Q2 2023 Darling Ingredients Inc Earnings Call
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Good morning.
And welcome to the Darling Ingredients, Inc conference call to discuss the company's second quarter 2023 results. After the Speakers' prepared remarks, there will be a question and answer period and instructions to ask a question will be given at that time today's call is being recorded.
I would now like to turn the call over to MS. Sue in Guthrie. Please go ahead.
Good morning, Thank you for joining the Darling ingredients second quarter 2023 earnings call here with me today are Mr. Randall C Stuewe, Chairman and Chief Executive Officer, Mr. Brad Phillips, Chief Financial Officer, Mr. John Bullock, Chief strategy Officer, and Mr. Matt Janssen, Chief operating officer of North.
Erica our second quarter 2023 earnings news release, and slide presentation are available on the Investor Relations page under events and presentations tab on our corporate website and will be joined by a transcript of this call. Once it is available.
During this call we will be making forward looking statements, which are predictions projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties actual results could materially differ because of factors discussed in yesterday's press release and the comments.
During this conference call and in the risk factors section of our Form 10-K, 10-Q, and other reported filings with the Securities and Exchange Commission, we do not undertake any duty to update any forward looking statement.
Now I'll hand, the call over to Randy.
Thanks Joanne.
Good morning, everyone. Thanks for joining us for our second quarter 2023 earnings call by all accounts Darling ingredients had a fantastic quarter with a record $508 3 million in combined adjusted EBITDA, Excluding a one time $18 5 million inventory negative impact due to the general Nexsan acquisition or <unk>.
Adjusted EBITDA would've been $526 8 million for the second quarter.
As I discussed in our last quarterly call. We told you lower fat prices translates into lower EBITDA in our feed segment. However, it is more than offset by increased earnings in our fuel segment due to the sheer scale of our platform. This quarter for the first time in our history, you were able to see the strength of the vertical we are built to leverage the <unk>.
Raymond Green diesel machine, the power of our integrated waste fats and oils business combined with best in class renewable diesel production capacity was clearly on display this quarter now turning to the feed ingredients segment in detail globally raw material volumes were up just over 15% compared to second quarter.
<unk> 2022, primarily due to our eastern USA and South American rendering acquisitions that closed last year, while we saw a softening in global fat prices protein prices in specialty ingredients demand continues to be very strong.
Despite lower fat prices, our gross margins held flat compared to Q1 2023 due to our continued integration efforts I'm pleased to report that these integration efforts are nearly complete I feel very good as we head into third quarter, while it's normal to experience some margin degradation due to the extremes or heat.
We are very well positioned to handle the challenges that summer rendering brings capital investments have been made yield adjustments and raw material procurement modifications have also been put in place and completed and we've now optimized our finished product sales opportunities turning to our specialty food ingredients segment the global call.
The Gen market in gelatin business remains robust if we exclude the one time purchase accounting inventory negative impact of 18, and a half million due to the gel next acquisition food segment EBITDA would that would have been $89 8 million for this quarter. Our integration efforts are going very well, we have cross pollinated our organizations to.
[noise] form one and we're excited about the scale and long term opportunities these markets offer us.
Moving to our fuel segment Diamond Green diesel had a record quarter with more than 387 million gallons of renewable diesel sold at approximately $1 28 per gallon EBITDA clearly benefiting from the lower feedstock prices.
<unk> received a 101 4 million cash dividend during the second quarter and subsequent to the quarter close we received another $62 2 million in cash dividends from the joint venture D. G. D completed its turnaround D. G. D. Two completed its turnaround and is back to normal production and D. G. D. Three has been running very well.
And above nameplate capacity, we continue to believe 1.2 billion gallons of renewable diesel.
Gold in 2023 is very achievable construction is progressing very nicely for our first S. AF plant in Port Arthur and we anticipate completion during late 2024, if all things go as plan now with that I'd like to turn the call over to Brad and then I'll come back and continue with an outlook for 2023 brand. Okay. Thanks Ryan.
Net income for the second quarter 2023 totaled $252.4 million or.
$1 55 per diluted share compared to net income of $202 million or $1 23 per diluted share for the 2022 second quarter net.
Net sales were 1.76 billion for the second quarter 2023, as compared to 1.65 billion for the second quarter 2022, or six 5% increase in net sales operating income increased $78 1 million or 28% to 356 point.
7 million for the second quarter of 2023 compared to $278 6 million for the second quarter of 2022.
Primarily due to Darling share of Diamond Green diesel earnings increasing $139 3 million.
This more than offset a 20.8 million decrease in the gross margin of our global ingredients business, which as Randy mentioned included a onetime 18, and a half million negative impact due to purchase accounting for inventory related to the <unk> acquisition.
Additionally, depreciation and amortization and SG&A each increased about 29 million as compared to the second quarter of fiscal 2022, primarily due to the gel next and falls of acquisitions now.
Now moving to non operating results.
Interest expense increased from 24 million in Q2 2022 to about $70 2 million in Q2 2023, primarily as a result of increased indebtedness due to the acquisitions. Other income increased $5 4 million, primarily due to insurance proceeds receive.
<unk> for the Ward South Carolina facility fire.
Now turning to income taxes. The company recorded income tax expense of $40 7 million for the second quarter of 2023, the effective tax rate for the second quarter is 13, 8%, which differs from the federal statutory rate of 21% due primarily to biofuel tax incentives.
And the relative mix of earnings among jurisdictions with different tax rates. The company also paid paid 49 million of income taxes in the second quarter.
For the six months ended July one 2023 Darling recorded income tax expense of 67.7 million and an effective tax rate of 13.2%.
The company has also paid $88 million of income taxes as of the end of the second quarter.
For 2023, we are projecting an effective tax rate of approximately 14% and cash taxes of approximately $50 million for the remainder of this year.
The company's total debt outstanding at second quarter, 2023 was $4 5 billion as compared to $3 4 billion at year end 2022, our bank covenant leverage ratio at the end of the second quarter was 3.11 times, we continue to maintain strong liquidity with 956 million available.
Available on our revolving credit facility as of quarter end capital expenditures totaled 123 million for the second quarter, 2023, and $234 3 million year to date the company repurchased approximately 153000 shares of its common stock for $9 1 million.
