Darling Ingredients Inc. · NYSE:DAR
Darling Ingredients — Investor Presentation (May 2017)
38 slides from Darling Ingredients's investor presentation, May 17, 2017
Slide 1: Investor Presentation Spring 2017
Investor Presentation Spring 2017 Randall C. Stuewe, Chairman and CEO Patrick C. Lynch, EVP Chief Financial Officer Melissa Gaither, VP IR and Global Communications Exhibit 99.1
Slide 2: Forward-looking statements
This presentation contains “forward-looking” statements regarding the business operations and prospects of Darling Ingredients Inc., including its Diamond Green Diesel joint venture, and industry factors affecting it. These statements are identified by words such as “believe,” “anticipate,” “expect,
Slide 3: Our strategy: Build, Acquire and Develop
3 …thus growing shareholder value. Our strategy is to be… We BUILD, ACQUIRE and DEVELOP businesses within geographies where we can achieve a sustainable Top 3 market position within 5 years… the Global Leader in the production of the highest quality sustainable protein and nutrient-recovered ingredi
Slide 4: Successful track record of growth
4 Darling & Company Darling-Delaware Inc. - 1962 Darling International Inc.- Public in 1994 Darling Ingredients Inc. - 2014 Creating the only global platform Southeastern Maintenance & Construction 2003 2006 2008 2010 2017 Tuck-In Acquisitions Platform Acquisitions / Investments 2011 2012 2013 2014
Slide 5: A broad and diverse platform
5 continents supporting operations 130+ years in business 200+ locations around the world 10,000 employees internationally $3.4 billion 2016 sales revenue Irving TX headquarters in USA DAR (NYSE) publicly traded since 1994 With a broad and diverse platform Food Pharma Feed Pet food Fuel Bioenergy Te
Slide 6: A world of growth
A unique platform to view the world and see opportunities where others can not. 2014 Growth from Vion Ingredients acquisition for an International footprint A world of growth 6
Slide 7: Population growth and wealth creation drive meat protein demand
7 ...better nutrition evolves and meat proteins become a staple in the global diet With population growth and wealth creation… Source: Company, based on multiple population data reports Source: Food & Agriculture Organization of the United Nations; Organization for Economic Competitionand Developmen
Slide 8: Global meat production generates significant by-products
8 258 million MT and growing at ~1% annually… (per USDA) ...generating ~100 million tons of meat by-products globally. • Darling Ingredients processes ~10 million tons of the world’s meat by-products... creating a tremendous opportunity for both organic and acquisitive growth! DAR Global Meat Produc
Slide 9: Diversified and unique portfolio
9 Offering a diversified and unique portfolio Processed 1.18 million MTProcessed 7.97 million MTProcessed 1.08 million MT **Processed amounts are for 2016
Slide 10: Recognized brands creating Food, Feed and Fuel ingredients
~$1 billion Food company Edible raw material 10Recognized brands creating Food, Feed and Fuel ingredients ~$500 million Fuel company Note: Includes DGD Not fit for human or animal consumption FOOD FEED FUEL Inedible raw material ~$2 billion Feed company
Slide 11: A defined model of identified and managed risk
A defined model of identified and managed risk 70% 20% 5% 5% FEED Spread Managed Margin Commodity Exposed Shared Margin Fee for Service 100% FOOD Spread Managed Margin 100% FUEL Fee for Service Fee for Service • Competition • Government regulations Commodity Exposed • Fat price • Soymeal price • Cor
Slide 12: A portfolio of spread managed businesses
12 FEEDFOOD FUEL(1) Alternative Ingredients Corn Palm Oil Soybean Meal Raw Meat Availability Beef Pork Chicken Currency Euro RMB CAD REAL Global Business Drivers EBITDA Margin Adjusted EBITDA (1) A portfolio of spread managed businesses $28.0 $32.3 $28.7 $39.1 $38.6 $37.4 $25.3 $30.0 $31.7 10.4% 11.
