Darling Ingredients at Global Farm to Market: Strategic Growth Amid Biofuel Changes

On Wednesday, 14 May 2025, Darling Ingredients (NYSE:DAR) presented at the 20th Annual Global Farm to Market Conference and Chemicals @ Farm to Market. CEO Randy Stuewe outlined the company’s strategic positioning amid evolving biofuel policies and expansions into higher-margin ingredient categories. While the company faces challenges from a weaker-than-expected first quarter, optimism remains high due to regulatory tailwinds and growth prospects in the renewable fuel sector.

Key Takeaways

• Darling Ingredients is optimistic about the impact of regulatory changes, including the 45Z tax credit and Renewable Volume Obligation, on its renewable fuel business.
• The company is ramping up sustainable aviation fuel production and exploring new markets.
• A joint venture in the food segment, NexTata, aims to unlock significant value with a focus on collagen and gelatin products.
• Despite a weaker Q1, Darling maintains its financial guidance, expecting improvements in Diamond Green Diesel margins.
• Organic growth and strategic expansion in South America are prioritized over mergers and acquisitions.

Financial Results

Despite a weaker-than-expected first quarter, Darling Ingredients reaffirmed its financial guidance, driven by anticipated improvements in Diamond Green Diesel (DGD) margins and a recovery in fat prices. The company expects its core business, excluding NexTata, to generate $1.2 billion in EBITDA annually, with potential total EBITDA reaching $1.8 to $2 billion when including DGD.

Operational Updates

CEO Randy Stuewe highlighted several operational updates:

• Regulatory Environment: The extension of the 45Z tax credit to 2031 and a proposed Renewable Volume Obligation of 5.25 billion gallons are seen as constructive developments for the company.
• Sustainable Aviation Fuel (SAF): The SAF plant is operating at or near capacity, with plans to explore voluntary and mandated markets in the U.S. and Europe.
• Feed Segment: While Q1 feed numbers were lower, a rebound in March suggests continued improvement, with expectations for fats to move back into the 50s.
• Food Segment and NexTata JV: The joint venture aims to leverage brand recognition and product development in collagen and gelatin, with potential EBITDA of $400 to $450 million on $1 billion in revenue.

Future Outlook

Darling Ingredients remains optimistic about future growth, driven by:

• Continued demand for animal-based protein and expansion opportunities in South America.
• Organic growth in the rendering business and new product development in the collagen segment.
• Expansion in the aviation fuel market, with ongoing engineering work on a potential second SAF plant.

Q&A Highlights

During the Q&A session, CEO Randy Stuewe emphasized the company’s commitment to supporting the agriculture community and adapting to market changes. He noted the need for careful consideration of import policies to avoid unintended consequences and highlighted the company’s focus on organic growth and balance sheet improvement.

For more detailed insights, readers are encouraged to refer to the full conference call transcript below.

Full transcript - 20th Annual Global Farm to Market Conference and Chemicals @ Farm to Market:

Andrew, Analyst: All right. Darling has positioned itself as a global leader across rendering biofuels and food ingredients as strategic acquisitions, capacity expansions and its Diamond Green Diesel joint venture have transformed its business model over time. CEO Randy Stuewe has led Darling through that business transformation and the business could be poised to demonstrate its improved earnings potential moving forward given evolving biofuels policy, ramping sustainable aviation fuel production and expansion into higher margin ingredient categories. Really appreciative, Randy, that you’re here with us today. So thank you very much.

Maybe I’ll start on what I feel like is what we I’ve been spending the most time talking about, and that’s the regulatory environment. We have guidance on 45Z, a preliminary RVO potentially coming here very soon. We’ve also seen kind of some pushback within Congress or portions of Congress to reinstate the BTC, another one to eliminate the IRA tax credits, which now we have some visibility against, so maybe that’s not as much of a risk. But how would you characterize the regulatory environment broadly under the current administration and kind of its view on decarbonization policies?