During the second quarter stock repurchased year to date is approximately 926000 shares for a total of $52 9 million with that Randy I'll turn it back over to you Hey, Thanks, Brad our business remains robust around the world fat prices have bottomed and are moving up and I expect continued.
Movement in the back half of 'twenty, three protein demand and pricing remains consistent with Q2 and Q3 volumes for Diamond Green diesel will be lighter compared to Q2 due to the planned turnaround at Diamond Green diesel to for the year. We are once again reconfirming our guidance of $1 87, 5 billion combined adjusted EBITDA.
Our global ingredients business is strong and D. G. D has completed all turnarounds and should be operating above nameplate for the balance of the year. So with that let's go ahead and open it up to Q&A.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
And also we ask that you. Please limit yourself to one question and one follow up at this time, we will pause momentarily to assemble our roster.
The first question is from Manav Gupta with UBS. Please go ahead.
Good morning, Randy and team.
So we felt a lot of commodity price volatility during the quarter.
When we look back you gave a guidance of 485 million to $5 5 million.
On your <unk> and you actually came in at the top end of that guidance meeting the guidance. So the question is help us understand the integrated business model, a little bit better and how God is able to withstand the volatility better than most other already produces and then there's this big and Hyatt.
Fact unused steel prices.
Decision not to raise guidance here guests being comes out of beta.
Okay. No I appreciate the comment Manav and I you know I think that was one of the two or three points. We wanted to you know leave the stakeholders with today was we provided the guidance. We came in at the high end of it you know ultimately you know fat prices were down somewhere between five and seven cents.
The pound a little more actually in Brazil, a little more in Europe , and you know that translates you know on an annualized basis to $70 million to $80 million of EBITDA run rate into our system, you know divide that by four and you're down about $20 million in the quarter and if you look at the feed segment.
<unk> was about 100000 tonnes lighter than prior sequential quarter and earnings were off I think about 26 million. So it was all fat price now as we said the reason we were comfortable in trying to put out the guidance there was because of the diamond Green diesel machine.
It was about four times larger than the Darling machine and it originates from around the world and was able to both benefit from the lower fat prices. The Darling provided but also from around the world and so you know it. It's it was very seem pretty straightforward to us John you want to add anything to this yeah I think the interest.
Same thing and probably the hard part looking on the outside of the Darling is the second quarter of this year is really the first quarter that you've been able to see garling with the vertical integration that renewable and scaled state now where we've added so much extra feedstock.
Supply around the world with our acquisitions and Diamond is scale from essentially 300, and 400 million gallons to one point to 1.3 billion gallons. This is your first look at that and what you see is quite frankly, when fat prices go up Darling lens.
Fat prices go down a little bit diamond ones, but the Bottomline is now we're consistently hitting on that $450 million to $550 million EBITDA run rate, which is exactly where we told the street, we were going to be when we went into the scaling process a couple of years ago.
Perfect. My quick follow up here I mean, you are moving ahead with the projects positive updates that it's still early but do you think on a boy I've got or profit maybe basis, you will be more profitable in SaaS, then oddity. So I'm just trying to understand if you make like $1 in EBITDA.
Or do you actually think you can make like 175 or $2, but guy, let and fast fully understanding it's very early in the process.
Yeah Manav. This is John absolutely I mean, we think that the the Saf market is a market that there is an insatiable demand for at an extremely limited supply and quite frankly, most of the alternatives that have been promised to the airline industry around the world for SaaS are our highest pie in the Sky doughnuts.
Best ideas. So we're gonna have an insatiable demand for our SaaS, we already see that coming to us.
Gonna be receiving a premium for this product.
The next question is from Derrick Whitfield with Stifel. Please go ahead.
Good morning, and congrats on another solid quarter.
Thanks Derek.
My first question I wanted to ask a question on your prepared comments on the record temperatures, we're seeing across several of your operating areas.
You noted your feedstock.
Feed margins have historically compressed during the summer.
Due to lower yields.
What have you experienced so far in Q3, and how should we think about your general preparedness this year versus last year.
Yeah, that's always a challenge.
<unk> and summer time, rendering or the the free fatty acids go up meaning that the raw material degrades as quick or quicker than you can get a processed into the plants and so.
Therefore, some of the premium markets that you're serving youre not able to achieve that so far you know we've made it through you know I think we are in the month of August now. So we've made it through almost you know one third of a little over one third of the the summer with very limited issues around the world. So far so you know at the end of the <unk>.
They were watching as I said, Derek we're watching fat prices they bought them, they're coming back up I mean, the U S is moving a little quicker up than the rest of the World. I think you know we've just completed a board meeting yesterday, the European side feels like its moving up now you know clearly there's been some unplanned downtime through.
Out Europe , and the R&D business that are made fat available and made it available to Diamond Green diesel and then obviously, Brazil got a little bit behind here in the system and we've been bringing in a lot of resilient, but at the end of the day, it's a normal summer it seems hot.
What we're seeing a little bit more just color for everybody out. There is just you know the slaughterhouses.
Animal numbers are not as large as they were last year and so at the end of the day the the extra tonnage that sometimes we get into summer times from the integrated slaughterhouses breaking down has not been as great. As it was last year, but at the end of the day I would tell you. That's good news and bad news the Bad news is less tiny it's the good news is it's.
Less stress on the system here for us and we've been able to kind of survive a little better than we got punched in the nose last summer, but you know third quarter is not over yet, but it feels pretty good right now Matt anything you want to add.
Oh, yeah. Thanks, Randy I, you know I would.
Just say that compared to the same quarter last year on Q3 over the last 12 months. The team has worked really hard and getting some of the wrinkles ironed out and getting some of the efficiencies improved especially in some of the the valley assets and so you know we're we're in as good a position as we can be to a to go through this.
This warm and seasonal period.
Great and then as my follow up I wanted to ask if you could elaborate on your comments on the fat market as you look into the second half and even beyond.
How would you frame the supply demand fundamentals over the next several quarters, while global collection efficiency has improved I can't imagine it's improved to a level, where you could cover 1 billion gallons of Rd demand that's already in construction in the U S and existing FCO focused operators that would likely want a low ci feedstocks to qualify.
For the F B C credit.
That's true.
Let me answer the question this way.
