Darling Ingredients Inc. · NYSE:DAR
Darling Ingredients — Q2 2016 Earnings Presentation
22 slides from Darling Ingredients's earnings presentation, Aug 11, 2016
Slide 1: Second 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 Second Quarter 2016 Earnings Conference Call August 12, 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
3 $859.3 $779.6 $420 $520 $620 $720 $820 $920 Revenue Quarterly Consolidated Revenue 2Q15 1Q16 2Q16 $877.3 • Revenue increase driven by higher finished product pricing for Global fats and proteins in the feed segment • Global raw material volumes continue to be strong • Revenue increase driven by hi
Slide 4: 2016 Second Quarter Overview
o Net income strong - $32.0 million in Q2 vs. $1.1 million in Q1 of 2016 o Net Sales higher - $877.3 million in Q2 vs. $779.6 million in Q1 of 2016 o EPS at $0.19 per diluted share o Adjusted EBITDA - $ 124.0 million in Q2 vs. $ 98.9 million in Q1 16 o DGD Joint venture EBITDA was $18.3 vs. $9.6 in
Slide 5: Adjusted EBITDA and Pro Forma Adjusted EBITDA
5 (1) Foreign currency exchange rates held constant for comparable quarters (€1.00:USD$1.10435 rate April 2, 2016 quarter; €1.00:USD$1.10561 rate July 4, 2015 six months). Adjusted EBITDA and Pro Forma Adjusted EBITDA (US$ in thousands) July 2, April 2, July 2, July 4, 2016 2016 2016 2015 Net income
Slide 6: 2016 Strategy – Delever and Grow
o Continuing focus on margin management • Operational Excellence; organic growth; and bio-fuel maximization o Target debt reduction of $150 million in 2016: year-end target total debt leverage ratio below 4.00 o Paid down debt by $49.9 million in quarter o Working Capital decreased slightly over Q1,
Slide 7: Cash Flow Statement
7 Cash Flow Statement Six Months Ended (US$ in thousands) July 2, 2016 Adjusted EBIDTA $ 222,946 Uses: Cap-Ex (109,406) Acquisitions (8,511) Proceeds from Stock Issuance 143 Stock Repurchase (5,000) Borrowings, net of repayments (48,185) Deferred Loan Costs 0 Cash Interest (10-Q) (41,813) Cash Taxes
Slide 8: Debt Summary, Balance Sheet Highlights, Leverage Ratios
Debt Summary Balance Sheet Highlights Leverage Ratios Net 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. (US$, in thousands) July 2, 2016 Cash (includes restrict
Slide 9: Operational Overview – Q2 2016 Feed
Operational Overview – Q2 2016 9 Non-GAAP EBITDA Margin Feed o Global protein and fat prices rallied in concert with Soy complex before softening late in quarter o Feed demand strong for both proteins and fats o Global rendering volumes solid with continued growth in poultry tonnage o Bakery Feeds d
Slide 10: Finished Product Pricing: Fats and Proteins
Yellow Grease-UCO o Sharp increase in pricing with strong bio fuel and feed demand o LCFS markets beginning to stabilize with sufficient nearby supply o Excellent global feed demand Protein price improvement over 1Q 2016 o Meat and bone meal price recovering over 48% from last quarter o Feed formula
Slide 11: Operational Overview – Q2 2016 Food
Note: Cost of Sales includes raw material costs, collection costs and factory costs. Non-GAAP EBITDA Margin Food Operational Overview – Q2 2016 11 EBITDA Bridge Q1-2016 to Q2-2016 (millions) Rousselot gelatin performance slightly off Q1 • softening in China • improved availability of raw material in
Slide 12: Operational Overview – Q2 2016 Fuel
Operational Overview – Q2 2016 Non-GAAP EBITDA Margin Fuel o Rendac delivers normal performance with steady volumes o Ecoson digester performing nicely while demand for our refined fat for biofuels improved in the quarter o Biodiesel-Canada delivered a profitable performance 12 Note: Cost of Sales i
Slide 13: Diamond Green Diesel (DGD)
DGD earnings recovered in Q2 2016 Q2 2016 EBITDA: $36.7 million entity level or $18.3 million Darling’s share Escalating fat prices ,volatile heating oil and stagnant RIN’s weighed on earnings $156 million tax credit received and a partner dividend of $25 million each received April 2016 C
Slide 14: Appendix – Additional Information
Appendix – Additional Information
Slide 15: Change in Net Sales – 2Q 2015 over 2Q 2016
15 Change in Net Sales - 2Q 2015 over 2Q 2016 Change in Net Sales – Three Months Ended (Sequential 1Q16 over 2Q16) Change in Net Sales -2Q15 to 2Q16 Fats Proteins Other Total Rendering Used Cooking Oil Bakery Other Total N t Sales Second Quarter Ended July 4, 2015 139.9$ 209.9$ 60.1$ 409.9$ 43.1$ 54
Slide 16: Change in Net Sales – Six Months Ended, Feed Ingredients Segment
16 Change in Net Sales – Six Months Ended July 4, 2015 over July 2, 2016 Fats Proteins Other Total Rendering Used Cooking Oil Bakery Other Total Net Sales Second Quarter Ended July 4, 2015 286.6$ 429.9$ 127.8$ 844.3$ 79.2$ 108.1$ 45.3$ 1,076.9$ Changes: Increase/(Decrease) in sales volumes 12.5 34.5
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 Ingredients
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 definition and notes
Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considers 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. Adjuste