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Introduction & Market Context
Darling Ingredients Inc. (NYSE:DAR) reported a net loss of $26.2 million in its first quarter of 2025, as revealed in the company’s presentation on April 24, 2025. The disappointing results primarily stemmed from challenges in the company’s Fuel segment, which is navigating a transition from the blender’s tax credit to the producer’s tax credit that took effect January 1, 2025.
Despite the overall loss, the company highlighted several positive developments, including $146.2 million in debt reduction, $129.5 million in cash dividends received from Diamond Green Diesel (DGD), and continued strength in its Food Ingredients segment.
Quarterly Performance Highlights
Darling Ingredients reported total net sales of $1,380.6 million for Q1 2025, representing a 2.8% decrease compared to $1,420.3 million in the same period last year. The company posted a net loss of $26.2 million, or $(0.16) per diluted share, a stark contrast to the $81.2 million profit, or $0.50 per diluted share, reported in Q1 2024.
Combined Adjusted EBITDA fell 30.1% year-over-year to $195.8 million, down from $280.1 million in Q1 2024. This decline was primarily driven by the Fuel segment’s performance.
As shown in the following chart of quarterly Combined Adjusted EBITDA, the company has experienced a downward trend since Q4 2024:
The Q1 2025 Combined Adjusted EBITDA breakdown by segment shows the Feed segment contributing the largest portion at 53.7%, followed by Food at 34.5%, and Fuel at 11.8%. This represents a significant shift from previous quarters when the Fuel segment typically contributed a larger percentage.
Segment Performance Analysis
The Feed Ingredients segment showed resilience with Combined Adjusted EBITDA of $110.6 million, a 3.6% increase from Q1 2024. Management noted that global raw material volumes remained steady and are expected to improve. Higher fat pricing began flowing through in March, driven by the renewable fuels market and anticipated RVO (Renewable Volume Obligation) growth. The segment also benefited from tariffs that supported higher fat prices.
The Food Ingredients segment was a bright spot, with Combined Adjusted EBITDA of $70.9 million, up 14.9% from $61.7 million in Q1 2024. Gross margin percentage improved significantly to 29.3% from 23.8% in the prior year period. Management highlighted that collagen peptides have regained strength, with strong demand for the company’s library of collagen products. They also mentioned momentum for Nextida GC, a new collagen peptide targeting post-meal glucose spikes.
The following table shows the Food segment’s performance:
The Fuel Ingredients segment, however, experienced a dramatic decline, with Combined Adjusted EBITDA falling to $24.2 million from $133.1 million in Q1 2024, an 81.8% decrease. This significant drop was largely responsible for the company’s overall disappointing results. The segment’s income swung to a loss of $(20.9) million from a profit of $87.8 million in the prior year period.
Renewable Fuel Market Challenges
The primary challenge for Darling Ingredients this quarter came from its Diamond Green Diesel joint venture, which saw EBITDA per gallon sold plummet to just $0.06 from $0.69 in Q1 2024. Total (EPA:TTEF) gallons produced also decreased significantly to 216.1 million from 335.4 million in the prior year period.
The following chart illustrates the historical trends in D4 RINs and Yellow (OTC:YELLQ) Grease prices, which have significant impact on the company’s Fuel segment performance:
Management attributed the challenges to the transition from the blender’s tax credit to the producer’s tax credit, effective January 1, 2025. They also noted that the market is awaiting clarity on RVO and California’s Low Carbon Fuel Standard (LCFS).
The historical data for California LCFS credit prices and biofuel RIN values provides additional context for the challenges facing the renewable fuel market:
Despite these challenges, management expressed optimism for Q2 and beyond, stating that DGD is positioned as the lowest cost and highest quality producer in the market.
Balance Sheet and Capital Allocation
Darling Ingredients continued its focus on debt reduction, paying down $146.2 million in debt during the quarter. The company’s preliminary leverage ratio improved to 3.33x as of March 29, 2025, compared to 3.93x at the end of 2024.
The balance sheet showed $81 million in cash and cash equivalents, with revolver availability of $1,272 million. Total debt stood at $3,921 million, down from $4,042 million at the end of 2024.
In addition to debt reduction, the company repurchased $35 million in common stock during the quarter, demonstrating confidence in its long-term prospects despite the current challenges.
Forward-Looking Statements
Management’s commentary suggests a more positive outlook for the coming quarters. For the Feed segment, they expect raw material volumes to improve and noted that the March run-rate suggests stronger Q2 performance. Higher fat pricing, driven by the renewable fuels market and anticipated RVO growth, should continue to benefit this segment.
In the Food segment, management anticipates continued performance improvement throughout the year, with strong demand for collagen products and momentum for new offerings like Nextida GC.
For the Fuel segment, management expressed optimism that the outlook for Q2 and beyond is brighter, as DGD is positioned as the lowest cost and highest quality producer. They noted strong interest in sustainable aviation fuel, with premium and volumes meeting expectations.
Conclusion
Darling Ingredients’ Q1 2025 results reflect significant challenges, particularly in its Fuel segment, which drove the company to its first quarterly loss in recent years. The transition in renewable fuel credits and uncertain regulatory environment created headwinds that overshadowed the positive performance in other segments.
However, the company continues to demonstrate financial discipline through debt reduction and maintains a strong balance sheet. The Food segment’s strong performance and management’s optimistic outlook for future quarters suggest potential for improvement as the year progresses.
Investors will likely focus on whether the company can navigate the renewable fuel market transition successfully and return to profitability in the coming quarters, particularly as regulatory clarity emerges around renewable volume obligations and low carbon fuel standards.
Full presentation:
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