Darling Ingredients Inc. · NYSE:DAR
Darling Ingredients — BofAML Leveraged Finance Conference 2017
29 slides from Darling Ingredients's conference presentation, Nov 29, 2017
Slide 1: BofAML Leveraged Finance Conference Presentation November 2017
BofAML Leveraged Finance Conference Presentation November 2017 Exhibit 99.1
Slide 2: Safe Harbor Statement
1 Date Safe Harbor Statement This presentation contains “forward-looking” statements regarding the business operations and prospects of Darling Ingredients Inc. (the “Company”) and industry factors affecting it. These statements are identified by words such as “believe,” “anticipate,” “expect,” “est
Slide 3: Company & Segment Overview
2 Date Company & Segment Overview CREATING SUSTAINABLE FOOD, FEED, AND FUEL INGREDIENTS FOR A GROWING POPULATION
Slide 4: Our Strategy
3 Date Our Strategy …thus generating substantial cash flow and growing shareholder value. We seek to BUILD, ACQUIRE and DEVELOP businesses within geographies where we can achieve a sustainable Top 3 market position within 5 years… To be the Global Leader in the production of high quality sustainable
Slide 5: Creating a Global Platform
4 Date Creating a Global Platform Darling & Company Darling-Delaware Inc. – 1962 Darling International Inc. – Public in 1994 Darling Ingredients Inc. – 2014 Southeastern Maintenance & Construction 2003 2006 2008 2010 2017 Tuck-In Acquisitions Platform Acquisitions / Investments 2011 2012 2013 2014 J
Slide 6: With Population Growth and Wealth Creation…
5 Date With Population Growth and Wealth Creation… ...better nutrition evolves, and meat proteins become a staple in the global diet Source: Company, based on multiple population data reports Source: Food & Agriculture Organization of the United Nations; Organization for Economic Competitionand Deve
Slide 7: DAR Processes ~10% of the World's Animal By-Products
6 Date DAR Processes ~10% of the World’s Animal By-Products Global Meat Production 2016 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 4.1 m MT 0.0 m MT 3.9 m MT India 2.7 m MT 0.5 m MT 2.1 m MT Asia / Australia 6.7 m MT 54.9 m MT 13.4 m MT China1.4m MT 2.6 m
Slide 8: Darling Has a Diversified and Unique Portfolio
7 Date Darling Has a Diversified and Unique Portfolio Processed 1.08 million metric tons of raw material in 2016 $1.1bn revenue, $131mm Adj. EBITDA Processed 1.18 million metric tons of raw material in 2016 $247mm revenue, $58mm Adj. EBITDA, $87mm DAR share of DGD Adj. EBITDA Processed 7.97 million
Slide 9: A defined model of identified and managed risk
8 Date A defined model of identified and managed risk Fee for Service •Competition •Government regulations Commodity Exposed • Fat price •Soymeal price •Corn Price Spread Managed Margin •Raw material availability • Food demand • Pharma demand Shared Margin • Fat price • Poultry meal pet food spread
Slide 10: Feed Segment – Nutrients for Growth
9 Date Feed Segment – Nutrients for Growth o Converting commercial bakery and snack food residuals into Cookie Meal®, a high-energy corn replacement for animal feed (poultry and aquaculture) o Leaders in North America o Used cooking oil removal, for animal feed and biofuel production o 1 billion pou
Slide 11: Feed Segment Performance and EBITDA Bridge
10 Date EBITDA Bridge Q3-2016 to Q3-2017 (millions) Feed Segment Performance Key Drivers – Q3 2017 o Global volumes remain strong. Improving North American slaughter o Fat pricing held firm during the quarter but trended lower during the back end due to uncertainty regarding biofuel mandates and typ
Slide 12: Growing our Feed Ingredient Segment – Pet and Aqua Demand
11 Date Growing our Feed Ingredient Segment – Focused on Serving the Growing Pet and Aqua Demand Global Pet Industry 4% annual growth in 2015; by 2019 - $91 billion Pet ownership increases with urban population rise Rise in disposable incomes Increased awareness for pet safety and health; pets
Slide 13: Food Segment – Ingredients for Living
12 Date Food Segment – Ingredients for Living o A producer of crude porcine heparin o Sonac food-grade fat has processing facilities in Germany & the Netherlands o Laru & Vada brands are Europe’s largest producers of high-quality edible fats for baking and frying o A leading global supplier of gelat
Slide 14: Food Segment Performance
13 Date Food Segment Performance Key Drivers – Q3 2017 o Rousselot gelatin business delivered stabilized results due to strong sales volumes and improving conditions in South America. o Sonac edible fats delivered increased performance with a stabilized palm oil market o CTH casings business produce
Slide 15: Food Segment Performance