Randy Stuewe, CEO, Darling: No, I think a lot of broad topics there. I think we’re very much in a transition moment at this time. For those that were following the House Ways and Means Committee just passed and has now sent the big beautiful bill on over. It contains a lot of great things in there for Darling and for many in the room. I think what I’d like to say is it’s transitioning from climate change to support for the agriculture community.

And ultimately, the things that are contained in it from the 45Z, which is you’ve got to go back to the history there. We’ve had a blenders tax credit since 02/2007, sometimes in place, sometimes retroactive, always a lot of unknown, but never really pulled. But at the end of the day, the PTC was enacted for 2526 ’20 ’7 as the House Ways and Means resolution or committee report suggests it’s going to be extended out to ’31, which is good. And ultimately, we’ve got what we want out there is agriculture. I think the piece you left out of there was if you think of the industry, Darling has led the world in renewable fuel since 2013.

We’ve had some wonderful incredible years. And then because of mandates that were too low for 2024, we finally hit the blend wall as you would call it. The renewable volume obligation, which we anticipate any day now, we’ll return that. And so the combination of 45Z as a producer’s tax credit that made in America for America that actually generated under Chuck Grassley about ten years ago, but was shut down by a series of lobbyists at that time is now back in place. Renewable volume obligation is now being proposed somewhere.

We’re hearing numbers 5,250,000,000.00 That’s very constructive to both Darling and constructive to my predecessors up here at ADM. And it’s a very good thing for American agriculture. If you think of the world that we’re in today and we lived through the tariff moments and then Trump tariff on Mondays that were relaxed, at the end of the day, we’ve got what he was trying to target and that was lower energy prices, natural gas. We’ve got ultimately pumped fuel pump prices. And now the only thing we don’t have is we still got $10 soybeans and $4 corn.

So we’ve not rewarded the farmer yet. And so Andrew, it’s coming. And are there unintended consequences? And will there be some horse trading, no pun intended, in that, that ultimately make this thing really work? But I think it is really exciting.

And this will return us to we had six record years in a row, a seventh year that I had a little challenging and I’m expecting to return to that track again.

Andrew, Analyst: Can you you mentioned the 5.5% on the RVO. Can you frame what that means relative to production capacity, relative to feedstocks? Like how do you think about that number in the context of what the industry can produce and the implications for you guys?

Randy Stuewe, CEO, Darling: Yes. Number one, I always have to wear two hats. And I wear the darling hat where for those in the room that know us, we process about 15% to 18% of the world’s slaughtered animal byproducts into fats and proteins. And then in rising protein and fat market, we do really, really well. And one out of every six animals in the world goes through one of our factories.

When I wear my hydrocarbon hat, we ultimately want to have a nice margin in there, which we had from 2013 to 2018 and 2018 to 2023 and then 2024 became a bit of a challenge here. As we look at the RVO today, back in 2022, we told the EPA through various trade organizations, we said, hey, the margins in this business have been very good. There’s capacity under construction. It’s coming from capacity that may not understand why they’re getting into the business, namely big oil. And but once they go, they’re going to go.

And so they built about 5,200,000,000 gallons of capacity. So there’s nothing magic with the 5,200,000,000. That was preached, delivered and now I hope it will be recognized. So that’s the first thing. So people say, where did that come from?

The second piece of it is, is that good or bad? Well, the interesting thing with it is we’ve added a lot of crushing capacity. The ABCs and the Ds did and the co ops did. More processed at home. What’s your alternative?

You’re reliant on China to buy your product, the beans, corn, the canola. So we’ve added a lot of capacity. So there’s plenty of oil in this country or veg oil to fulfill most of it. Now the magnitude of the five twenty five is that’s 1,900,000,000 gallons bigger than the 25 number today. And if it takes 7.5 pounds or eight pounds, I’ll do fuzzy math, let’s call it 14,000,000,000 pounds of new supply to fulfill that.

