Darling Ingredients Q2 2025 slides: net income plunges despite margin gains

Introduction & Market Context

Darling Ingredients (NASDAQ:DAR) presented its second quarter 2025 financial results on July 24, revealing a significant decline in profitability despite modest revenue growth and improved gross margins. The company’s stock reacted negatively to the earnings miss, dropping 6.05% in regular trading with an additional 2.33% decline in premarket activity the following day, reflecting investor disappointment with the results.

The sustainable ingredients company reported total net sales of $1.48 billion, up 1.8% year-over-year, but saw net income plummet 83.9% to just $12.7 million compared to $78.9 million in the same period last year. Diluted earnings per share fell to $0.08 from $0.49 a year earlier, significantly below analyst expectations of $0.30.

Quarterly Performance Highlights

Darling’s Q2 2025 results showed a mixed performance across its business segments. While the company achieved gross margin improvement to 23.3% from 22.5% in Q2 2024, its combined adjusted EBITDA declined 8.8% to $249.5 million.

As shown in the following chart of combined adjusted EBITDA by segment, the Feed segment represented the largest portion of the company’s earnings:

The company’s balance sheet showed some improvement with cash and cash equivalents increasing to $95 million from $76 million at the end of 2024, while total debt decreased to $3.98 billion from $4.04 billion. The preliminary leverage ratio improved to 3.34x from 3.93x at year-end 2024.

Segment Analysis

The Feed segment emerged as the strongest performer in Q2 2025, with adjusted EBITDA increasing 11.3% to $135.9 million. The segment benefited from steady global raw material volumes and margin expansion, with rising fat prices partially offsetting softer protein prices in export markets.

The following slide details the Feed segment’s performance and outlook:

The Food segment showed a slight decline in performance with adjusted EBITDA decreasing 4.5% to $69.9 million. Despite this, the company highlighted improving supply/demand dynamics in gelatin and strengthening global demand for collagen driven by health and wellness trends. A significant strategic development was the signing of a non-binding term sheet with Tessenderlo Group to form Nextida, positioned as a new global leader in collagen and gelatin.

The Fuel segment faced the most significant challenges, with combined adjusted EBITDA declining 29.1% to $61.3 million. This decline was primarily driven by lower performance at the Diamond Green Diesel (DGD) joint venture, where Darling’s share of adjusted EBITDA fell to $42.6 million from $76.6 million in Q2 2024.

The following slide outlines the key challenges and outlook for the Fuel segment:

Diamond Green Diesel Performance

The DGD joint venture, a critical component of Darling’s renewable fuel strategy, showed decreased production and efficiency in Q2 2025. Total gallons produced declined to 266.1 million from 315.1 million in Q2 2024, while EBITDA per gallon sold decreased to $0.34 from $0.49.

The following chart illustrates DGD metrics alongside quarterly average prices for D4 RINs and Yellow Grease:

Despite current challenges, management expressed optimism about the future of the renewable fuels market, noting that the California Low Carbon Fuel Standard (LCFS) is expected to strengthen and support margin recovery over time. Additionally, the proposed Renewable Volume Obligation (RVO) framework was highlighted as a potential tailwind for the renewables market.

Strategic Initiatives

A key strategic development announced in the presentation was the planned formation of Nextida, a joint venture with Tessenderlo Group aimed at creating a global leader in collagen and gelatin. This initiative aligns with Darling’s focus on expanding its presence in health and wellness markets.

The company is also advancing scientific validation for Nextida GC - Glucose Control, with additional studies nearing completion and early results showing strong potential, according to the presentation.

In the renewable fuels space, Darling emphasized its continued focus on sustainable aviation fuel (SAF) production, noting that volumes demonstrate flexibility and resilience in balancing market dynamics despite current challenges.

Forward-Looking Statements

Despite the significant earnings miss in Q2, Darling’s management maintained a constructive outlook for the remainder of 2025 and into 2026. The Feed segment is expected to benefit from favorable pricing environments supported by domestic fat policies, while the Food segment anticipates continued strength in collagen demand.

For the Fuel segment, management expects the California LCFS to strengthen and support margin recovery, with the proposed RVO framework representing a potential tailwind for renewables.

According to the earnings call, Darling projects full-year Combined Adjusted EBITDA of $1.05 billion to $1.1 billion, anticipating sequential improvement across its businesses. The company is targeting capital expenditures of $400 million or lower for the year.

CEO Randy Stewie expressed optimism during the earnings call, particularly regarding core ingredients, while acknowledging timing challenges with the quote, "I’ve never made a bad trade, but I’ve lost a fortune in timing."

As of October 14, 2025, Darling’s stock was trading at $29.91, up 2.14% for the day but still near its 52-week low of $26, reflecting ongoing investor concerns about the company’s performance and outlook despite management’s positive projections.

Full presentation:

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.