Darling Ingredients Inc. · NYSE:DAR
Darling Ingredients — Darling International — 2013 Denver Food Symposium (Wells Fargo Securities)
42 slides from Darling Ingredients's conference presentation, Jan 23, 2013
Slide 1: 2013 Denver Food Symposium: Managing Volatility in a Value Economy
2013 Denver Food Symposium Managing Volatility in a Value Economy Wells Fargo Securities January 23, 2013 North America’s oldest, largest and most innovative recycling solutions company serving the nation’s food industry Exhibit 99.1
Slide 2: Forward-looking statements
This presentation contains forward-looking statements regarding the business, operations and prospects of Darling and industry factors affecting it. These statements are identified by words such as “may,” “will,” “begin,” “look forward,” “expect,” “believe,” “intend,” “anticipate,” “should,” “potent
Slide 3: Darling International is the recycling solutions company serving the food industry
recycling solutions company serving the nation’s food industry Darling International is the A Family Heritage ► Darling & Co. was founded in 1882 by the Swift and Darling families to meet the needs of the growing Chicago meat-packing industry. ► Over 130 years old ► Listed as 984 on Fortune 1000 ► F
Slide 4: A History of Transition: Feed, Fuel, and Fertilizer
A History of Transition Feed, Fuel, and Fertilizer Fertilizer & Feed Soap & Fertilizer Animal Fats, UCO, Proteins Feed •Commodity ingredients •Specialized pet food ingredients •Custom aquaculture ingredients Animal Fats, UCO Fuel •Boiler fuels •Biodiesel •Renewable diesel (green diesel) Enriched Ani
Slide 5: Our Reporting Segments & Business Model
Our Reporting Segments & Business Model Darling International Inc. Route- based Service Provider Fertilizers Specialty Ingredients Renewable Fuels Food Industry Recycler 5
Slide 6: Recently Repositioning its Rendering Segment
Recently Repositioning its Rendering Segment Our New York Stock Exchange (NYSE) symbol provides a strong connection to both our corporate identity and our 130 years of recycling expertise. It also connects our brand to our owners – the shareholder. We are a PROfessional, PROgressive and PROactive co
Slide 7: What sets DAR apart?
What sets DAR apart? Differentiator National Presence (over 120 locations) Integrated Trucking Value-Added Focus Multi-Specie Plants Integrated Biofuels DAR Regionals Integrated 7
Slide 8: Room to Grow
Room to Grow Base Business Large Market DAR Growing Faster Growing Steadily 59 billion pounds DAR Share 13% Raw Materials (animal by-products) 1,109 % 1 .1 3 % Market Cap Growth2 U.S. Meat Production1 Note 1: USDA 10-yr CAGR in millions lbs Note 2: Darling 10-yr Market Cap Growth 8
Slide 9: Our Value Proposition
Our Value Proposition Transforming waste streams into value-added ingredients Key Raw Material Streams Target Value Add Strategy Beef Poultry Pork Lamb Bakery Grease Wastewater Sludges Pet foods Aquaculture feeds Biofuels Animal feed Fertilizers Grease management systems Fresh oil systems Tanks Supp
Slide 10: Our Performance Profile
Our Performance Profile • National Presence 1 • Integrated Supply Chain with Built-in Margin Management 2 • Exceptional Customers and Suppliers 3 • Solid Margins 4 • Passionate about Growth 5 Superior Return to Shareholders 10
Slide 11: National Presence
BB national Presence
Slide 12: Darling Rendering Processing and Transfer Facilities
Darling Corporate/Regional Offices Darling Facilities Darling Rendering – Processing and Transfer Facilities 12
Slide 13: Darling Bakery Processing and Transfer Facilities
Darling Bakery Processing and Transfer Facilities Bakery Industry Approximately 3.0 million tons of bakery residuals are created annually Servicing commercial baking, snack, cookie and cracker producers Additional food safety regulations and traceability should help “scrape” rates grow 13
Slide 14: Integrated Supply Chain with Built-in Margin Management
Integrated Supply Chain with Built-in Margin Management 2 14
Slide 15: Revenue Business Model: Raw Material/Finished Products
