IRVING, Texas – Darling Ingredients, which specializes in converting edible and inedible bio-nutrient streams into a wide range of ingredients and specialty products, reported a profit for the third quarter despite challenges in the company’s Food segment.
For the quarter ended Oct. 1, the company reported net income of $28.7 million, or $0.17 per share compared with a loss of $9.1 million, or $0.06 per share in the year ago quarter. The company attributed the result to higher earnings from the company’s Diamond Green Diesel business, which benefited from the inclusion of the blenders’ tax credit which was not available as of the end of the third quarter of 2015. Higher Renewable Identification Number (RIN) values and an income tax benefit also provided tailwinds.
Revenue was flat at $853.9 million compared to $853.7 million reported for the third quarter of 2015. Adjusted EBITDA for the period was $106.2 million.
“We continue to execute against our strategic plan to de-lever and grow while managing through considerable volatility in many of our markets,” Randall C. Stuewe, chairman and CEO, said in a statement. “Our Feed Ingredients segment results were predictably lower due to record North American crop harvests weighing on global pricing for fats and proteins. However, strong tonnage offset some price volatility, and our model is adjusting to lower finished product values. Food segment performance disappointed due to several moving parts, including major annual plant turnarounds and softness in China compressing margin expansion. Our Fuel segment was seasonally driven and continued to perform well with strong demand for biofuel feedstock in Europe. We intend to manage the volatile markets through the fourth quarter and carry good momentum into 2017.”
On a segment basis:
Feed Ingredients reported a 2.1 percent decline in revenue to $531.4 million sequentially. Gross margin retreated 7.1 percent to $117.8 million sequentially. EBITDA for the quarter was $78.9 million, down 5.5 percent sequentially. The Feed Ingredients segment includes Darling’s used cooking oil, trap grease and food residuals collection businesses, the Rothsay ingredients business, and the ingredients and specialty products businesses under the Sonac name. Feed Ingredients operations process animal by-products and used cooking oil into fats, protein and hides.
Food Ingredients, which includes the company’s natural casings and meat-by-products business called CTH, reported revenue declined 3.7 percent to $262.0 million sequentially. Gross margin for the quarter dropped 12.3 percent to $50.7 million sequentially. EBITDA was $25.3 million, down 32.4 percent sequentially.
In the Fuel Ingredients segment, EBITDA for the quarter declined 6.5 percent sequentially to $12.9 million; Revenue for the period eased 3.0 percent sequentially to $60.4 million, while gross margin was down 3.3 percent sequentially to $14.2 million.
EBITDA for the company’s Diamond Green Diesel joint venture was $45.0 million at entity level, Darling’s share was $22.5 million. The company said final engineering on a facility expansion is complete with construction expected to be completed early in the second quarter of Q2 2018.