There’s production capacity to convert it, but it’s a very significant number. It’s very constructive to veg oil prices. It’s constructive to animal fat and waste cooking oil prices. So it’s a big number that’s out there. It’s what agriculture needs.

It will allow some additional expansion in the crushing side. It will allow our animal fats to receive the value they deserve. You know, and we’ll just see how it works. The challenge that’s out there is, as you look at the world today, last year, why did margins go bad? Margins in the RD business went bad because of cheap biofuel being diverted into this country and cheap feedstocks that were being coming out of the Asian countries, namely Chinese Yuko.

The way that the legislation today now prohibits some of those feedstocks from coming in, that’s even more friendly. But over time, you’re going to have to allow additional feedstock into this country in order to meet that need. But people will figure that out. That’s a down the road deal.

Andrew, Analyst: We’ve seen a pretty significant increase in rent values. And in some ways, coincided with some of the policy actions or discussion. Do you think that that’s been the real driver? Is it simply the BOHO spread? Is it more kind of the under production maybe that we’ve seen relative to current mandate?

With what we’ve seen so far, how do you think about what’s been the driver of RINs?

Randy Stuewe, CEO, Darling: Yes. So ultimately, what the renewables or the biomass based diesel business experienced last year was the mandate blend wall. Ultimately, ethanol experienced it many years ago, but when you make one extra gallon, it’s worth zero. And so ultimately, as big oil finally got to the party here, then ultimately they overproduced with the imports coming in, still generating RINs. And ultimately, at the end of the day, we drove the margin to zero.

That’s why it has to go up now. So what’s it going to take? I think the more relative question relevant question is, what’s it take to restart the industry? So if you look at Jan, Feb, March, possibly April here in a few more days, RIN production is not large enough to meet the need this year. Yes, we’re carrying over a surplus.

And yes, it will get tighter towards the end of the year. And yes, you can roll your gallons forwards, etcetera. There’s a lot of way to play the roulette game here in a sense. But at the end of the day, in order to create a RIN, you got to make a physical gallon. And in order for a physical gallon to be created, it’s got to be marginally profitable, however you want to define that.

We would tell you today, given where feedstock costs are, given where RINs are, that the RIN has to come up at least another $0.06 0 to $0.80 a gallon in order to restart capacity to meet this year’s requirement, not next year’s. And so we’ve never been in a marketplace that’s trying to trade the future like and really, at the end of the day, the RINs market is very thin. The physicals can be, if you will, shifted out or diverted to another year. So this is a moment, like I said, it’s an inflection point in the business. And I think as we’re hearing, hopefully, the RVO will be released before Memorial Day.

You’ll have the details of it. Certainly, will be out for public comment. And certainly, there’ll be people that are really happy and there’ll be people that aren’t. You’ve already seen the 45Z announcements. You’ve seen the extension there.

You’ve seen foreign feedstocks. There’s like I said, this thing is really, really setting up very nice. And then I always ask myself when I convince myself that it’s setting up really, really nice, what could go wrong? And I think it’s fair. You know, under Trump one point zero and under Scott Pruitt and under Carl Icahn, you had all the small refinery exemptions.

There are exemptions still out there that came out of the courts now dating back to 2017. They may take a little bit of the edge off of it, but not going forward. And so at the end of the day, it’s not material. Last night at dinner with you, you know, they said, well, what if it’s not 5.2? Well, I said, well, what if it’s 4.5?

Let’s take all 800,000,000 of small refinery exemptions. That’s still a 10,000,000,000 pound feedstock increase. I mean the numbers are there. Now when the market accepts it and realizes it, we’ll see.

Andrew, Analyst: One of the I go through the same exercise. So when it sounds as positive as it could be, I think about the risks. One of the things you didn’t mention is imports. If the RINs go up that much, you mitigate kind of the impact of the tax credit. Do you think imports will come back in?

And what’s your concern about that maybe also taking the edge off?

Randy Stuewe, CEO, Darling: Well, you know, and I you know my personality. I’m trying not to offend too many people in the same day. Know? But it’s a very naive approach in the world to believe that you can build a wall. If you think around Europe, they built a wall.