Slide 13: Evaluating both organic and acquisitive growth
13Evaluating both organic and acquisitive growth FEED A- Rendering plant A- Rendering plant A- Rendering plant B- Rendering plants (3) B- Organic fertilizer B- Soldier fly plant B- Blood plant B- Blood plant B- Wet pet food plant FUEL A- Waste hauler B- Biodiesel expansion B- Digester B- Digester B-
Slide 14: California LCFS Carbon Reduction Program and DGD
California LCFS Carbon Reduction Program Baseline Carbon Intensity start 2016 = 102.01 Held constant 2013 through 2015 CA Diesel gallon consumption forecasted at 4 billion gallons in 2020 Source: www.arb.ca.gov/regat/2015/lcfs2015/lcfs15appb.pdf Carbon Credit Avg. Price $/gallon in years 2013, 2014,
Slide 15: Carbon intensity of our plant processes
Carbon intensity is lifecycle emissions (“well-to-wheels”), referring to how much total pollution is generated in the production, transport, storage and use of a transportation fuel. http://www.deq.state.or.us/aq/cleanFuel/qa.htm (“Released” refers to GHG a plant emits from the daily operation). “Ca
Slide 16: Transforming and creating new earnings power
16 *Excludes annual maintenance capex of approximately $10 mm. Diamond Green Diesel @ 275 million gallons Renewable Diesel $206.25 $275.00 $343.75 $412.50 $- $100.00 $200.00 $300.00 $400.00 $500.00 0.75 1.00 1.25 1.50 T o ta l D G D e n ti ty E B IT D A Cash Generation by DGD EBITDA/Gallon: A de-lev
Slide 17: Our commitment to sustainability
17All while responsibly making the planet a better place OUR COMMITMENT TO SUSTAINABILITY
Slide 18: Our world of commitment: Corporate Social Responsibility
18 …IS VISIBLE AND PART OF OUR OPERATIONS …DRIVEN BY METRICS (2018) to SAFE FOOD & FEED • Innovations • Product recalls • Complete traceability • Food Safety programs NEW INNOVATIVE DIETARY PROTEIN SOURCES IMPROVING FEED INTAKE OF YOUNG ANIMALS to CLEAN AIR & WATER • Net clean water returned • GHG r
Slide 19: Our strategy: Build, Acquire and Develop
19 …thus growing shareholder value. Our strategy is to be… We BUILD, ACQUIRE and DEVELOP businesses within geographies where we can achieve a sustainable Top 3 market position within 5 years… the Global Leader in the production of the highest quality sustainable protein and nutrient-recovered ingred
Slide 20: The talents and processes we possess
20The talents and processes we possess • Experienced, international management • Operational excellence • 130+ year history • Track record of strong performance • Strong balance sheet and cash flow • Good risk management • Global growth opportunities • Innovative R&D around the world • Commitment to
Slide 21: To accomplish this journey, we will...
21 o view the world with a long-term horizon o see meat production grow at or above population growth o expand, build and acquire facilities within these protein growth geographies omaintain our strong model, generating predictable cash o reduce our debt and keep a strong balance sheet o deploy capi
Slide 22: DAR: a global growth platform for generations to come
22 Creating sustainable food, feed and fuel ingredients for a growing population DAR— A GLOBAL GROWTH PLATFORM FOR GENERATIONS TO COME
Slide 23: Financials
FINANCIALS DARLING INGREDIENTS
Slide 24: Consolidated Earnings Q1 2017
24 Consolidated Earnings Q1 2017 Overview Year over Year • Global volumes up 4.3% over Q1 2016 • Global pricing increased across most business lines • Food segment reduction related to challenges in South American gelatin business • SG&A expense higher due to incremental one time administrative cost
Slide 25: Adjusted EBITDA
25 Adjusted EBITDA (1) Foreign currency exchange rates held constant for comparable quarters (€1.00:USD$1.10 rate April 2, 2016 quarter; €1.00:USD $1.08 rate December 31, 2016 quarter). Adjusted EBITDA and Pro Forma Adjusted EBITDA (US$ in thousands) April 1, December 31, April 1, April 2, 2017 2016
Slide 26: Balance Sheet Highlights and Debt Summary
26Balance Sheet Highlights and Debt Summary Balance Sheet Highlights Leverage Ratios Debt Summary April 1, 2017 Actual Credit Agreement Total Debt to EBITDA: 3.46 5.50 (US$, in thousands) April 1, 2017 Cash (includes restricted cash of $282) 139,162$ Accounts receivable 389,864 Total Inventories 342
Slide 27: Food Segment Key Drivers Q1 2017
4 6 8 10 12 14 16 18 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 27 Food Segment Key Drivers– Q1 2017 • Rousselot gelatin business delivered a steady performance in China and Europe with slight seasonality in NA and challenges in South America • Sonac edible fats held margins despite weakening palm oil
Slide 28: Feed Segment
12.2% 15.4% 14.8% 13.7% 13.5% 28 Feed Segment Note: Cost of Sales includes raw material costs, collection costs and factory costs. EBITDA Bridge Q4-2016 to Q1-2017 (millions) US$ and metric tons (millions) Q1 2016 Q2 2016 Q3 2016 Q4 2016 Total 2016 Q1 2017 Revenue $476.2 $543.0 $531.4 $538.5 $2,089.