All you have the most efficient best machine in the industry, you're always going to be able to source. The fat you need and quite frankly, that's what we have at diamond Green diesel so.
The supply of Fad is always out there for us because we're in the right place with the right pre treatment capabilities and the ability to market to the different markets and maximize the value of our finished product we're going to get the fat and and so you know.
We're not worried about the fast supply and what's interesting about it is this.
You know we operated at production levels of 330 340 million gallons in Q2, which quite frankly, if you take 340 and multiply it by four you'll get a number that's over one 3 billion dollar a gallon.
It starts to factor that into our machine without a problem solved the reality is the.
The shortage is a problem for people and bad places with bad machines.
Not a problem for a person in the right place at the right machine.
The next question is from Sean Duchamp's, along with Jefferies. Please go ahead.
Hi team. Thank you for taking my questions. My first one is on free cash flow with D. G. D distributions coming in can you just remind us on how you would.
Private as free cash flow for the next you know yeah, possibly.
Yes, Sean this is Brad.
Yeah. So the 164, we've now received.
As of today year to date, we do anticipate additional distributions between now and the end of the year.
As we said before we are our number one priority along with integration is really to continue.
Through the end of this year at a minimum to delever.
So we do anticipate you see where we're at we decreased our leverage slightly here in Q2.
And we will see the cadence of that continued through the end of the year to where it will be clearly below three times.
At year end, if not before.
Brilliant. Thank you and then my second question was just on the D. G. D capacity I think he has mentioned that.
Barring the door neurons you have been operating above nameplate capacity.
There are new I dunno limit that we can think of with D. J D. In terms of you know what's the capacity you can think of.
Yeah. This is John .
I mean, if you take a look at what we did in Q2 and multiply by four you get a number well in excess of $1 3 billion, we're always going to have operational hiccups. So it's never going to allow you to run at 100% pure capacity.
But the reality is our diamond Green diesel I think we've had $1 2 billion gallons out there is the capacity for diamond on an annualized basis, even taking into account scheduled downtime and some operational inefficiencies from hiccups here here or there, it's pretty easy for somebody to do the math and figure that 1.2 billion gallons a year is way low.
What that machine can produce on an annualized basis.
Certainly 1.25 shouldn't surprise anybody.
<unk> on what we can produce this year and you know I wouldn't be surprised if there are years of diamond can't do well in excess of $1 3 billion gallons.
And we're always trying to make sure were aligned with our partner, but I think on their call about 10 days ago. They actually acknowledged that it can run in excess of 1.2 billion, but they didn't raise it so I don't want to be the guy that raises it but as John says four times, a 340 kind of gives US gives you the reality of what's out there.
The next question is from Sam Margolin with Wolfe Research. Please go ahead.
Hey, good morning, everybody.
Hum.
So are you guys always have a really good perspective on.
Competitive capacity.
We're in you know sort of the eighth inning of a commissioning or startups on some of these high profile projects I think what's interesting is that.
Is there the margin spread between you know an advantaged facility like the D. J D system versus sort of a marginal AR facility that might be using pretreated soybean oil is very wide, it's reminiscent of like 2021.
Are you seeing anything like as far as feedstock.
Competition or or you know I guess, the other facilities in the market sort of pulling away the advantaged feedstocks or do you think that you know the startups were seeing now are mostly on the pretreated side and arent really.
Affecting you right now.
Well I think Theres a couple embedded you know relevant points here or there that you pointed out number one.
Feedstock markets are moving up a little bit for us right now they probably move up more if there wasn't so much resale material out there available from the guys that can't run that bought it and have to resell it you've seen a compression in the RB D soybean oil versus the crude spread right now because there.
Having to resell our B D out there because they can't even operate with the you know what I'm, what I'm gonna call Champagne and in the sense of processing. The other thing that becomes very and should be very obvious to the listeners is that diamond Green diesel is a real estate play it's a real estate play on the Gulf Coast. It gives us.
Access to all feedstocks in the World and allows the commercial team to optimize the lowest priced fat in the world today, the lowest price fatten, the world's Brazil, and so more boats are coming in from Brazil, Europe's moving back up and you know given some turnarounds hum over and these.
Stern part of the World you know, we're moving feedstock from there too. So ultimately is it affects when I think about the whole business model for us, it's allowing us as Darling specialty ingredient supplier to provide fat to some that can try to pre treat there aren't many out there yet today.
And so ultimately we own the arbitrage that we've always talked about you know it I think you know about a year ago. If I reflect everybody on here said, there was going to be a feedstock shortage and how we were going to allocate it and I think I've made the comment it would be okay. If I didnt supply a pound of diamond Green diesel because it means they can buy it for cheaper than I can.
All it for more and so ultimately that arbitrage exists today.
And we're moving product both.
The world ended into the D. G D system, and we're selling X are quality products onto other people John anything you want to add to that or yeah. I think it's always interesting to read all the press reports about all of the capacity that's going to be coming up in the next quarter.
We've read those pressure for us now for three years and quite frankly every quarter. The same companies come out and talk about how well next photo we're actually going to get there is it's hard to run a renewable diesel machine. It's like riding a unicycle. These things are much more difficult to operate I think people find that out over a period of time I think it's also interesting that everybody always.
Adds up the state of capacity, that's coming online and assuming that those guys are going to run efficiently.
Those people are running two and three catalysts turnarounds a year.
And they've got to figure out their machines. These guys are smart some of them will figure it out over a period of time and then when you shorten the last time the amount of people that actually have putting in pretreatment systems or put in pretty crazy and systems that are actually capable of pre trading the material to protect the catalyst in the machine that list starts to shrink really really.
Really fast so there's a lot of discussion about capacity out there quite frankly, most of the capacity that's being discussed aren't competing with us.
There aren't an entirely different business than we are we're comfortable with the business. We're in and we love the vertical lockdown, we have between Darling feedstocks and Diamond Green diesel it allows us as Randy says we own the arbitrage it allows us to maximize profitability, regardless of what happens in the marketplace and that's the position we're in and that's exactly what we saw.
We were gonna be we're extremely comfortable with the machine. They extremely proud of all the hard work from the people and Darling in the people and Valero that have allowed us to create this machine.
Understood. That's super helpful. I actually don't have a follow up so thanks, thanks very much.
The next question is from Andrew.
