Darling Ingredients Inc. · NYSE:DAR
Darling Ingredients — BNP Paribas High Yield Conference (January 2020)
44 slides from Darling Ingredients's conference presentation, Jan 15, 2020
Slide 1: Darling Ingredients Investor Presentation January 2020
Exhibit 99.1 January 16, 2020 Randall C. Stuewe, Chairman and CEO Brad Phillips, EVP Chief Financial Officer Jim Stark, VP Investor Relations
Slide 2: Safe Harbor Statement
2 Safe Harbor Statement This presentation contains “forward-looking” statements that are subject to risks and uncertainties that could cause the actual results of Darling Ingredients Inc. (the “Company”) to differ materially from those expressed or implied in the statements. Statements that are not
Slide 3: Who is Darling Ingredients
3 Who is Darling Ingredients For over 135 years we have led our industry…. 1882 Founded by Ira Darling in Chicago, as a solution to beef Today, we are the world’s largest processor of slaughtered stockyards growth animal by-products, transforming them into value-added ingredients and solutions to fe
Slide 4: We operate a diverse global platform
We operate a diverse global platform 4 HQ Irving, Texas 135+ years in business DAR (NYSE) $3.4 billion 200+ locations worldwide Publicly traded 2018 sales since 1994 15 countries revenue 5 continents Industries served: ~10,000 employees Pharma, food, animal feed, pet food, bioenergy, fuel, fertilize
Slide 5: Producing a wide array of products
5 Producing a wide array of products…… that touches the lives of families around the world… Animal feed ingredients every day! Providing solutions to feed and fuel a growing world
Slide 6: Closing the loops with sustainable solutions
6 Closing the loops with sustainable solutions Darling is active Livestock in each market... Food, Pharma Suppliers & Health Markets Meat Feed, Pet Foods Processors & Aquaculture Food Biofuels & production Green Energy Food service Specialty industry ...adding value Markets and safeguarding the food
Slide 7: Growing rapidly for the last years
7 Growing rapidly for the last 17 years….. Over 200 locations on 5 continents 2003 2006 2007 2010 2013 2014 2015 2016-18 2018 • New CEO Acquired Listed on Griffin Industries • Diamond Acquired Name change: 13 new DGD Randall National NYSE: acquisition fills Green Diesel Vion Darling processing Phase
Slide 8: Supported by our basic belief
Supported by our basic belief…… 8 As populations grow, countries’ wealth increase, people eat better and that generally includes center of the plate protein From fish ……. to chicken ……… to pork & beef
Slide 9: And we see this trend continuing
9 And we see this trend continuing…… Despite Meatless Mondays and plant-based protein alternatives, in 2018, Americans hit an all-time high in meat consumption, ~270.7 pounds/person/year. Though per capita consumption will rise slower (up 3% thru 2030), the world’s total meat consumption will increa
Slide 10: Darling will play a significant role in feeding and fueling the world
…and Darling will play a significant role in 10 feeding and fueling the world Meat production expected to increase from 218 million MT in 1997-1999, to 376 million MT by 2030 Russia China 1.3 m MT 6.6 m MT Europe 3.3 m MT 8.1 m MT 4.9 m MT 48.5 m MT North America 25.6 m MT 12.6 m MT 15.7 m MT 13.8 m
Slide 11: So how do you think about our business?
So how do you think about our business? 11 Darling is in the protein and fat recovery business
Slide 12: Stating it simply
12 Stating it simply…….. Proteins Fats are sold as sustainable ingredients Collagen Proteins Bioenergy Segmented for reporting into FOOD FEED FUEL
Slide 13: Driving our strategy
13 Driving our strategy of….. Providing natural and sustainable solutions for feeding and fueling a growing population Accomplished through Building Acquiring Developing New Grapeland, TX poultry plant TripleT acquisition, Springdale, AR animal-based ingredient businesses across the globe
Slide 14: And reported as segments
14 And reported as segments…. $1 billion FOOD company $2 billion FEED company $635 million FUEL company FOOD FEED FUEL* Tons: 1.11 million MT Tons: 8.60 million MT Tons: 1.82 million MT EBITDA: $131.3 5-year avg. EBITDA: $308.1 5-year avg. EBITDA: $148.4 5-year avg. Sector Developments: Sector Devel
Slide 15: Creating strong financial performance & predictable margins
Creating strong financial performance & predictable margins from our core segments $600.0 1.35 1.32 $454.0 1.30 $500.0 10,805.0 $512.6 $445.0 $420.8 10,546.2 1.25 10,239.3 $429.4 $400.0 1.20 9,693.7 $300.0 1.18 1.15 8,973.5 1.13 1.10 $200.0 1.108 1.106 1.05 Adjusted EBITDA EBITDA $millionsAdjusted $
Slide 16: A world in transition
However, we see a world in transition 16 8.5 billion humans to feed by 2030 with dwindling resources to provide for them Clean water Safe Clean Food & Clean Energy air Feed We believe Darling has an obligation to develop solutions.
