27: DGD and DAR to benefit from the LCFS
And now DGD and DAR to benefit from the LCFS LCFS (State) is separate rule from RFS2 (Federal) Mandates reduction of carbon intensity in transportation fuels (in effect in California, Oregon, parts of Canada and other countries) California has mandated a 10% reduction by 2020, to help reduce carbon
Slide 28: Our strategy
Our strategy is: To be THE Recognized Global Leader in the production, development and marketing of sustainable protein & nutrient-derived ingredients. FOOD FEED FUEL INGREDIENTS for a growing population. We will build, acquire and develop businesses within geographies where we can achieve a sustain
Slide 29: To accomplish this journey, we will...
To accomplish this journey, we will... view the world with a long-term horizon see meat production grow at or above population growth expand, build and acquire facilities within these protein growth geographies maintain our strong model, generating predictable cash reduce our debt and keep a strong
Slide 30: In the short term... the journey we see today
In the short term…The journey we see today….. 2016 2017 2018 2 USA wet pet plants USA gelatin expansion China gelatin expansion China blood expansion USA Bakery Feeds plant Netherlands acquisition Netherlands de-hiding facility 2 USA rendering plants China blood expansion China gelatin expansion New
Slide 31: Long-term global growth strategy
And the Long-term Global Growth Strategy North America New rendering plants Blood plant expansion Fertilizer expansion Gelatin expansion Bolt on acquisition Black Soldier Flies Europe New blood plant New Ecoson plant Geographic expansion Gelatin expansion Organic fertilizer expansion Wet pet food ex
Slide 32: DAR - A global growth platform
Creating sustainable food, feed and fuel ingredients for a growing population DAR—A Global Growth Platform FOR GENERATIONS TO COME
Slide 33: Appendix and Financials
Appendix and Financials DARLING INGREDIENTS -- DARPRO hepac (IY cth *@Rendsc
Slide 34: Earnings Summary
Earnings Summary Three Months Ended - Sequential Three Months Ended - Year over Year April 2, January 2, April 2, April 4, 2016 2016 2016 2015 Revenues $,779,641 $,809,675 $,779,641 $,874,694 Gross profit 180748 179768 180748 190173 Selling, general and administrative expenses 81469 76623 81469 8663
Slide 35: Adjusted EBITDA and Pro Forma Adjusted EBITDA
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 a
Slide 36: Long-Term Strategy - Delever and Grow
Long-Term Strategy - Delever and Grow Continuing focus on margin management Cost efficiencies; organic growth; LCFS margin opportunities Target debt reduction of $150 million in 2016: year-end target total debt leverage ratio below 4.00 Total debt increased in Q1 because the 4.75% Euro bond was mark
Slide 37: Balance Sheet Highlights and Debt Summary
Balance Sheet Highlights and Debt Summary Debt Summary Balance Sheet Highlights Leverage Ratios Net Debt on Balance Sheet Total Debt now adjusted to reflect deferred loan cost amortization. Total Debt includes 4.75% euro bond and Canadian debt which is FX adjusted quarterly. (US$, in thousands) Apri
Slide 38: Food Segment
Food Segment Note: Cost of Sales includes raw material costs, collection costs and factory costs. EBITDA Margin Food 10.4% 11.4% Operational Overview – Q1 2016 EBITDA Bridge Q4-15 to Q1-16 (millions) 10.7% 14.4% 15.6% Rousselot delivers robust Q1 performance China performance steady South America vo
Slide 39: Feed Segment Operational Overview - Q1 2016
Feed Segment Operational Overview – Q1 2016 EBITDA Margin Feed 13.8% 14.3% 14.6% 12.2% 11.5% 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 Glo
Slide 40: Historical finished product pricing
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 41: 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 42: Bridge Pro Forma EBITDA 2013 - 2015
Bridge Pro Forma EBITDA 2013 - 2015 1 billion lbs. collected 70% Yield 65% Non-Formula Each $0.01 Fat Price change $4.5m EBITDA UCO AVG. Pricing 2013: $34.5/cwt 2015: $21.8/cwt Change: $12.7 Shared Model 2013 corn $6.22/bu. 2015 corn $3.89/bu. Change in P&L ($20.7) Int’l Operations 2013 FX EUR 1.327
Slide 43: Non-U.S. GAAP Measures
Non-U.S. GAAP Measures 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, depreciati
Slide 44: New Joint Venture - JV with Intrexon
New Joint Venture JV with Intrexon – April 2016 Black soldier fly larvae for a sustainable, cost-effective and complete aquaculture feed source Larvae feed off limited-use waste streams*; produce frass which is used as a high-protein, low-fat feed ingredient – for aquaculture and animal feed Larvae
Slide 45: Our three pillars of social responsibility
Our three pillars of social responsibility Respecting the Environment In a world of limited natural resources, we must strive to maximize their use. We give a second life to materials that would otherwise be discarded by turning them into food, feed or fuel ingredients, thus positively impacting our
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