Stelmach with BMO. Please go ahead.
Hey, good morning, Thanks for taking the questions.
My first one I guess I'm, hoping that maybe you could compare and contrast kind of the back half of your outlook with the front half of the year and I guess, where I'm coming from is.
If I annualize that first half EBITDA take out that gel Max charge.
You will be running ahead of the guidance, which is great. You also had in the first half lower fat prices only one quarter of <unk>.
He is getting better Dvds ran right.
Yes.
Is there anything where you expect things to get worse in the back half for some of the strength to not hold I'm just trying to make sure that I understand the back half outlook relative to the fire.
No I I think.
Number one it's very difficult to try to predict this thing segment. This segment quarter to quarter and you know and so I think we've been pretty pretty darn close and in the last couple of fiscal years, clearly as I would point out to you and I I think third quarter I would suggest to you is going to be weaker than Q2.
Two why because fat prices may be moving up but the quality of our summer rendering is always weaker and and you know historically over my 20 years at that that's just proven out jelinek will contribute fully in the in the in Q3 and so the feet and you know the food segment is going to be strong.
If not stronger the feed segment should improve slightly.
From where it's at today and then ultimately the question is you know what how many gallons can we get through the D. G. D system in Q3 D. G D too I believe went down and in July and just yeah and came back up in the first week of August here. So you know we missed.
20, something 24 27 days of production there against the as John said, the $3 44 production in.
In in clearly in Q2, so clearly the the contribution of D. G D buys pure balling them with margins holding or improving and D. G. D. It will be less in Q3, and that's where we kind of say the core business specialty ingredients business right now 40 days into the quarter look.
<unk>, then Q2 and D. G. D. Just has less gallons so that would be the way that I would frame. It John anything you want to add to that or that's exactly right. Okay.
That's super helpful. Thank you and then maybe just one follow up on the <unk>.
Margins, obviously, there's been a lot of volatility you know, there's always a gap relative to what we would calculator or other numbers out. There you are talking about Brazil being the cheapest feedstocks right now so could you just from a level setting perspective like how should we think about the BG economics today or through the back half.
There's always that gap and stuff so any help would be would be helpful.
Yeah, I think and John and I'll Tag. This I mean, clearly you know, we've we've watched a heating oil or crude oil and heating oil move back up sharply here.
Hopefully that that will widen a little bit of margin. There's no no lack of volatility as John says and that that business. You know spot margins have ranged from about 22 about 50 in there and I think for the into the balance of the year I think somewhere I don't know John what do you want to put out there about 20 about 25 for the balance of yours, what looks pretty achieved.
Both yep.
That's right I mean at the end of the day, we're always going to see volatility on diamond's margins on a quarter by quarter basis, because you have a massive amount of feedstock going into it a lot of different markets that we're selling into and then we've got heating oil moving around we have rented loving her out and by the way that the disastrous news on the rent.
Pricing that came out after the R. V. I always came out the RIN market is up about eight cents a gallon since that point in time. So all of that's right and play with what we thought it was going to be the margins move around a little bit you kind of see because of the supply chain being so huge and fairly long kind of a lead lag type of a thing that happens on a corner.
By quarter basis, I've said in the past.
Don't get too excited about really high earnings from Diamond on a quarterly basis or a little less per gallon from diamond on a quarterly basis, because when you even that out over the last 12 months you kind of come to the conclusion of the diamonds running at about that dollar dollar 25, a gallon. The only difference is we used to make 300 million gallons of this stuff and now were met.
One two to one 3 billion gallons of this stuff and that math adds up quite differently.
The next question is from Ryan Todd with Piper Sandler. Please go ahead.
Hey, Thanks, maybe.
A question on margins as we think about your feed and food business.
You've had no material acquisitions or most of those valley protein in a couple of others on the feed side and John like on the food side.
You know you you held margin gross margin flat in the feed business sequentially.
Food was down a little bit, but adjusted for the <unk> just to put the inventory charges look like it would have been still around 26%.
As we think about those post these acquisitions.
Should we still expect the.
Food the right way to think about the food margins still kind of in that.
25, 26% and maybe the same on the feed side or are there post acquisition or are there things that would drive those margins one way or the other.
Yeah, I mean I think.
The feed segment I think the gross margin percentage held quarter over quarter I'm.
Clearly that's you know.
Indicative of the progress that has been made in the North American Valley proteins integration acquisition. I mean, there were many things as we said that had to happen there from changing our raw material formulas to yield adjustments to labor attrition and just operate.
Adding a reliability and efficiency and many of those things are happening still some work to do there while we feel that we've got our plan complete as we reminded people some of the raw material formulas are not changeable in that system.
The end of this year one more next year and then one in 'twenty six so that was always the 1000 day integration plan that they laid out there, but long story short the margins in that business have now improved quite a bit you've seen that so I think we're pretty consistent there in the in the food segment.
What youre seeing is pretty symbolic of what's achievable. There we continue to move our product mix more towards the collagen peptide that's.
That's been that that's what's driving those margins there and clearly you know as we told people that the gel next margins were consistent or better than many of the different products and geographies that we didnt operate in and you'll see over time that work its way through so no I think Ryan I think it's pretty symbolic.
And that's that would be consistent with my comments of Q3 core ingredients being better than Q2 core ingredients.
Great. Thank you and then.
Maybe one follow up on you just made some comments about it briefly but.
The final RVO guidance came out during.
During the quarter.
Any thoughts on you know.
Takeaways from that from that final guidance, what it means for your business than maybe the biofuel sector in general as you look forward over the next few years.
This is John Yeah, I mean at the end of the day. It was it was interesting because when we saw that RV all will come out internally, we were like well that's great kind of right in line with what we were hoping for.
And then all of a sudden the marketplace had all sorts of headlines about disappointing terrible awful Rotten and of course, the ranch market has gone up since that RVO dip for a couple of days and went right back up.
The reality is this while the 650 page document that the EPA puts out every year massively painful to read through when you do sell what you see is this Dave.
They've been fairly effective at managing to a 20% rent bank.
On a forward look basis and that will keep the market place in $1.25 to $1 75 rent prices, depending on what the psychology of the moment is there.
The only time that didn't know it.
It was one of the EPA came right out of left field with the small refinery exemptions.
