Darling Ingredients Inc. (NYSE:DAR) Q4 2022 Earnings Call Transcript

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Dushyant Ailani: Got it. And then my second question was just wanted to talk about the margins for the Food segment. I think it was down quarter-over-quarter. Any kind of drivers around that? And then how do we think about that going forward?

Brad Phillips: Energy prices, as Randy mentioned earlier in Europe. Those will rebound. And clearly, I can tell you we’re off to a good start this year. I mean, the chart in the earnings deck of the growth of that Food segment just gets — is really the story that we’re doing. Clearly, that’s — it’s a multi-continent strategy. China had a great year. South America had a great year. The U.S. had a great year, and Europe struggled a little bit, especially in Q4 with energy prices and raw materials because of the reduced porcine kill. So that should remedy itself a little bit in Q1, but overall, we’re set to have a really good year in the Food segment this year.

Operator: The next question will be from Tom Palmer from JPMorgan.

Thomas Palmer: I wanted to clarify the guidance a bit. So it sounds as if temporary downtime at RD plants, including at DGD, are contributing to the fat and UCO price weakness we’ve seen. So maybe could we just clarify the expected duration of DGD’s turnaround? It sounds like DGD 1’s back up and running. Is number 2 down right now? And then is the message that the first quarter because of this might be a little bit below kind of that quarterly EBITDA run rate implied by guidance? And then starting in 2Q, we see a more substantial rebound?

Randall Stuewe: Yes. I mean, clearly, Tom, I mean, just going around the horn, DGD 1 was down for 18 to 20 days here. Number 3, we don’t have the logistics down. I mean, we got a couple of railroads embargoed. We’re trying to get the logistics up there. I understand Geismar was down. I understand Neste Rotterdam was down for over a month, and that was 800,000 tons there. So as we’ve said, the feedstock market is a global market. And clearly, with the Port Arthur and St. Charles facilities, we’re originating from around the world. But as I said earlier, it’s not going to take much to turn this thing as if you believe any of this capacity that all of you guys write about is truly starting up. I mean, I read a start-up on PBF for Q1 here.

I read a start-up for Vertex for Q1. HollyFrontier has been trying to start up for a year, only ran 54 million gallons at 3 plants. So like I said, pick your poison here. But any of those facilities come on, it’s positive. And once we get DGD 3 up to — at rate or above rate, you’re going to see it change pretty rapidly here. Sandy, anything you want to add?

Sandra Dudley: I think the great thing about DGD 3 or DGD in total is that even despite what’s going on here with feedstocks is we’re taking in different feedstocks from around the world. And I think that, that’s been a huge benefit to us, bringing those internationally because we’re able to take advantage of the lowest priced feedstocks available in the world because we do have those capabilities. And so I think it will just increase margins as we go further on to the year.

Thomas Palmer: Okay. And then maybe just a quick follow-up on the cash flow. The K mentioned a capital contribution to DGD in the first quarter. Maybe just an update on kind of the capital needs right now for DGD and maybe the timing of when we might start to see the distribution. I did see you’re guiding for some DGD back to Darling starting this year.

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