Darling Ingredients, a renewable diesel and feedstock producer based in Irving, Texas, reported a notable decrease in net income for the fourth quarter of 2023. Despite this, executives remain optimistic about improved cash flow and debt reduction in 2024.
Financial Performance
In Q4 2023, Darling’s net income stood at $84.5 million, marking a 46% decrease from the $156 million reported in the same period in 2022. Furthermore, year-over-year income also witnessed a 12% decline from $737 million in 2022 to $647 million in 2023.
Market Challenges
Randall Stuewe, Chairman and CEO of Darling, highlighted the company’s resilience in delivering Q4 results amidst “significant volatility in the global food, feed, and fuel ingredient markets.”
Sales Performance
Although net sales slightly decreased to $1.6 billion from $1.7 billion in Q4 2022, total sales for 2023 increased by 3.9% to $6.7 billion compared to the previous year.
Renewable Diesel Ventures
Darling’s joint venture, Diamond Green Diesel, with Valero Energy witnessed a substantial increase in renewable diesel sales, selling 336 million gallons in Q4 2023 as opposed to 208 million gallons in the same period of 2022. The company reported a gross margin of $33 million for fuel operations during this quarter, up from $30 million in Q4 2022.
Analysis of Company Margins
Stuewe emphasized that Darling’s DGD plant experienced a significant impact on margins due to various factors such as lower diesel prices, RIN, and LCFS values. Additionally, there was a decrease in market inventory valuation for renewable diesel.
Exceeding Projections
Despite these challenges, the joint venture is surpassing Darling’s 12-year EBITDA projection. The quarter achieved 81cts per gallon, exceeding the predicted 79cts. Stuewe believes that with the increasing availability of renewable diesel in the market, fat prices are likely to rise, benefiting Darling’s core Ingredients business and Diamond Green Diesel.
Future Prospects
While there is a delay in receiving dividends from the DGD venture, the company is steadily progressing towards that goal. Stuewe is optimistic about Darling’s ability to pay off around $400 million in debt by 2024. He anticipates a cash influx starting in 2025, emphasizing the impressive cash generation potential once SAF is in full swing.