And hit the market place with a big destruction of demand for Rins that the EPA was unable to predict than their previous rulemaking. So at the end of the day. This thing's been condition stable right, where the EPA has managed it to her wants it to be it seems like which is a very nice market for us it's a very adaptable market.
For the marketplace.
Costa out there is not too great for false and we're able to market the product and have a nice margin out of it. So it works very well, we're very pleased with how that RVO came out and renewable diesel in particular.
Great positioning within that RVO profile that just came out so we liked it a lot we were surprised when the marketplace did.
The next question is from Adam Samuelson with Goldman Sachs. Please go ahead.
Yes. Thank you good morning, everyone.
Good morning, Good morning, maybe John I guess, if I could maybe follow on that last kind of a comment that you just made and if you think about 2025 and in this shift to the 45 Z where existing renewable diesel producers and existing conventional biodiesel producers won't get kind of either.
The full or partial portion of the biodiesel tax credit that they currently enjoy.
Do you see risk or a potential that that changes the paradigm on RIN pricing as you move out.
Ultimately that kind of.
That gap or that people are now, earning on the BTC has to get filled by other parts of the the different credit different credits and.
And in the marketplace.
So the 45 days, a very interesting piece of legislation I think it surprised people.
When they went back to the producer cashed out at the income tax credit.
Late in the game as they were deciding how to stand.
At the end of the day, you're exactly right you do see I adjust on that tax credit. So when you look at that on an absolute basis, you could say, where you're going to get less than a dollar here's what we loved about it for Darling.
The fact, the matter is we produce.
Darling low Ci feedstocks.
Diamond Green diesel is capable of taking that low Ci feedstocks and turning it into the highest value renewable diesel in the world.
What that all adds up to is we've always enjoyed in the L. CFS programs. The C. I adjusted concept that maximizes the value of our fat and maximizes the value of what Diamond Green diesel can produce what we just saw in the 45 C was that same contact concept is now.
Implemented into the federal incentive structure, that's advantage for Diamond Green diesel over time and at the end of the day, our margins are going to be defined.
By our competitive advantage versus the alternatives that can supply biomass based diesel into the market place that advantage just got greater with this piece of legislation and one other thing to consider is it's a producers tax credit.
That means the product has to be produced in the United States of America.
And we are the largest producer in the United States of America again, another huge win for our team garlic and also John I think you know relative to and atom. Two you know by then when that when the peak the producers tax credit hit or 45. So he comes into play we're going to be in the SaaS market and we hold that arbitrage.
At the same time that that absolutely favors low Ci feedstocks most C. I S. A yeah. So you know I think for anybody to say this is a static oh, it's less than a dollar will be as we call. It internally the green premium have to adjust to keep the marginal producer profitable.
Maybe but I think you know I don't know that we spent a lot of time thinking about that right. Now we just think that optimizing margins between the R. D. S. A F.
The markets are going to be what drives the future profitability here and whether or not you're getting 75 cents or a dollar I don't think that plays into the thinking of us around here at Adams since they spread since the last time, we spoke of last quarter the.
They've ruled on our allowed transferability as well under that rule. So that gives them more flexibility from a tax incentive perspective. Okay. That's that's helpful and if I could just ask a follow up on capital allocation and obviously, there's a D. D D distributions happened in June .
Another one.
In the third quarter or whether that was July or August should we look at kind of the cumulative kind of total that you've received in the last in the last few months and kind of against the operating kind of earnings power of the business at current production rates and that being a reasonable indication of kind of how distributions we'll will progress.
Yes.
Moving forward, obviously, some volatility in cash spend for cap for Capex in the Saf plant at the JV, but is there anything that would kind of alter that kind of pay out in a material way moving forward.
Yeah, and I think Brad and I'll tag team. This a little bit I mean, obviously it was important to me important to our board and also to the Street to show you the earnings power of Diamond Green diesel and to start to bring those dividends and so you know $101 million in Q2 subsequent in July here, whether it's another.
62, clearly diamond Green diesel to down on a major turnaround for most of the month, we use the excess cash but cash comes and goes from that joint venture as the blenders tax credit check comes in and so what brad's been able to do is move this to a monthly calculation instead of a quarterly calculation.
And you know ultimately you know that that calculation gets made at the end of the month and then we'll see it Brad what do you Wanna. That's that's the only thing I was going to point out Adam is what Randy just hit on and I think you know you know it but big picture I think youre right on for the year. The cadence of your should continue but if you look at it in a real short.
Period with them with a calculation each month and you know would you hold back some some cash you know you repay the if if there's a working capital and the revolving line outstanding So when we get to the end of the year, what's the total exactly going to be it's hard to say Randy mentioned big BTC flows.
In that and in John's Big machine of D. G. D. One two and three those are big cash movements, but in the big scheme of things for this year I'd say.
What we've seen ballpark, depending on timing, particularly at the end of the year is kind of just kind of how we're seeing it for the rest of the year, Yeah, and I think you know I tried to put a number on its hard Adam I mean, clearly we're just speaking at the ultimate number of beam being below three times leverage by the end of the year and then I do think kind of back in.
That number against you know I've given you all the bread crumbs of the EBITDA and all of that yeah.
Yeah, and so our leverage we've said, we'll be clearly below below three times, that's factoring in some additional distributions, let's put it that way.
The next question is from Ben <unk> with Baird. Please go ahead.
Hey, good morning, guys.
Congrats drawn.
I know youre realm until next year, but.
But congrats on everything.
Maybe just.
Going to drill next maybe everything together.
So you had the.
The one timer here a question we get a lot is just.
Are we going to see more of those and so I know you don't have a crystal ball, but as we look out.
As most of them.
See the light in the tunnel with the acquisitions, what type of things related to them.
Yeah, Ben this is Brad I'll just speak up here.
We had smaller amounts for the other significant acquisitions didn't really speak to them as it is clearly because they were about a third this amount.
What will have a Q3 is just the minimus its really in the month of July . So we wanted to really be even speaking toward it so that that take 18 and a half as you know I don't know 90% of it yeah. Yeah. So yeah. The answer to you Ben we do have a crystal ball and you know, we got another million a million and a half of Jones Stephens.
Okay.
Then that's over and you know it's a we're operating now as we've said where our focus is laser on finishing the integration.