And it’s very hard to move product in and out. In The U. S, if we do if this isn’t done properly, you’ll build a wall. And you can’t be so naive to believe that those feedstocks that exist out in the world, we’re the largest operator in Brazil and Europe, our Chinese operations, those feedstocks will find other conversion capacity offshore, most likely Neste. They’ll be discounted because they can’t get here.

And then they’ve created a renewable fuel that will be brought in here. And thus, they’ve taken away the demand that has been created by the new RVO. So we have to be careful on prohibiting feedstocks. If you wanted to say what’s the ultimate win, the ultimate win would be to somehow either tariff imported renewable diesel or not let it generate a rent. Then you’ve got that in the perfect environment in a sense.

I’m not sure we’ll get there. I think the Congress is pretty open to allowing feedstocks in here. Where Chinese Yuko fits into that and for those that still think Chinese Yuko is the devil. I mean, remember, there’s 12,600,000 restaurants in China. There’s 700,000 in The U.

S. Yes, they produce Yuko. And so it can’t go to animal feed in China, so it’s got to go somewhere. So ultimately, it will find its way to the most efficient market in the world. It was European biodiesel, but now as SAF and RD capacity come online, it’s finding its way there.

Andrew, Analyst: Kind of just to round out the regulatory discussion, I wanted to get your perspective on LCFS and where that process stands now. How is that progressing? And do you have a sense on time line, how that will be implemented? What are your current thoughts?

Randy Stuewe, CEO, Darling: Well, the what I am told, number one, we were very disappointed that it went back to basically carve for administrative review of 22 pages. Who knows the real reason behind that? It’s political. We understand that the CARB has wrapped it up, and we understand that CARB will most likely deliver it here between May 18 or May 19. And people say, why is that a critical date?

Well, that allows then OAL under a statutory review, the Office of Administrative Law to relook at it in thirty days and hand it off to Governor Newsom. If they do that before July 1, it by definition has a January 1 implementation date of 2025. So we’re hoping that happens. We’re told we are. I think many of you in the room watch the news and the media out of California every day and where Governor Newsom is, this is his program.

But he’s all over the political map today.

Andrew, Analyst: SAF, that’s obviously one of the growth engines for Darling through DGD. Production is online, it came online last year. Where is that in the ramp? How did it contribute to the first quarter? And maybe how should we think about the progression of that through the balance of the year?

Randy Stuewe, CEO, Darling: Yes. SAF, and as we like to talk to people, when we went into the renewable diesel business and plant came online in, I think, 2013, ultimately, the first mover advantage and the first machine in the world that could convert low cost feedstocks into a hydrocarbon. We started looking at SAF. The market wasn’t really defined, but we said, if big oil brings on this capacity, why not have the optionality to play in both markets? And then we said, well, what’s that cost?

And is that worth the risk? And do we believe that SAF will develop? And the answer was yes to all of them. So plant came online early in November starting up last year. It’s at or near capacity today.

The sales ledger is really developing at the margins that we’d expected. And so at the end of the day, we’ve got the physicals market, which is voluntary in The U. S. You’ve seen many of our announcements out there. Are a few gallons here, a few gallons there.

You’re seeing Europe. Europe’s obligation doesn’t really initiate until the end of the year. So Europe’s been a little slow. They’re trying to figure out the rules to bring it in and how it’s turned into a very complicated feedstock issue. Because if you think about it and this is kind of the learning in the room.

Because when somebody says, I’m going to make SAF, great. Those are easy words. When you’re physically going to make it, it takes technology that can split the molecule and give you a freeze point that you need for the standard. But you’re going to make about half RD and you’re going to make half SAF. Well, in January 20, what the world tell you under 45Z, they told you which feedstocks qualify.

