The company turns food waste into sustainable products. It currently repurposes nearly 10% of the world's meat industry waste streams into products, such as green energy, renewable diesel, collagen, fertilizer, animal proteins and meals and pet food ingredients.
The global ingredients division earned US$244.1m in EBITDA in the quarter, noted CEO, Randall C Stuewe, and that was driven by “strong raw material volumes across the globe, robust finished products prices, including record high fat prices, and growing demand for green energy.”
On an earnings call with analysts today, the CEO weighed in on developments for the feed segment in Q1: “Globally, raw material volumes are up year-over-year (YOY) and we are not seeing any indication of livestock or herd reduction. Fat prices continued to escalate throughout the quarter, while protein prices improved.. and grew sequentially. However, logistical disruptions due to container shortages have kept our prices lower YOY. Additionally, we saw some margin compression relative to Q1 2021, which reflects procurement process lags due to rising prices. We are working diligently to maintain margin structure in a higher energy cost environment, especially in Europe.”
Looking ahead, Stuewe said the business environment remains very favorable for Darling Ingredients. “Rendering volumes are robust and growing. Despite global supply chain concerns, we are optimistic as we have seen some improvement and better raw material availability,” he added.
The financial update follows the announcements last week by Darling of two strategic deals to grow its base business, the completion of the Valley Proteins acquisition, first announced in December 2021, and the signing of a definitive agreement, on May 5, to purchase Brazil's largest independent rendering company, Fasa Group, for about BRL 2.8bn (US$567m/€536m) in cash.
With those two firms under the Darling umbrella, the CEO said the company would "process more than 15m metric tons of the world’s available slaughtered animal by-products or about 15% of the world’s supply.”
The Fasa deal is expected to close by the end of 2022, subject to customary conditions.
The Brazilian group processes more than 1.3m metric tons of beef, pork, and chicken annually through 14 rendering plants, with an additional two plants under construction; it has approximately 2,400 employees.
"Brazil is a leader in global agricultural commodities growth and is expected to take on a bigger role in world's meat production, making it a premier location for rendering growth," said Stuewe.
Fasa will also supplement Darling's global supply of waste fats, making it, said the CEO, a leader in the supply of low carbon waste fats and oils in North and South America to be used in the production of renewable diesel.
The current operating EBIDTA of that Brazilian business is about BRL 500m per year, noted Stuewe, on today’s call.
The Valley Proteins deal closed on May 2, for a purchase price of $1.1bn, plus or minus various closing adjustments. That firm is one of the largest independent rendering companies in the US. As part of the transaction, Darling gains 18 major rendering plants, which will process about 2.4m mt of raw materials per year, and enough fat to produce about 125m gallons of renewable diesel.
“This is a great acquisition. For 2022, we expect a contribution of US$60-70m of new EBITDA and, under current market conditions, I anticipate the business contribution [from Valley Proteins] to be more than US$150m in EBIDTA in 2023 as we address operational synergies,” said the CEO.