You know moving some move into one operating computer system around the world and.
Paying down debt.
One one thing that I think you had some trouble there.
The previous question or a previous question on Chalmette, but could you just talk to us about.
Because.
College is becoming a bigger part of your business.
Your customer base or customer is.
Uh huh.
Gov envision growth.
Business I know you talked about margins a bit which was good topline growth as well.
Yeah, I mean, clearly the decision to acquire Jelinek was a became available b, we were out of capacity in our system as we moved our product mix around from straight gelatin through a college in gelatin mix and so it became a pretty interesting opportunity.
You know as we closed on the business and you got to look or deep dive into the sales ledger. What we started to see was it was it was one of the more fascinating things for me and my my food and AG career was as always they were doing a lot of business and geographies, Inc. And also North America with customers, who we were.
So we had very little I mean, when I say little very little overlap. So our customer base grew the fun part with Brazil is where four plants are they're very efficient one in Paraguay, and then went up in Portage, Indiana.
It gives us a chance to you know optimize our product mix around the world and from geographic movements of those products I think the other thing and in my earlier comments was Ricardo <unk> you know was the operating.
Operations manager of the other genomics operations. He is now in charge of all of Darling Rousseau low worldwide.
And in their sales manager has moved out of the North America and he's moved to run our European operations clearly the cross pollination of the team. There is something that we're very very bullish on you know in my case and I get to sit at the in the big seat here. Our team has a lot to learn from them and I'm very proud of.
That and I think the integration is going to go very very well it isn't going very very well right now the sales ledger is really solid the other thing I would comment about our global college in businesses, where this is kind of the completion of phase one phase two you're going to hear more about over the coming year.
As a as we move into the active peptide area and we'll be talking more about the potential growth vehicles in that and we needed the capacity of the jelinek system to help US move through you know phase two of active peptides you know the other piece that's underneath this business is our continued strong performer.
And China and ultimately you know, we're going to add a little bit of capacity in China over the coming year in our northern China plant and ultimately grow that business you know clearly the pharmaceutical or the pharma business as we call. It from bone gelatin in China is is growing very rapidly as is.
Population looks to Nutraceuticals and supplements for for health care, John anything you want to add to this I mean, no I mean, the wonderful part about John that besides having a fabulous system in a fabulous location is at the end of the day, it's always people that makes money and we've picked up a fabulous fabulous.
Fabulous set of talent and you know what the Jelinek Scoop and South America, that's going to benefit us not only in the Jonas organization, but as it already has and as Randy mentioned throughout the entire Darling and Russell organization in years to come and we're really excited about it.
Our next question is from Ben <unk>.
<unk> with Stephens. Please go ahead.
Hey, good morning, Thanks for taking my questions.
I wanted to maybe ask a little bit of in the context of as your highlighted the benefits of vertical integration to the model. Despite what was a lot of volatility in the first half of the year you demonstrated really solid earnings power from the business and some consistency.
But I think it's quite remarkable and so as you think about.
This business now being a cash machine and wanting to grow it over the next.
Decade, do you like the proportions of the various segments of the business today and how they intertwine.
How do you think about allocating capital in a balanced way to maintain this competitive advantage that you have down the road.
Yeah. This is Randy and I'll tag team with the team here I mean, you know it.
Think a little bit I spend a lot of time looking at geographic concentration I mean, clearly we place too.
Pretty sizable bet in Brazil, and I think we've been bullish Brazil for a lot of years here and waiting on the right opportunity to enter the core rendering and the the gelatin collagen business and grow it there. So clearly we've increased our exposure there why because we continue to believe that that country.
Possesses.
No land water and the ability and people and the ability to produce more animals, and that's where we want to be so I mean, clearly we place that that we.
We will continue to grow in Brazil will.
We will continue to expand the rendering business I mean, it's a very very large countries north to south east to west and so it'll give us a lot more opportunity, we're bringing on a couple more plants as we speak right now there I mean as I look at our total portfolio you know clearly I still think as it's as political tensions.
Potentially ease over time, China deserves a deeper look and then ultimately Africa over time. So the question becomes what is our growth strategy clearly green energy in Europe .
You'll see some additional digester growth from us potentially this year in that area, both expansion and Greenfield.
And then ultimately S a F.
2.0, I mean, clearly diamond Green diesel one and two were not laid out is as apply as number three for the addition of a unit, but we're studying that right now for seam, where it fits and ultimately that decision will depend on how the market develops.
You know I love John's word insatiable demand I'm, hoping for insatiable margins and then we'll build number number 2.0, there are core rendering I mean, you saw the butterball announcements are theres a couple more out there that we're working on right now both domestically and internationally for rendering plant growth and then ultimately.
We you know as the gelatin collagen, we talked about the active peptide market and where we're moving there. So you know we feel really good about the trajectory of growth for you know for this business ultimately the real estate side you have to remember as we said on the Gulf Coast I mean, no announcement here.
D G D 4.0 or D G.
Four but clearly our confidence now in originating global feedstocks gives us the opportunity as that market grows, whereas the saf market grows to consider that investment and then ultimately you know as Brad as we get back to you know two and a half times leverage is where we want to be which should be.
Nearly achievable by the end of our 24, you know we've got to start evaluating cash allocations and what we're going to do with it and that once again puts the dividend on the on the table as a board decision that could be made at that time, Brad John anything you guys want to add.
Perfect Okay.
Okay very good thanks Randy.
My second question is just related to al TFS markets, what you think the.
The runway ahead of us for potentially changing compliance standards.
And what the considerations are as you look to.
California, Osteopaths market, and what theyre thinking through to make that determination.
So this is John I mean, obviously, they're going to the mapping process right now to try to figure out where they go I think one of the things that's great news out of California is carb has figured out that their program works spectacularly.
They have the ability to accelerate the mandates going forward.
And that they know that quite frankly is 75 to $85 a tonne credit there's probably a little low to create the type of additional incremental low Ci feedstocks. They want in the marketplace. We would anticipate to have come forward with a rulemaking that's going to show up from a very good demand increase in California.
We really like the direction that that's going I think carbs had all the right signals sent to us that it can substantially increase those mandates going forward and we would anticipate that they would.