So even though we could bring in Chinese YUCO that’s CORSEA certified, make SAF and ship it back to Europe and claim a duty drawback, at the end of the day, the other 50% of RD wouldn’t get duty drawback or the PTC. So it’s a very complicated trade right now is what I would tell you. The team has figured it out. Port Arthur is now really just is a Yuko animal fat plant that is doing quite well and meeting all of our expectations. The sales ledger, on one side of the ledger, you’ve got the voluntary, you’ve got the mandated.

And really, there’s a min maxes on there. There’s lots of flexibility on these contracts. And it feels like we’re building out to a full book for ’25 and ’26 sales are coming. The other piece that’s developing out there is really what we would call the book and claim market. And the book and claim market is we kind of we’d like to just without giving names of who’s there, the technology companies that are really focused on AI and are going to be huge energy consumers want to remain or try to be back to energy or carbon neutral.

And they’re willing to buy a credit. And so that is in the early development stages. If you ask me to handicap it, we may be making Jet A and selling book and claim credits as we go forward. I mean how you’re watching the airlines in The U. S.

All talk about lower summer travel and challenges. I mean without that credit being able to be marketed, which is what some of the airlines are doing, it’s really kind of without a mandate, at least in The U. S, it’s physically and economically challenging. Do you

Andrew, Analyst: you guys have talked or you have talked about a potential second SAF plant at some point. So I’d love to know your thinking about that. But I guess as I think longer term, if we don’t have a mandate around SAF specifically, some of those challenges, do you foresee the margin premiums compressing or at least being some pushback or pressure on that? I guess I’m just curious over time how you think about sustaining that.

Randy Stuewe, CEO, Darling: Well, number one, we continue to finish engineering on SAF two, where there’s multiple options. Clearly, the feedstock challenges have made how you engineer and where you put it, whether it’s Port Arthur, whether it’s in Norco, more challenging. And then the phase out of the 45Z, is it really going to step Even if we put a spade in the ground today, you’re talking 27 until number two is up. Now we’re extremely bullish on SAF around the world and think that it’s going to move forward. And the margin structure is such that I don’t see it really changing because I don’t see new capital going into it.

Andrew, Analyst: Okay. That’s pretty clear. Shifting gears a bit to the feed segment. How do you look, it’s been a bit of a cycle here. How do you think about the earnings potential of that piece of the business over a multiyear period over the next couple of years?

You’ve improved that business in a number of ways. You’ve made acquisitions, integrated those. So what’s kind of the right framework to think about the earnings potential of that piece of the business?

Randy Stuewe, CEO, Darling: Yes. And I it’s always it’s interesting, you guys always talk the feed segment. I talk the whole business because we kind of really just make fats and proteins across the spectrum. The application is the segment. Feed segment by far, because we pick up most inedible product is by far the largest.

The margin structure in that business is driven by how you buy the raw material and more importantly, what’s the value of the fat, the waste fat that comes off of it. Clearly, the resurgence and the RVO is making fats worth more. Decarbonization drove it for the last couple of years. And then we kind of hit the lower end here, and now it feels like it’s coming back. As we came out of Q1, we started to see fats move back into the 50s now, which we haven’t seen for a lot of years.

So you’d have to go back. I’ve kind of forward casted it for the segment for the year, 9.5. I hope I’m low. I’ve been punished the last couple of years in a this is a business that I say is fairly easy to forward look as long as prices are stable, tonnage is stable. That’s what we’re kind of looking at and we think prices are actually going to move up.

So I think we’re going to be on the low end there as we go forward.

Andrew, Analyst: Maybe to that point, narrowing in on the quarter you just reported, the first quarter feed numbers were a bit lighter than we would have our forward look was maybe not as good as it should have been. What were the dynamics kind of that drove that? Was there anything unusual in there that we should keep in mind?

Randy Stuewe, CEO, Darling: Yes. We’ve always operated, and one of our core values is transparency. Q4 is always our biggest quarter because that’s when we clean up everything around the world in a sense. And we took in some insurance settlements that we probably should have kind of revealed. We had two fires over the years and then eucalyptus forest in Brazil and a flood in Brazil.