Slide 17: Climate Change is clearly happening
No matter your view of HOW or WHY, 17 Climate Change is clearly happening There is no single answer – we all must do our part. Darling is well positioned to provide sustainable solutions for our growing world.
Slide 18: Darling and Valero created Diamond Green Diesel
In 2013, Darling Ingredients and Valero Energy 18 joined forces to create Diamond Green Diesel Leading green feedstock supplier Leading green fuel producer • Darling (NYSE: DAR) collects and transforms all • Valero (NYSE: VLO) an international manufacturer and aspects of animal by-product streams in
Slide 19: Clean air and clean energy: renewable diesel
19 Creating a solution to help with clean air and clean energy Diamond Green Diesel was originally conceived to fill the RENEWABLE DIESEL (RD) mandated volumes driven by the Renewable Fuel Standard • RD is a drop-in fuel • RD has same chemical properties as petro-diesel, with biofuel advantages • RD
Slide 20: Low carbon biofuels help lower GHG emissions
Low carbon biofuels help lower GHG emissions 20 from tail pipes = Cleaner air California has led the charge on reducing GHG emissions (2007: LCFS) – Low carbon fuels are mandated to replace increasing percentages of petroleum-based diesel fuel Low carbon fuels from animal fats and used cooking oils
Slide 21: Early stages of demand for RD
And yet we are in the early stages of demand for RD 21 California Average Carbon Reduction Mandate – State of CA Carbon Price $/MT, UCO Spot price January 2, 2020 25.00% $196.37 $197.50 20.00% 20.00% 18.75% 17.50% $168.29 16.25% 15.00% 15.00% $100.33 13.75% 12.50% 11.25% $100.33 10.00% 10.00% 8.75%
Slide 22: Renewable Diesel is the solution the world recognizes
22 Renewable Diesel is the solution the world recognizes Renewable Diesel is produced from animal fats/used cooking oils and reduces GHG emissions by up to 85% 20 WORLD BIOMASS BASED DIESEL USAGE (Biodiesel & Renewable Diesel) (billions of annual gallons) 15 2.252 3.097 3.832 10 1.862 z 11.741 11.34
Slide 23: The world will also produce renewable diesel
The world will also produce renewable diesel… 23 but this is positive for Darling’s core business 1 3 180,000 MT 620,000 MT capacity capacity 1 1,000,000 MT capacity 1 500,000 MT capacity 1 4 20,000 MT 1,455,000 MT 2 capacity capacity 240,000 MT capacity 1 1,000,000 MT capacity 1 1 230,000 MT 400,00
Slide 24: Leading processor of low CI feedstocks
Darling is the leading processor of 24 low CI feedstocks in the world… 93% Production Volumes (MTs) 1,600,000 1,505,997 1,342,071 1,385,902 1,400,000 1,284,854 344,569 1,200,000 313,956 316,882 315,717 1,000,000 800,000 z (UCO) Oil Cooking Used Metric Tons Metric 600,000 1,161,428 967,972 1,026,354
Slide 25: A unique opportunity to grow: Diamond II
25 Providing DAR a unique opportunity to grow… • Diamond II construction underway • 675 million total annual gallons renewable diesel Start up late 2021 • Parallel 400 million gallon plant • Diamond II estimated construction costs of $1.1 billion for entire project includes: - expansion on 28-acre s
Slide 26: Attractive historical margin structure
With an attractive historical margin structure 26 DIAMOND GREEN DIESEL – EBITDA per GALLON (Entity Basis) • Capture greater % of LCFS market • Adding 60 million gallon Naphtha plant in 2022 • Lowering CI scores • Renewable Naphtha to Low CI Markets • Reduced per gallon operating expenses SOURCE: Com
Slide 27: How do we see the future?