They do a nice job on evaluating the future and capabilities of supply and what the demand looks like what the pattern really seems set that we're in a good position to have growth there.
Good morning, Matt.
Hi can you hear me.
Yes.
Great.
Yes.
[laughter] my apologies.
I wanted to follow up on the recent butterball announcement, it sounds like you'll be building, a new poultry rendering plant would rates or feed volumes by about 3% could you talk about how this deal came about and whether there might be additional opportunities with butterball. Thanks.
Well you know this is a model that we've started I think it's probably somewhere between five and seven years ago now.
With Pico foods in Pocahontas, Arkansas, Encase foods, and wines Burger, Ohio, and ultimately it gets to you know as we said this is a transportation logistics business on one hand, it with a perishable item.
Have water to two thirds water in some cases and so you know we were hauling butterball, a long way and it just made to our factories you know as you know clearly a year ago today, we had armageddon and the sense of trying to handle all the the poultry tonnage in the new Valley system, and so we were either going to have to build some additional.
Capacity in the Delmarva or on the east coast to handle that the tonnage and butter ball just became a candidate because of their tonnage internally and then our ability to.
Third party tonnage into a site take some pressure off of our site and give them improved economics and help them grow. So these are just really fabulous deals I mean, you saw us announce or.
What heritage Cattlemen's, or Cattlemen's heritage up and up in Nebraska. That's the same type of deal and it's just really gets down to.
A transportation savings you know trucking is not as cheap as it used to be so as you look at the concentration of tonnage and we're always looking to optimize our system and say, okay, where who's spending what money on freight and then does it makes sense to build a plant and in this case their land they are building our equipment and <unk>.
Long term agreement and better economics, with our expertise to both operating rendering capacity and our marketing of our product line around the world.
Sounds good and then do you have more color on the food segment in Q2, I guess, we were a little surprised to see it down quarter over quarter, even with gel next rolling in I understand there was the inventory hit which would just be one time, but if the gel next annual run rate still in the one.
The $120 million EBITDA range and.
Could you talk about how things are going so far in Q3 for food.
Yeah, I mean Q2, I mean, you got to add back the 18 and a half and you would see that it was it was up nicely.
Quarter over quarter representative of the gel next contribution remember, there's three components in the feed and the food segment.
There's the Rousselot business there's the.
Edible animal fats business, and then there's the casings and heparin business.
And you know edible fats followed the rest of the animal fat complex down so theres a little bit of reduction there and then the casings business was a little bit lower.
Quarter over quarter, you know that that's related to the Russian and Ukraine issue on the Russian sales.
That arent in there right now so Q3, we're I can tell you that we're back at operating levels that we thought we would and yes. You know we said that the gel next would contribute on the on the final corner you know at the $75 million right.
Most you know the 18 and a half million dollar inventory charge and where were at that run rate at least what I saw on July here. So that's about the only color I can give you at this time with you know 30 days into the quarter.
The next question is from Tom Palmer with J P. Morgan. Please go ahead.
Good morning, and thanks for squeezing me in.
I just wanted to ask I know it.
Capex expectations at Diamond Green diesel the key figure.
It was below your depreciation expense, but I know you've got some projects ramping up so just any color on maybe how that progresses.
I think would be helpful.
I'm not sure I understand the question.
Capital expenditures.
Just your capital expenditure plans at Diamond Green diesel in the back half they were.
They are low in the in the second quarter, but I know the shaft project is starting to ramp up.
Oh I got it so yes, no we will see an increasing capex run rate out of the SaaS project, but the majority of that still next year is when we see the majority of the Capex on that but I think the bigger point on Diamond Green diesel in terms of cash flow out of it is it is true we have a little money, we're going to spend each year on turnarounds.
And we have some money that we're spending on the SAP project, but compare to the cash flow that we've had going out as we've been building Diamond Green diesel two in Diamond Green diesel three.
These arent even drops in the pond, so the free cash flow out of Diamond Green diesel increases tremendously as we stop the massive expansion process within within Diamond and that gives us confidence that we'll continue to see dividends coming out of the diamond Green diesel going forward.
Okay. Thanks, Thanks for that and maybe I'll just follow up on that dividend comment I know you covered some of this already but.
The past you had a more formal criteria to determine the magnitude of distributions I think if we go back to like 2019 2020.
Maybe I missed it but it doesn't seem like there was a policy to that extent in place at this point.
Maybe what kind of determined that the magnitude of payout this time around in my.
Anticipate something perhaps more formal at some point in coming quarters.
Yes, Tom this is Brad so, yes, I think you're probably referencing a 50 million dollar number that we previously previously a couple of years ago. When D. G. D was smaller in terms of kind of a catch hold that that number is.
Due to the size of the machine now won't really speak toward a specific number but that's I think maybe a bit of what youre driving at so but the mechanics of that is largely Randy mentioned, we went to a monthly rather than than a quarterly so that that was a significant move.
A number of quarters ago, but by and large other than those items. It's still done the same the same way and we we pay that revolving facility down or we have it in the calculation for it to be paid down to be a factor to be factored in it in terms of what the distributions will be.
And the other thing just to tag onto what John was referencing on Capex It at Diamond.
I want to be clear when we think about and referenced toward distributions. The remainder of the year. We are factoring in the cap or the presumed or the projected capex there. So.
I hope I hope some of that helps you.
The next question is from Paul Cheng with Scotiabank. Please go ahead.
Thank you good morning, guys.
Randy I wanted to go back on you mentioned about the phase two on the collagen business on the growth plan.
Ken can you share with us that what kind of timeline and milestones.
We should be watching.
Yeah.
On that I mean that if you can talk about that the new business what is the margin.
Paint to you on legacy Pizza that needs. We can have some idea that how the margin improvement may look like on the office visits.
Yeah, I mean active.
Think about the product line, that's being marketed today of the collagen peptides that that's just an aggregation of the peptide today, meaning they've not been separated the work that we're doing at the R&D level today that that gives us a lot of excitement is.
Isolating and concentrating the different peptides and then doing clinical's in different studies on what kind of.
You know reaction the body of the human body gifts for taking those peptides. It is just way too early at this moment due to even think about volumes or margin in that area, but clearly I believe it'll be substantially better overtime than commodity gelatin the apple.
Occasions that are being worked on today that we've released and discussed during some of our public innovation days are absolutely.
