Published: Feb. 28, 2024 at 6:06 p.m. ET
The renewable diesel and feedstock producer Darling Ingredients reported a significant dip in quarter-over-quarter net income for Q4 2023 this week, while executives said on a Wednesday earnings call that they nonetheless expect cash flow to improve, and the company will be able to shed much of its debt in 2024.
The Irving, Texas-based company reported Q4 net income at $84.5 million, down 46% from the $156 million reported over the same period in 2022. Year-over-year income was also down 12% from $737 million in 2022 to $647…
The renewable diesel and feedstock producer Darling Ingredients reported a significant dip in quarter-over-quarter net income for Q4 2023 this week, while executives said on a Wednesday earnings call that they nonetheless expect cash flow to improve, and the company will be able to shed much of its debt in 2024.
The Irving, Texas-based company reported Q4 net income at $84.5 million, down 46% from the $156 million reported over the same period in 2022. Year-over-year income was also down 12% from $737 million in 2022 to $647 million in 2023.
Darling Chairman and Chief Executive Randall Stuewe said the company delivered its Q4 results despite “significant volatility in the global food, feed and fuel ingredient markets.”
Net sales over the period were down, as the company saw its transactions dip from $1.7 billion in Q4 2022 to $1.6 billion. But sales in 2023 were up 3.9% from the year prior at $6.7 billion.
Darling said its Diamond Green Diesel renewable diesel production joint venture with Valero Energy sold 336 million gal of renewable diesel in the quarter, up significantly from 208 million gal in Q4 2022. The company also said that its gross margin for fuel operations came in at $33 million during the period, up from $30 million in Q4 2022.
Stuewe added that the company saw margins for its DGD plant impacted significantly over the period by lower diesel prices, Renewable Identification Number (RIN) and Low Carbon Fuel Standard (LCFS) values, and a lower market inventory valuation for the renewable diesel.
But he said the joint venture is nevertheless charting above the 12-year projection that Darling had for its operations, which predicted EBIDTA at 79cts per gallon compared to the 81cts achieved in the quarter. And he said the likelihood of fat prices increasing as more and more renewable diesel comes on the market will be advantageous to Darling and “provide opportunity for our core Ingredients business and ultimately benefit Diamond Green Diesel.”
Stuewe added that the company is on a “bit of a deferred timeline” currently for reaching dividends from the DGD venture, but said the company “is getting closer” to that point.
And he went on to note that Darling executives are “convinced” the company will be able to pay down roughly $400 million in doubt in 2024, and that, beginning in 2025, “once you have SAF and don’t have any other projects going on out there, all of a sudden it will be pretty impressive how much cash [we] are generating.”
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–Reporting by Patrick Newkumet, [email protected]; Editing by Jordan Godwin, [email protected]