And that was part of it. And then part of it was there are massive significant, I think, well, let me use massive, inventory holdbacks for both DGD and for the rising prices. And so when you normalize it, it made sense. January is always our most difficult month. February, we were hit by tornadoes, floods and freezing everywhere.

And then March just really came roaring back to where we thought it would be. So December might have been optically a little better to you and my learning from it is I’m going to be more transparent on that in the future. But I can tell you March and April are where we need to be and it should only improve.

Andrew, Analyst: Okay. So starting in 2Q and beyond, that’s kind of the right way to think about? Yes. Okay. Okay, that makes sense.

You talk about a $0.10 or zero zero move in fat prices, rule of thumb is x to the profitability of the feed segment. Protein prices have been pretty depressed. Is there a rule of thumb on that side of the business?

Randy Stuewe, CEO, Darling: There is, but not really. It’s not material. Typically, the biggest challenge on the protein side, so each penny globally or $20 a short tons, dollars 12,000,000, maybe $15,000,000 depending on where you’re at. And the protein side, the value added proteins, if you think that, that would be pet foods and then aquaculture grade material got heavily tariffed into the destinations, China. So ultimately, if those tariffs roll back, then those proteins should come back.

Mixed species animal byproduct meal or meat and bone meal and now has very limited homes, but most of it is in the poultry regions of the Asia Pacific area. And that just got kind of confused here. So typically, clearly, we’re crushing a lot more beans. Soybean meal has got a 300 in it. We’d like to have a 300 in it again on our base product.

I think it will come back there.

Andrew, Analyst: Okay. That makes sense. You guys threw me a curveball this week. I had all my questions nicely prepared and then you announced the JV in the food segment. Can you talk about the rationale of that of forming that JV and kind of what you’re trying to achieve over the longer term with that?

Randy Stuewe, CEO, Darling: Yes. And try not to be a bit cliche. We’re not clearly, we’ve built something special there. Just find it for the audience. I mean when an animal goes to slaughter, part of it can go to food grade materials.

Obviously, the cutout of the meat does, but there’s other byproducts that can. And those are bones and skins that we make collagen and gelatin out of. Edible animal fats, we’ve got a very significant edible business in Europe and then ultimately a casings business and a heparin business. And that rolls into the food segment. If you can’t feed it to a human but it hasn’t been essentially condemned, that’s the feed segment.

The formation of the stool or the platform was really by segmentation of animal back in 2015. And the belief was, well, we could dump it all and just call it global rendering and just really confuse the hell out of everybody. Or we could say food, feed and fuel. And food, because these are specialty ingredients, should get a higher multiple. And feed, we’re probably like big ag out there.

We should get their multiple. And our small little fuel is an annuity business before Diamond Green Diesel. And we knew it would get a lower multiple, but the game was to try to blend it to around 11 or 12. And the only thing I got rewarded with was a renewable fuel multiple at 6.5. And so experiment failed.

And so we’ve taken the collagen business. We’re one of the largest, if not the largest in the world. We’re 150,000 tons before the joint venture. And we have built a product line that probably many of you touched you this morning in what’s called hydrolyzed collagen peptides. That’s us.

We’re not retail, we’re business to business. And we’ve taken a business that used to make $90,000,000 and it makes $250,000,000 to 300,000,000 now off of product line expansion. We’re in two point zero of that business now, which is concentrated or isolated collagen peptides that have a specific health, wellness and nutrition application. We’ve launched one now for GLP-one, where it fits in the profile of weight management and appetite suppression, it’s really just in its early stages. We’ve got about a dozen more of them out there that are in the launch form right now over the next three to five years.

The joint venture came out of a relationship with not only a competitor, but a friend of ten plus years. And he called me and said, hey, I have five children. He says, this business does not fit what the five the top five want to do. And would you think of letting us form a new company? PB Liner is an absolutely stellar player.