Revenue Business Model Raw Material/Finished Products Diversified supply of raw material Approximately 75% of our raw material is procured under a processing agreement, whereby margins are established and the risk is shared. The balance is a “fee for service” business. 28.74% 10.10% 24.27% 5.76% 9.6
Slide 16: Revenue/Products
Revenue/Products Industry Raw Yield Finished Material Factors Product Finished Products % Category (1) Available Protein Fat 28.74% Beef 48% 13.80% 6.90% 6.90% 24.27% Poultry 35% 8.50% 4.61% 3.89% 10.10% Pork 42% 4.25% 2.12% 2.13% 9.65% Used Cooking Oil 70% 6.75% – 6.75% 5.76% Grocery 45% 2.59% 1.30
Slide 17: A Significant Portion has a Built-In Margin
A Significant Portion has a “Built-In Margin” How We Buy It Darling Formula Pricing Example Industry has evolved to a shared risk procurement model Pricing protocols reduce exposure to commodity price fluctuation and provide minimum margins Raw materials procured under the following pricing arrangem
Slide 18: Darling Historical Financials (Segments)
$1 ,29 7 $ 9 8 4 $1 ,14 5 $1 ,50 1 $1 ,06 2 192 139 195 296 215 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2008 2009 2010 2011 YTD 3Q12 Bakery Revenues Rendering Revenues $ 2 5 5 $ 1 8 4 $ 2 1 1 $ 3 2 3 $ 1 9 4 $53 $19 $26 $71 $51 0 50 100 150 200 250 300 350 400 450 2008 2009 2010 2011 YTD 3Q1
Slide 19: Revenue ($ Millions)
Revenue ($ Millions) 19 Factors: - Finished product prices - Raw material volume/yield - Energy - Operating costs – collection & factory
Slide 20: Exceptional Customers & Suppliers
Exceptional Customers & Suppliers 3
Slide 21: Exceptional Customers & Suppliers
Exceptional Customers & Suppliers 21
Slide 22: Solid Margins
Solid Margins 4
Slide 23: 5-Year Earnings, EPS and Cash Flow
LTM LTM 5-Year Earnings, EPS and Cash Flow Net Income (US$ millions) EBITDA – CAPEX (US$ millions) Earnings Per Share (US $’s) Note: 2008-2010 EBITDA- CAPEX numbers include proforma of Griffin Industries EBITDA (US$ millions) $237 $133 $176 $334 $226 $0 $50 $100 $150 $200 $250 $300 $350 $400 2008 20
Slide 24: Historical Financials - Capex
Historical Financials - Capex Capex (US$ millions) 1 Source: Company Management 1 Griffin capex includes capex and investments, including acquisitions. Note: 2008-2010 includes combined proforma of Griffin Industries $71 $69 $61 $60 $100 $0 $20 $40 $60 $80 $100 $120 2008 2009 2010 2011 LTM Capex 24
Slide 25: Passionate About Growth
Passionate About Growth 5
Slide 26: Passionate About Growth
Passionate About Growth Aug 2008 API Recycling, div of American Proteins Inc. GA Oct 2005 Southeastern Maintenance & Construction Inc. FL, GA Feb 2009 Boca Transport, Inc. GA Dec 2009 Sanimax USA Great Lakes Dec 2010 Griffin Industries SE/Central US Dec 2004 Burrows Industries, Inc. dba Minuteman Pu
Slide 27: Years of DAR Growth
10 Years of DAR Growth ©BigCharts.com 400 3 8 3 3 is} iy Millions
Slide 28: Areas for Growth Focus
Areas for Growth Focus Acquisition of other independent rendering companies New locations for recycling Bakery residuals Integrated oil delivery systems Hexane extraction fat recovery Expansion of Diamond Green Diesel 28
Slide 29: Rendering Companies – Growth Opportunities
Rendering Companies – Growth Opportunities 29
Slide 30: Fresh Oil System
Fresh Oil System Integrated Oil Delivery & Removal Small footprint Additional storage Delivers fresh oil Monitors usage Collects used oil 30
Slide 31: Hampton Extraction Plant
Hampton Extraction Plant Secondary protein nutrients (SPN), also called dissolved air flotation (DAF) float or skimming's, is a wastewater byproduct that is produced by the poultry industry. Today a majority of this product is land applied. We estimate several billion pounds of this product is avail
Slide 32: Diamond Green Diesel
Diamond Green Diesel , DIAMOND GREEN DIESEL
Slide 33: Darling Biofuels: The Path to Here
Darling Biofuels The Path to Here • Tax credit for Biodiesel/ Renewable Diesel implemented • Darling evaluates Biodiesel product and processes • RFS 1 implemented- Ethanol only Darling begins studying biofuels • Darling evaluates over 20 different biodiesel processes • Determines that while feasible
Slide 34: What is DGD?