Slide 29: Fuel Segment Key Drivers Q1 2017
29 Fuel Segment Key Drivers– Q1 2017 • Absence of blenders tax credit in 2017 vs 2016 • Sequential difference also related to an insurance settlement and Rendac tariff true-up in Q4 2016 • Ecoson biophosphate plant back on line and gaining momentum • North American biodiesel operating at small losse
Slide 30: Creating sustainable food, feed and fuel ingredients
Creating sustainable food, feed and fuel ingredients for a growing population
Slide 31: Food Segment - Historical
31Food Segment - Historical US$ and metric tons (millions) Q1 2015 Q2 2015 Q3 2015 Q4 2015 Total 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Total 2016 Q1 2017 Revenue $270.2 $283.4 $269.2 $272.1 $1,094.9 $247.9 $272.1 $262.0 $279.9 $1,061.9 $267.8 Gross Margin 53.5 60.2 54.8 62.9 231.4 62.3 57.8 50.7 56.7
Slide 32: Feed Segment - Historical
32 Feed Segment - Historical US$ and metric tons (millions) Q1 2015 Q2 2015 Q3 2015 Q4 2015 Total 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Total 2016 Q1 2017 Revenue $547.5 $529.4 $525.2 $472.2 $2,074.3 $476.2 $543.0 $531.4 $538.5 $2,089.1 $552.6 Gross Margin 123.5 124.5 116.2 96.7 460.9 103.5 126.8 117
Slide 33: Feed Ingredients Segment Change in Net Sales
33 Feed Ingredients Segment Change in Net Sales – Year over Year (1Q 2016 over 1Q 2017) Change in Net Sales – Three Months Ended (Sequential 4Q16 over 1Q17) (1) Rendering Net Sales- Other category includes hides, pet food, and service charges (2) Other Net Sales category includes trap services, indu
Slide 34: Historical commodity pricing
34 Jacobsen, Wall Street Journal and Thomson Reuters Historical Pricing QTR. Over QTR. Year Over Year Comparison Q4-2016 Q1-2017 % Q1-2016 Q1-2017 % Average Jacobsen Prices (USD) Avg. Avg. Change Avg. Avg. Change Bleachable Fancy Tallow - Chicago Renderer / cwt $30.77 $31.35 1.9% $27.07 $31.35 15.8%
Slide 35: Fuel Segment - Historical
35Fuel Segment - Historical (1) Pro forma Adjusted EBITDA assumes blenders tax credit was received during quarters earned in 2015 and Q1 2017 for comparison to 2016 when the blenders tax credit was prospective. US$ and metric tons (millions) Q1 2015 Q2 2015 Q3 2015 Q4 2015 Total 2015 Q1 2016 Q2 2016
Slide 36: JV with Intrexon: black soldier fly larvae
36 • JV with Intrexon – April 2016 • Announced construction of commercial-scale production site May 2017 Black soldier fly larvae for a sustainable, cost-effective and complete aquaculture feed source o Larvae feed off limited-use waste streams*; produce frass which is used as a high- protein, low-f
Slide 37: Locations by continent and process
37 European categories for rendering of animal by-products: • C3 – food-grade material, for food and feed products • C2 – unfit for food or animal feed, can be used as fertilizer • C1 – must be destroyed; used to generate green energy Note: List excludes administrative and dedicated sales offices. L
Slide 38: Adjusted EBITDA definition
38 Adjusted EBITDA is presented here not as an alternative to net income, but rather as a measure of the Company’s operating performance and is not intended to be a presentation in accordance with GAAP. Since EBITDA (generally, net income plus interest expenses, taxes, depreciation and amortization)
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