Darling Ingredients Inc Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Manav Gupta - UBS - Analyst : Good morning, Randy, and congrats, Brad. You've been very helpful over the years. My question relates to 45Z. Like when we look at 45Z, it feels like it was custom created for Dar, almost like one of the senior management members broke into the room where it was being written and wrote it for them. There is no credit for imported RD, no credit for RD from imported [yuko]. Waste oil is getting a much bigger credit than bean oil, no credit for canola. All these things should help Dar. So help us understand all the ways in which, 45Z makes Dar a relative winner in the space.

Question: Manav Gupta - UBS - Analyst : Perfect guys, I'll ask a very quick follow up. Randy, in your opening comments you did say looking to make more staff versus RD. Can you just elaborate on that a little?

Question: Dushyant Ailani - Jefferies - Analyst : Thank you for taking my question. Brad, it was a pleasure working with you. And Bob, congrats on the new role. My first question is on the LCM adjustment. Maybe could you share more about what that -- like more about what the actual adjustment, is it truly non-cash? And then maybe thinking about 2025, the guide that you've given the $1.25 billion to $1.3 billion, does that as of today, does that exclude any impact from LCM adjustments?

Question: Dushyant Ailani - Jefferies - Analyst : Perfect, thank you guys. I appreciate that. And then maybe just the next one on Nextida. Could you share kind of more details on what the ramp looks like in 2025 and then maybe if possible, could you quantify what how much of the food sales was Nextida in 4Q? Well, I think -- we don't disclose what sales were in the fourth quarter, but what we can say is that we are working with a number of CPG companies to help them determine what they can say about the product, its efficacy, and really support the rollout of different brands of getting this as an ingredient in there. And what we're seeing is some interesting traction there. This is the kind of product that requires consumer education and so our CPG customers are investing a lot to educate customers on how to use the product, and we're just really confident that we're going to continue to see traction. This is a hot topic in our environment today and a lot of people are trying to figure out what do they do after they're done using the pharmaceutical products. And this is a great solution to that problem.

Question: Pooran Sharma - Stephens - Analyst : Thanks for the question. I wanted to start off and just kind of dig into the dividend. On the release you mentioned that the JV's debt free, so, an uplift to the distributions. And then the January figure was pretty large so just want to get your thoughts on how to think about that dividend for the year. Is January -- is there something in there that that made that number large or -- just any color on that would be helpful?

Question: Pooran Sharma - Stephens - Analyst : Got it appreciate that color, and I guess just as a follow up here. Wanted to dig into the SAF opportunity a little bit more. From the operational side, I think you guys mentioned that the incremental production costs are lower for lower cost operators like yourselves. I just wanted to get some color around that. And then secondly, if you could maybe just talk about maybe the progress you've been making on the commercial side. You've made some announcements within the past month but just wondering if you could kind of give us a state of the union on that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 2:00PM, DAR.N - Q4 2024 Darling Ingredients Inc Earnings Call

Question: Heather Jones - Heather Jones Research - Analyst : Congratulations on the retirement, Brad. It's been great working with you for many, many years. So my question was on fat pricing. So I think, Matt, you mentioned that the catalyst change is still ongoing at Diamond Green, but I mean we've seen very strong moves in fat pricing over the past few weeks here in the US and then European fats have just taken off. So in the US market, is that just simply a function of just a sharp shut-off of feedstock imports? Is it the commission in a [geyser] expansion. Just what do you see driving that giving you all are in the catalyst change and the uncertainty around 45Z, there's been some pull back in producer demand. So I would just love to see hear what you all have seen in that market.

Question: Heather Jones - Heather Jones Research - Analyst : And following up on that and the European piece, I mean, [yuko] have been getting stronger, all through late '24 and continues to be strong, but the animal fats have taken off and is that related to the new SAF mandates there and having to -- can't use vegetable oil for those? I mean, what do you all see driving that business?

Question: Andrew Strelzik - BMO Capital Markets - Analyst : Thanks for taking the questions. My first one, I wanted to ask about the focus on operational excellence, which obviously we've talked about in prior quarters as well. But can you talk about anything incremental that happened on that front in the fourth quarter, maybe even into 2025, given kind of the decoupling of the trends in fats and your margins, is there a way to frame the contribution from that in the quarter?

Question: Andrew Strelzik - BMO Capital Markets - Analyst : Okay, that's helpful color. And then I wanted to ask about also the food segment where you had a nice sequential step-up quarter over quarter. Is there seasonality in that business that would have helped that? Are you seeing kind of underlying improvements? Maybe you could talk about what you're seeing in terms of destocking and demand and competitive dynamics that you've addressed in the in the past couple of quarters.

Question: Matthew Blair - Tudor Pickering & Co. - Analyst : Brad, congrats on your long and successful tenure and wishing you the best on your future endeavors.

Question: Matthew Blair - Tudor Pickering & Co. - Analyst : Circling back to the 2025 guide, if I heard correctly, it sounds like the core business would be around [900 to a billion], that's included in that guide. If we analyze Q4, I think we're looking around [840], but Q4 does tend to have some seasonal tailwinds in feed. So could you talk about what's the incremental upside into 2025? Is that simply higher [fats] pricing from 45Z that it's boosting feed and are there any other growth initiatives or what else is helping push the numbers up for your core business in 2025?

Question: Matthew Blair - Tudor Pickering & Co. - Analyst : Sounds good. And then you're aiming to pay down about $400 million of debt in 2024. Looks like you almost hit that target. Could you discuss any targets for debt reduction in 2025 or 2026?

Question: Matthew Blair - Tudor Pickering & Co. - Analyst : Great. Thank you.

Question: Davis Sunderland - Baird - Analyst : Thank you for the time. I appreciate you taking the question. I just want to start by adding my congratulations to Brad and Bob. Thank you for all the help, Brad. Most of my questions have already been answered. If I could just circle back to one about SAF. Randy, I think you talked earlier in 2024 about contracting and the process for these SAF contracts taking longer than you guys had initially planned just due to many different suppliers in the supply chain and moving pieces in the market and obviously just being a new product. And I just wondered, is there any sense of now that some deals are out there and there's a template for how to do these deals, maybe any kind of acceleration with new deals that you're seeing now having moved into 2025 or how do we think about that market developing from your guys' contracting perspective? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 2:00PM, DAR.N - Q4 2024 Darling Ingredients Inc Earnings Call

Question: Davis Sunderland - Baird - Analyst : Great, I'll take the rest offline. Thanks, guys.

Question: Jason Gabelman - TD Cowen - Analyst : Thanks for taking my questions, and Brad, congrats on retirement. It was great working with you. The first question is kind of a broad policy one. Right now you're selling SAF into Europe, and Europe obviously has anti-dumping duties for renewable diesel and biodiesel, not for SAF then. Do you see that as a potential risk for your SAF sales into the region if that happens? Are you able to get grandfathered in because of your contracts or move volumes while retaining the margin? And then kind of a broader part of that, do you see any other regulatory risk out there besides, of course, the 45Z?

Question: Jason Gabelman - TD Cowen - Analyst : Got it. Great, thanks for that color. And my follow up is on the LCFS program. I think there was some hope with the new amendment that that LCFS prices would start to move higher. They've clearly come off lows, but maybe not at the triple digit levels that some REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 2:00PM, DAR.N - Q4 2024 Darling Ingredients Inc Earnings Call had hoped, hoping you could reflect on kind of why you think LCFS prices have not rebounded maybe to the expectations that some have had and your assumption for LCFS prices for 2025 within your guidance.