14 Date Food Segment Performance Film coating Expansion of Gelatin plant in France Dubuque Iowa expansion Wenzhou China expansion CTH sheep casing sorting workshop in China Gelatin expansions in China, USA, Brazil Expanded Peptan production--Fish Halal dedicated gelatin production Ca
Slide 16: Fuel Segment – Energy for Today's World
15 Date Fuel Segment – Energy for Today’s World o Collect animal fats and used cooking oils from restaurants, supermarkets, hospitality and other food industry customers o Recycled material converted into biodiesel DAR PRO Bioenergy – 1st Company plant built in USA Rothsay Biodiesel - 1st Compan
Slide 17: Fuel Segment Performance
16 Date Fuel Segment Performance o Ecoson, bioenergy business, was curtailed during the quarter to address current regulatory requirements. Capital improvements underway to regain needed efficiencies o Rendac, disposal rendering business, received business interruption insurance advance during quart
Slide 18: Diamond Green Diesel – A Gem of an Ingredient
17 Date Diamond Green Diesel (“DGD”) - A Gem of an Ingredient 3Q16 4Q16 Total 2016 1Q17 2Q17 3Q17 DAR Share of Adj. EBITDA $22.5 $36.7 $87.2 $5.0 $12.4 $10.6 Production (Gallons in millions) 43.8 42 158.1 32.6 43.7 41.7 Gallons Sold / Shipped 42.5 46.6 160.9 32.7 40.5 43.0 Background & Rationale o 5
Slide 19: New LCFS Standards Driving Expansion Plans
18 Date New LCFS Standards Driving Expansion Plans and Enhancing Contribution to Darling 1.0% 1.0% 1.0% 2.0% 3.5% 5.0% 7.5% 10.0% 2013A 2014A 2015A 2016A 2017E 2018P 2019P 2020P California LCFS Carbon Reduction Program $0.71 Jul-Dec $0.30 Fiscal $0.52 Fiscal $1.01 Fiscal Carbon Credit Avg. Price $ /
Slide 20: Financial Review
19 Date Financial Review CREATING SUSTAINABLE FOOD, FEED, AND FUEL INGREDIENTS FOR A GROWING POPULATION
Slide 21: The 2017 Strategy – A World of Growth
20 Date The 2017 Strategy – “A World of Growth” Continue to target debt reduction in 2017 o Paid down debt by $18.5 million in third quarter; YTD paid down $69.5 million o Total leverage ratio of 3.56x, secured debt leverage ratio of 1.30x as of 30-Sep-2017 (1) Targeting Working Capital improvem
Slide 22: Q3 2017 Overview
21 Date Q3 2017 Overview Year over Year • Global volumes up 3.8% over 3Q 2016. • Gross margin compression driven by Fuel Segment. Operating challenges at the company’s Ecoson bioenergy plant, absence of a Blenders Tax Credit and business interruption at Rendac- Son facility explain the variance. • G
Slide 23: Historical Financials
22 Date Source: Company Management See Cautionary Statement at end of this presentation. Revenue (US$ millions) Adj. EBITDA (US$ millions) Capex (US$ millions) Historical Financials $3,956 $3,397 $3,398 $3,601 2014A 2015A 2016A LTM 30-Sep-17 $434 $413 $442 $436 $82 $89 $87 $65 $515 501 529 $501 2014
Slide 24: Key Credit Highlights
23 Date Key Credit Highlights Global, Diversified Platform Across Feed, Food, and Fuel Segments Producer of High Quality Sustainable Ingredients, Supported by Industry and Macro Dynamics Proven Economic Model with High Barriers to Entry Track Record of Strong Financial Performance and Margin
Slide 25: Appendix
24 Date Appendix
Slide 26: Adjusted EBITDA Reconciliation
25 Date Adjusted EBITDA Reconciliation Darling Adjusted EBITDA Total 2014 Total 2015 Q3 2016 Q4 2016 Total 2016 Q1 2017 Q2 2017 Q3 2017 LTM 9/30/2017 (US$ in millions) Net income attributable to Darling $64 $79 $29 $41 $102 $6 $9 $8 $63 Depreciation and amortization 270 270 71 77 290 71 73 77 299 In
Slide 27: Adjusted Segment EBITDA Reconciliation
26 Date Adjusted Segment EBITDA Reconciliation Feed Segment Adjusted EBITDA Q3 2016 Q4 2016 Total 2016 Q1 2017 Q2 2017 Q3 2017 LTM (US$ in millions) Segment Income $35 $25 $116 $31 $39 $34 $130 Depreciation and amortization 44 49 179 44 44 47 184 Equity in Net Income of Unconsolidated Subsidiaries -
Slide 28: DGD EBITDA Reconciliation
27 Date DGD EBITDA Reconciliation DGD Adjusted EBITDA Total 2014 Total 2015 Q3 2016 Q4 2016 Total 2016 Q1 2017 Q2 2017 Q3 2017 LTM (US$ in millions) Net Income $128 $144 $36 $65 $140 $1 $16 $14 $97 Depreciation and amortization $18 $20 7 7 28 8 8 7 30 Other (income) -- -- -- -- (1) -- -- -- (1) Inte
Slide 29: DGD Provides a Hedge on Commodity Exposure of DAR's U.S. Fats
28 Date DGD Provides a “hedge” on Commodity Exposure of DAR’s U.S. Fats o DAR collects approximately 1 billion pounds of used cooking oil annually o Yielding nearly 700 million pounds of finished product to market o Approximately 35% is under shared risk formula pricing o The balance has commodity o
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