What is DGD? 50/50 JV with Valero Energy Corporation Construct and operate a 136.7 million gallon Renewable Diesel plant located next to Valero’s 3rd largest oil refinery in Norco, Louisiana using Desmet-Ballestra pre-treatment and UOP eco-fining technologies Agriculture Petroleum $-Millions Total P
Slide 35: Why DGD is Being Built
Why DGD is Being Built Most economical feedstock available – 1.135 billion pounds annually DGD will be the low cost producer of the highest quality product capable of fulfilling the RFS2 biomass-based diesel mandate D-975 diesel fuel is capable of distribution using existing infrastructure • 136.7 m
Slide 36: DGD Feedstock Origination
DGD Feedstock Origination What we use defines our advantage Darling is one of the largest suppliers of animal fats and used cooking oils in the U.S. DGD is expected to consume ~11% of historical 10-year avg. supply of animal fats & used cooking oils DGD will always have available supply of feedstock
Slide 37: DGD Margin Foundation
DGD Margin Foundation How the margins are created RFS2 Mandates Requires minimum annual production of 1 million gallons of biomass-based diesel (ie, biodiesel or renewable diesel only). Renewable RIN valued higher than biodiesel RIN (1.7 vs 1.5) Renewable diesel can be distributed through existing i
Slide 38: RFS2 The Bedrock
RFS2 The Bedrock 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Undifferentiated Advanced Biofuel 1.75 2.00 2.50 3.00 3.50 4.00 4.50 4.50 4.50 5.00 Biomass Based Diesel 1.28 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Cellulosic 0 1.75 3.00 4.25 5.50 7.00 8.50 10.50 13.50 16.00 0 5 10 15 20 25 4
Slide 39: DGD Feedstock & Processing Advantage
Canola oil Soybean oil Palm oil Edible tallow Non-edible tallow Choice white grease Poultry fat Yellow grease 4.06 3.83 3.49 2.98 2.98 2.87 2.66 2.47 Cost per gallon of Biofuel 2007-2012 Average Prices ($) DGD primary feedstocks DGD Feedstock & Processing Advantage Hydrogen vs. methanol Energy effic
Slide 40: DGD Margin Equation
DGD Margin Equation The Bottom Line Item DGD Renewable Diesel Biodiesel (Midwest Soybean) Advantage To: DGD RENEWABLE DIESEL has the ADVANTAGE in: RIN’s value (.22); distribution cost (.15); co-product value (.235); raw material (.62); and processing aid (.04) Note: Above proforma assumes revenue, f
Slide 41: DAR EBITDA & Pro Forma DGD EBITDA
DAR EBITDA & Pro Forma DGD EBITDA Diamond Green Diesel... Creating a New Market U S $ m ill ion s $383 $243 $271 $464 $314 Above pro forma assumes revenue, feedstock and production costs are consistent with projections Diamond Green Diesel Pro Forma EPS (1) DGD pro forma: (EBITDA minus interest, dep
Slide 42: Q&A
North America’s oldest, largest and most innovative recycling solutions company serving the nation’s food industry Q&A 42
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