So how do we see the future? 27 Looking back helps us look to the future… Darling Core Historical Proforma Adjusted EBITDA DGD Historical Adjusted EBITDA Darling’s Share $600.0 300 $200.0 300 $512.6 $180.0 $172.5 $500.0 275 250 275 250 Gallonssold (millions) $445.0 $454.0 $429.4 $160.0 projected $42
Slide 28: Diamond II will transform and revalue DAR
What do we see in our future? 28 Diamond II will transform and revalue DAR Estimated Consolidated Proforma ($millions) $1,400 $1,300 $1,200 $1,000 $794 $794 $747 $800 $600 $1,300.0 $600 Assumptions: $87.4 • 2019 – TTM EBITDA + DAR’s ½ of 275mm $400 $747.0 $794.0 $794.0 gallons @ $2.26 per gallon $51
Slide 29: Did you know that Darling
29 Did you know that Darling… Processes Returns Removes 10% CO2 10 bln equivalent of animal gallons of by-products 450,000 water to worldwide environment cars from road (from DGD production) Produces Provides Avoids 3.3 bln ~12,000 5.4 mln pounds of homes Metric tons of low CI with green CO2 emissio
Slide 30: A company focused on innovation
Darling Ingredients… 30 A company focused on innovation Sustainable natural ingredients For the Providing people Insect Collagen solutions to Proteins Peptides feed and fuel a growing For the planet population For the Digitization Renewable planet & Diesel Automation
Slide 31: Each day, we invest in a greener future
• Each day, we invest in a greener future. Touching • A cleaner world. your life every day • Healthier people and animals. • A profitable future. Feeding and fueling a growing population
Slide 32: Historical Results
32 Historical Results
Slide 33: Consolidated Earnings
Consolidated Earnings 33 Q3 Q4 Total Q1 Q2 Q3 US$ (millions) except per share price Q3 2019 Overview 2018 2018 2018 2019 2019 2019 Revenue $ 812.6 $ 853.1 $ 3,387.7 $ 835.1 $ 827.3 $ 842.0 Gross Margin 164.7 185.4 741.3 184.1 182.6 189.1 • Combined adjusted EBITDA of $147.8 million Gross Margin % 20
Slide 34: Third Quarter 2019 Financial Summary
Third Quarter 2019 Financial Summary 34 Q3 2019 Overview $ in millions Gross Profit and Margin % • Net sales - $842.0 million • Net income - $25.7 million • EPS at $0.15 per diluted share • Combined adjusted EBITDA* - $147.8 million • Potential additional Blenders Tax Credit (BTC) earnings if passed
Slide 35: Feed Ingredients Segment Historical
35 US$ and metric tons Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 (millions) 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 2019 2019 2019 Revenue $552.6 $549.1 $575.5 $562.3 $2,239.5 $485.8 (1) $498.8 (1) $482.7 (1) $485.3 (1) $1,952.6 $495.8 $487.4 $497.0 Gross Margin 119.8 126.7 125.9 122.1
Slide 36: Feed Ingredients Segment Net Sales
Feed Ingredients Segment – Net Sales 36 Change in Net Sales – Year over Year Three Months Ended September 29, 2018 over September 28, 2019 Rendering Sales Change in Net Sales - 3Q18 to 3Q19 Used Total Cooking Three Months Ended Fats Proteins Other (1) Rendering Oil Bakery Other (2) Total Net Sales T
Slide 37: Historical Finished Product Pricing
Jacobsen, Wall Street Journal and Thomson Reuters 37 Historical Pricing 2019 Finished Product Pricing 2019 Average Jacobsen Prices (USD) Feed Segment Ingredients January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct. QTR. Over QTR. Year Over Year Bleachable Fancy Tallow
Slide 38: Food Segment Historical
Food Segment - Historical 38 US$ and metric tons Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 (millions) 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 2019 2019 2019 Revenue (1) $266.2 $278.4 $298.9 $313.5 $1,157.0 $305.5 (2) $276.7 (2) $265.2 (2) $291.7 (2) $1,139.1 $279.2 (2) $274.8 (2) $276.5
Slide 39: Fuel Segment Historical
Fuel Segment - Historical 39 US$ and metric tons Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 (millions) 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 2019 2019 2019 Revenue $59.7 $67.4 $61.9 $76.8 $265.8 $84.1 $71.1 $64.6 $76.2 $296.0 $60.1 $65.0 $68.6 Gross Margin 13.7 12.7 7.4 21.5 55.3 24.3
Slide 40: A successful partnership of Ag and Oil: Diamond Green Diesel
40 A successful partnership of Ag and Oil…… Diamond Green Diesel (50% Joint Venture)
Slide 41: Renewable fuel is not solely supported by government mandates
But…. renewable fuel is not solely supported by 41 government mandated programs… RD originally received support from programs intended …and then through agreements & programs, to help agriculture and ensure energy security… focused on combatting climate change… Renewable Fuel Standard Volumes by Yea
Slide 42: Renewable Fuel Mandates helped drive initial demand
Renewable Fuel Mandates helped drive initial demand 42 State (USA) Global Low Carbon Fuel Standard - LCFS • 66 countries have adopted mandates or target goals to reduce emissions • Low Carbon Fuel Standard mandate was enacted in • British Columbia, European Union and United Kingdom have 2007 by the
Slide 43: Adjusted EBITDA and Pro Forma Adjusted EBITDA
Adjusted EBITDA 43 Adjusted EBITDA and Pro Forma Adjusted EBITDA Three Months Ended - Year over Year Nine Months Ended - Year over Year (US$ in thousands) September 28 September 29 September 28 September 29 2019 2018 2019 2018 Net income/(loss) attributable to Darling $ 25,721 $ (6,037) $ 69,991 $ 6
Slide 44: Adjusted EBITDA definition
44 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. Adj
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