Darling Ingredients ((DAR)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Darling Ingredients presented a mixed sentiment, reflecting both positive developments and ongoing challenges. While the company showcased improvements in financial flexibility, gross margins, and strategic joint ventures, these were counterbalanced by difficulties in the renewable fuel segment, a decrease in EBITDA, and a decline in net income. Despite these hurdles, the outlook for the core business remains robust, though there is uncertainty surrounding the timing of regulatory impacts on the DGD segment.
Positive Earnings and Financial Flexibility
Darling Ingredients reported positive earnings for the second quarter of 2025, demonstrating strict capital discipline and enhanced financial flexibility. The company successfully refinanced its debt, locking in borrowing costs for over five years, which positions it well for future financial stability.
Gross Margin Improvement
The company achieved a noteworthy improvement in gross margins, which rose to 23.3% for Q2 2025 from 22.5% in Q2 2024. Year-to-date gross margins also showed an increase, reaching 23.0% compared to 21.9% in the first half of 2024, highlighting operational efficiency and cost management.
Nextida Joint Venture Announcement
In a strategic move to diversify and grow in high-margin areas, Darling Ingredients announced the formation of Nextida, a new joint venture focused on the health and wellness sector. This aligns with the company’s strategy to expand its footprint in lucrative markets.
Feed Segment Margin Expansion
The Feed Segment experienced margin expansion both quarter-over-quarter and year-over-year, driven by rising fat prices and improved operational efficiency. This segment’s performance underscores the company’s ability to adapt to market conditions and optimize profitability.
Improved Debt Position
Darling Ingredients made strides in improving its debt position, reducing total debt net of cash to $3.89 billion as of June 28, 2025, down from $3.97 billion at the end of 2024. This reduction helped lower the leverage ratio to 3.34x, enhancing the company’s financial health.
Decreased Combined Adjusted EBITDA
The company faced a decrease in combined adjusted EBITDA, which stood at $249.5 million for Q2 2025, down from $273.6 million in Q2 2024. This decline reflects challenges in certain segments, impacting overall profitability.
DGD Segment Pressure
Darling’s share of DGD EBITDA experienced significant pressure, dropping to $42.6 million for Q2 2025 from $76.6 million in Q2 2024. The year-to-date figure also saw a decline, indicating ongoing challenges in this segment.
Net Income Decline
Net income for Q2 2025 fell sharply to $12.7 million, or $0.08 per diluted share, compared to $78.9 million, or $0.49 per diluted share, in Q2 2024. Year-to-date, the company reported a net loss of $13.5 million, highlighting the financial pressures faced during the period.
Challenging Renewable Fuel Environment
The renewable fuel segment continues to face a challenging environment, with pressure on margins and regulatory hurdles affecting performance. This segment’s difficulties have been a significant factor in the company’s overall financial results.
Forward-Looking Guidance
Despite the challenges faced, Darling Ingredients remains optimistic about its long-term growth prospects. The company expects full-year combined adjusted EBITDA to range between $1.05 billion and $1.1 billion. Strategic initiatives like the Nextida joint venture and improvements in the regulatory landscape are anticipated to positively impact future performance.
In summary, Darling Ingredients’ earnings call highlighted a mix of positive developments and ongoing challenges. While the company has made strides in financial flexibility and operational efficiency, it continues to navigate difficulties in the renewable fuel segment. The outlook remains optimistic, with strategic initiatives expected to drive future growth.