They have brand recognition. They have products we don’t have. They have plants in geographies we don’t have. They have access to raw materials that is superior in some cases to us. And so we started down the path of saying what would a new company look like because our challenge is, as we go forward with the next tied to product line, we were either going to have to acquire or construct capacity.

And the deal we were capable negotiating here made this a more favorable decision. Typically, you don’t announce an MOU. Unfortunately, Belgian public company law, that triggers union notifications and stock exchange, so you have to. We’ll head to definitive agreement as quickly as we can here. And then we’ll hand it off to the attorneys in the antitrust world of Europe, China, South America and The U.

S. To get approval. The concept here is, as we look at the food segment, we’ve said this basically represents about 77% of our revenue in there, but in the high 80s of our earnings. There’s some smaller businesses there that can be moved back over into the I’m going to call it the global rendering segment. You call it the feed segment.

And then we’ll have the global rendering. We’ll have we like the word ag energy because Trump doesn’t like the word renewables, so we’ll stay away from renewables. And then we’ll have NexTata as a freestanding company that you will have complete transparency to of its performance, its growth and its dreams, at which time it either will bring to me and us the multiple evaluation that we deserve or we’ll take it public. And it’s just that simple. And that, yes, that’s a longer time frame than most people in the room always want to hear, but that’s the reality of how it works.

Andrew, Analyst: The JV is next tied up. The product is also next tied up. Can you talk about the product and your enthusiasm for the product? And I think it officially launched six months ago roughly. What’s the receptivity been?

Kind of how do we think about the glide path for that?

Randy Stuewe, CEO, Darling: Yes. It’s essentially, we’re as you go into these products, they operate in the supplement world, which is a bit of the Wild Wild West of regulation or lack of regulation. But when your customers are large health and wellness companies, and you know who I’m talking about here, they’re requiring a more sophisticated level of clinical trials. We completed many of them, smaller groups on our GLP-one alternative, showed a 42% drop in glucose spikes. That’s right there with the big pharma numbers.

Maybe it doesn’t have the appetite suppression side, but maybe it’s the alternative when you come off of the pharma. And it’s about $68 a jar for a month, so very affordable. So we’re in secondary and very significant clinicals on that, which should accelerate the growth. We’ve got brain health one, now dementia treatment potentially. Then women’s health, hair, nails, skin, there’s many of them.

And I said I know that it sounds like a lot. When I go back, 2015 is when we backstopped the little company in Chicago called Vital Proteins. And the founder had he was an avid runner. As we all get older, we know that the lubricity in our joints lessens. He had done his research and said, can I have collagen?

And so we made him the first shipment out of Amparo, Brazil. And needless to say, that product line globally has grown to about 30% of our product line. What’s unique about it and comparative is it took ten years to get there. So the NexTyta platform is being launched. It has a library of products.

It has great assets in the world. And we see just really a strong trajectory of growth, which is more common to being able as a health and wellness company to talk about a three- to five year outlook without injecting the word commodity in there.

Andrew, Analyst: Got it. Okay. And if I think about what the opportunity looks like for that business overall, Can you help us understand and I understand it takes some time to develop, but I think you made the comment that you think that business can be more valuable than the global rendering business, think is what you said, maybe I misunderstood that.

Randy Stuewe, CEO, Darling: But how do you think about the Was I drinking last night?

Andrew, Analyst: I cannot confirm or deny. How do you frame that?

Randy Stuewe, CEO, Darling: No, you look at the margins, the gross margins there, 25% to 30%. Last quarter, I think 29%. You take $1,000,000,000 revenue, you got $400.04 50,000,000 before the next tighter product line of potential EBITDA. And that’s really bringing the PV plants and product mixes and moving around synergies over time after close. And then the question is, when you start to say when you go out and start finding health and wellness ingredient comparisons out there, you’re 12 to 16x.

And so we’ve got a market cap today on a little under $6,000,000,000 before I got up here. Hopefully, doesn’t go down after I get up here. But and ultimately, that’s what that company would be worth today.

