Darling Ingredients Inc. · NYSE:DAR
Darling Ingredients — Q3 2016 Earnings Presentation
22 slides from Darling Ingredients's earnings presentation, Nov 10, 2016
Slide 1: Third Quarter 2016 Earnings Conference Call
Randall C. Stuewe, Chairman and CEO John O. Muse, EVP Chief Financial Officer Melissa A. Gaither, VP IR and Global Communications Third Quarter 2016 Earnings Conference Call November 11, 2016 Exhibit 99.2
Slide 2: Forward-looking statements
2 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,” “
Slide 3: Earnings Summary 3Q 2016
3 $50 $60 $70 $80 $90 $100 $110 $120 $130 Quarterly Adjusted EBITDA 3Q15 4Q15 1Q16 2Q16 3Q16 $106.1 $102.7 $98.9 $124.0 $106.2 Gross Profit and Margin 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 22.0% 23.0% 24.0% $140 $150 $160 $170 $180 $190 $200 $210 3Q15 2Q16 3Q16 Gross Profit Gross Margin 21.40%21.37% $
Slide 4: 2016 Third Quarter Overview
o Net income - $ 28.7 million o Net Sales - $853.9 million o EPS at $0.17 per diluted share o Adjusted EBITDA - $106.2 million o DGD joint venture EBITDA - $22.5 million (Darling’s share) o Global rendering raw material volumes remain strong o Feed segment adjusting to lower finished product values
Slide 5: Adjusted EBITDA and Pro Forma Adjusted EBITDA
5 (1) Foreign currency exchange rates held constant for comparable quarters (€1.00:USD$1.12877 rate July 2, 2016 quarter; €1.00 : USD$1.11438 rate October 3, 2015 nine months). Note: See slide 22 for information regarding Darling’s use of Non-GAAP measures. Adjusted EBITDA Adjusted EBITDA and Pro Fo
Slide 6: 2016 Strategy – Delever and Grow
o Target debt reduction of $150 million in 2016: year-end target total debt leverage ratio below 3.90 – Paid down debt by $60.0 million in quarter; YTD paid down $105.0 million – Debt leverage ratio now 3.97 – S&P and Moody’s outlook improved to stable o Working Capital utilization improved over Q2
Slide 7: Cash Flow Statement
7 Cash Flow Statement Cash Flow Statement Nine Months Ended (US$ in thousands) October 1, 2016 Adjusted EBIDTA $ 329,127 Uses: Cap-Ex (168,224) Acquisitions (8,511) Proceeds from Stock Issuance 143 Stock Repurchase (5,000) Borrowings, net of repayments (109,627) Cash Interest (10-Q) (62,395) Cash Ta
Slide 8: Balance Sheet Highlights and Debt Summary
Balance Sheet Highlights Leverage RatiosNet Debt on Balance Sheet 8 (1) Total Debt now adjusted to reflect deferred loan cost amortization. (2) Total Debt includes 4.75% euro bond and Canadian debt which is FX adjusted quarterly. Balance Sheet Highlights and Debt Summary (US$, in thousands) October
Slide 9: Operational Overview – Q3 2016 Feed Segment
Operational Overview – Q3 2016 9 Non-GAAP EBITDA Margin Feed Note: Cost of Sales includes raw material costs, collection costs and factory costs. EBITDA Bridge Q2-2016 to Q3-2016 (millions) Feed Segment 4 6 8 10 12 14 16 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 14.8% 14.6% 11.5% 12.2% 15.4% $83.5 $1.
Slide 10: 2016 Finished Product Pricing Feed Segment
Fat Pricing o Drop in pricing follows a lower corn market o Biofuel demand remains strong with LCFS markets Protein Pricing o Protein prices globally under pressure due to large crops and move to “Vegetable or Animal free diets” o Poultry proteins, while higher in quarter, saw the spread between Fee
Slide 11: Operational Overview – Q3 2016 Food Segment
Note: Cost of Sales includes raw material costs, collection costs and factory costs. Non-GAAP EBITDA Margin Food Operational Overview – Q3 2016 11 EBITDA Bridge Q2-2016 to Q3-2016 (millions) Food Segment 4 6 8 10 12 14 16 18 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 10.7% 14.4% 15.6% 13.7% 9.7% $37.4
Slide 12: Operational Overview – Q3 2016 Fuel Segment
Operational Overview – Q3 2016 Non-GAAP EBITDA Margin Fuel 12 Note: Cost of Sales includes raw material costs, collection costs and factory costs. EBITDA Bridge Q2-2016 to Q3-2016 (millions) Adjusted EBITDA Margins for normalized blenders tax credit in Pro forma EBITDA and in Revenues for 2015 would
Slide 13: Diamond Green Diesel (DGD)
DGD reports strong earnings for Q3 2016 Q3 2016 EBITDA: $45.1 million entity level or $22.5 million Darling’s share Lower fat prices, stable heating oil and rising RIN pricing support earnings Vessel shipment at end of quarter will shift RIN revenue to Q4 Current total debt in JV stands at
Slide 14: Appendix – Additional Information
Appendix – Additional Information
Slide 15: Change in Net Sales – Year over Year and Sequential
15 Change in Net Sales - Year over Year (3Q 2015 over 3Q 2016) Change in Net Sales – Three Months Ended (Sequential 2Q16 over 3Q16) Feed Ingredients Segment (1) Rendering Net Sales- Other category includes hides, pet food, and service charges (2) Other Net Sales category includes trap services, indu
Slide 16: YTD Change in Net Sales – Nine Months
16 YTD Change in Net Sales – Nine Months Ended October 3, 2015 over October 1, 2016 Feed Ingredients Segment (1) Rendering Net Sales- Other category includes hides, pet food, and service charges (2) Other Net Sales category includes trap services, industrial residual services and organic fertilizer
Slide 17: Feed Segment - Historical
(1) Has impact of inventory step-up in 1st and 2nd quarter of 2014. (2) Exclusive of non-cash inventory step-up and Darling Ingredients International 13th week during 2014. (3) Raw material process volumes in 2014 have been adjusted to include additional blending materials. (A) Quarters 1, 2 and 3 r
Slide 18: Food Segment - Historical
(1) Has impact of inventory step-up in 1st and 2nd quarter in 2014. (2) Exclusive of non-cash inventory step-up and Darling Ingredients International 13th week during 2014. (3) Raw material process volumes for the first quarter 2014 have been adjusted to be consistent with the presentation of the se
Slide 19: Fuel Segment - Historical
(A) Quarters 1, 2 and 3 revenues in 2014 have been adjusted for re-class between sales and cost of sales. 19 (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 Ingredients Int'l 13th we
Slide 20: 2015 Finished Product Pricing Feed Segment
20 2015 Finished Product Pricing Feed Segment Ingredients January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct. Nov. Dec. Q4 Avg. Year Avg. Bleachable Fancy Tallow - Chicago Renderer / cwt $29.16 $29.14 $30.53 $29.66 $28.69 $28.95 $29.91 $29.18 $29.00 $29.64 $29.62 $29
Slide 21: Locations by Continent and Process
Process USA Canada Europe China S. America Australia Total: Rendering - (C3 By-products & UCO) 92 5 18 115 Bakery 10 10 Used Cooking Oil processing only 8 1 9 Disposal Rendering - (C1 & C2) 6 6 Food Grade Fat Processing 5 5 Blood Processing 1 4 5 1 11 Bone Processing 2 2 Bio Diesel 1 1 2 Renewable D
Slide 22: Adjusted EBITDA non-GAAP notes
Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity, and is not intended to be a presentation in accordance with GAAP. Adjust