Andrew, Analyst: Got it. Okay. Thinking about this year, I believe the first quarter was weaker than you might have expected. It was weaker than we expected, but you reiterated the guidance. Maybe frame how it compared to your expectations.

And then kind of what were the moving pieces that hold the guidance? What did you include versus what you weren’t including? How do I just kind of think about the expectations?

Randy Stuewe, CEO, Darling: Yes. The March run rate divided by five times 40, and that gave us basically a $950,000,000 run rate without fat prices moving up anymore. The Diamond Green Diesel, we’re looking at that and just saying something’s got to give. And what we mean by that is margins have to improve or RINs are really going to jump here. And that will really be a back half of the year.

And it doesn’t take much. The first five years, we ran $1.26 a gallon. The next five years, almost $2.2 a gallon. And then it kind of fell off last year. The investment case was around $0.80 a gallon.

We still believe that’s our competitive advantage before SAF. And to restart the biodiesel industry and some of these off players, it’s going to take a significant margin improvement, and

Andrew, Analyst: we’re there. We started the discussion. My intro, we talked about the transformation of the business over a number of years. If I think about the next kind of three to five years and how you think about growing the business, we talked about SAF, we talked about NexTita. What are the other kind of ways in which you think about evolving the business, growing the business over the next handful of years?

Randy Stuewe, CEO, Darling: Yes. When I still look at the world, still fundamentally, as we’ve always said, with population, even though somewhat flat or decline in some places, you still got population growth. You got wealth creation. There’s still people eating better and wanting protein. At the end of the day, the preference is still animal based protein.

And so we continue to see continued growth in South America. I’ve got four plants down there today that are in need of additional capacity as we go forward. We continue to I fundamentally believe Brazil and one day Argentina will help really feed China. I don’t we haven’t waved off of that one. Clearly, the next tie to it is really exciting for us in the SAF project.

So organic growth in the rendering business, new products in the collagen business and aviation fuel as we go forward.

Andrew, Analyst: Does M and A become more a part of that as a driver, certainly not with SAF and Nexidia, but I think maybe for the core business? Or is that something that you would do more organically?

Randy Stuewe, CEO, Darling: Well, M and A will be opportunistic as it comes. The challenge in this business today has been over the last three to five years, the cost to build a plant has tripled. And that changes the M and A, what you can acquire a brownfield for and ultimately retrofit. So yes, there’s players out there that clearly there are three of them for sale in Brazil today. We’re I’ve still declared an M and A holiday, want to get the balance sheet more in a better shape.

Ultimately, in NexTata, once we close, do we move some debt over there? Those are all things. So in no hurry to do anything other than to deliver on what’s available to us today.

Andrew, Analyst: And so when I think about delivering on what’s available to you today, and I think we closed with this last year as well, but I want to ask it again. When you look at Darling’s asset base as it sits today, and I get the kind of the ups and downs of the cycles and some of those disruptions, what do you think this business should earn from an EBITDA perspective? Certainly not guidance, but just how do you think about what kind of the right level of earnings for this

Randy Stuewe, CEO, Darling: I mean pre any future growth in next tie to today, we look at when we put the Diamond Green Diesel machine on top of this, it was really thought of as a hedge. If we had low fat prices, we’d have higher earnings in DGD. If we get the RVO, which we fundamentally do believe will get a significant increase, that goes back into play here. So easily, as we’ve said, that the core business is $100,000,000 a month business, 1,200,000,000.0. And DGD, the investment case, was right at $0.80 a gallon on 1,300,000,000 gallons.

So you’re somewhere between $1.8 and $2,000,000,000 in the current form that it’s at today.

Andrew, Analyst: Before next

Randy Stuewe, CEO, Darling: Before next Ida.

Andrew, Analyst: Got it. We’re right on time. So we’ll end it there. Thank you very much. Really appreciate it.

Randy Stuewe, CEO, Darling: Thank you.

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