They are breathtaking, John what do you want to add to that I mean, you've been working in this area I think well what do you think about in terms of active peptide.
This is just a continuing example of dialing as an innovation company. We're constantly out there trying to figure out all of our customer base and figure out why are these new products center. The demand is being created for how we can develop supply chains at higher margins to be able to supply. These market change active peptides as a continuation of what we've been doing all of that.
Last 10 years. It takes time to develop these and it's not always a straight line everything doesn't happen at all this is going to happen in this day and something else is going to happen. This day, we've got a dog on good track record and we've got a phenomenal organization out there working on the innovation stream. We think there's just a tremendous opportunity in the active peptide world. Yeah, I think Paul if you think about it I mean.
Today, you're seeing a really broad.
<unk> group being out there that you know from vital proteins.
No in the sense of just taking you know collagen peptide and putting it in solution oriented protein bar, but it's just listed as collagen peptides.
Stuff that we're seeing out here that's being worked on.
Would be for a specific purpose joint lubricity nail growth hair retention.
Got held.
I've heard as I've, even heard words dementia treatment I've heard words of of ultimately a one C management and so what all that means is while it's a long runway to get there you know we're working hard in that area, but it broadens the number of products that we can use our product.
Put our ingredient into around the world and given the specificity of those ingredients. It will command a premium to what we're doing today and so how big those markets are we'll see but it wasn't seven eight years ago, we didn't know how big the collagen peptide market was but it clearly.
From our research says this isn't a fad. This is absolutely got proven medical benefits out here.
We're just excited about it and we'll see where it goes.
Hey, Randy and John I think you are doing.
Doing these studies may have some university on some of the products.
When do you think that the first part that May go to with the F. D. A full approval or that may be go food that face one I don't know where they are at this point.
There have been several patents received at this time there are several petitions out there around the world for approval of these products, but I guess, that's all we would like to comment at this time, John anything you want.
That's exactly right, we try not to discuss the stuff out.
On that day.
The next question is from Jason <unk> with TD Cowen. Please go ahead.
Hey, good morning, Thanks for taking my questions.
The first one is just on the impact of feed prices to the overall business Randy last quarter on the earnings call. You discussed the fact that lower feed prices were a net benefit to the.
The company's earnings and I, just wanted to get your understanding or your comments now that prices have kind of.
Rebound at year end and is the inverse true that that higher feed prices are going to be a net negative for the overall business or are there some offsets going on in the marketplace. We should be aware of and then my follow up is just on EBITDA as we think about next year, we could see.
See if we annualize.
Second half 'twenty three EBITDA, you've got to about $1 9 billion is that a fair benchmark to think about for 2024, assuming pricing remains.
Flat, which I know is obviously, a big assumption to make or are there.
Some other things going on in the underlying business that we should think about as well. Thank you.
No I think good questions, Jason this might be where I say I got a fog in my crystal ball, a little bit, but not you know I think the thing that I just want to once again reiterate and try to say, it's OK fat prices globally were down five to seven cents, a pound depending on geography and ultimately at the end.
The day that translates into 70 to 80 million U S dollars annually of EBITDA divide that by four and you get you know $18 million to $20 million and you look at the feed segment and you say how much was it down it was down $26 million. Then you say well what was volume volume was 100000 tons lower than it was in the pre.
Quarter.
And so at the end of the day it kind of makes sense now as we come into Q3 remember the pipeline, whether it's coming out of Europe , Brazil or North America.
Been priced into D. G D for 45 to 60 days already so we won't see the pick up.
In animal fat prices or yellow grease, or yuko until probably September into our system because of the pricing lags. So yes, that's gonna be that'll play positive towards the end of Q3 and that will carry momentum into Q4, you know the other thing that you look at as we talked about the food segment has a little bit.
Fat in it so it's down but it's coming back and then you look at Diamond Green diesel. It was offline for basically July number two was and you know that's a 470 500 million gallon plant offline. It's gonna. It's it's back up at capacity and we're also watching you know license.
Crude oil is up 80 bucks a barrel quite a bit from what it was in Q2 and in heating oil is back up. So you know if theyre not exactly perfectly offsetting each other in the sense, but I think at the end of the day you could have a situation where you've got a higher crude oil prices improve feedstock price.
And both businesses benefit John you want to.
Trying to get in that mess up.
I think at the end of the day, what you see is this there isn't.
Not always a one to one correlation that that goes up in fact goes down.
Darling core business profitability in diamonds car business profitability, but what you have seen when we were producing one two to one 3 billion gallons out of Diamond Green diesel we've seen significant adjustments are down and the feedstock price and when you look at the combined vertical what Youll see is extremely strong earnings we anticipate that's going to continue.
When you look at the combined vertical as we see fat prices rebound and Randy you had a very important point rents have been stable to slightly up L. CFS has been stable, but we've seen the heating oil market go up by 80 cents a gallon.
In the past five or six weeks, so yeah that prices are going up but the baseline on which we salary renewable has been going up so to some degree there are circumstances in which we benefit on both sides of the wall here as Darling and as a.
Condition with stable margins at Diamond Green diesel so the combined entity is going to see some flex back and forth, but because where we are in the vertical we're gonna benefit out of that vertical chain I think at the end of the day is the big message.
The next question is from Bill Baldwin with Baldwin Anthony Securities. Please go ahead.
Yes, good morning.
Just one other quick areas.
With the I just wanted to see any color a rent.
Randy regarding the issues at Tyson has was shutting down.
Some of their poultry plants.
Do any of your customers pick up volume in this.
What's going on out there I mean could that potentially benefit your.
Poultry volumes are.
With am shutting down some.
Plants here in the U S.
Yeah, I mean, clearly I'm not don't have the inside baseball on that but the four plants that Tyson closed are what I would consider to be older higher labor cost plants, and clearly speed up the chain speed at some other more efficient plants that have higher levels of automation I mean, John and John .
<unk> been clear about the 1 billion dollar challenge in there they are delivering on that that's number one number two is that yes, we have picked up some volume and move volumes around on the east coast.
With some of the closures that are happening you know were still seeing a poultry expansion I mean by no means is this symbolic of the world. You know this has been probably the longest most profitable poultry and meat cycle, but I think this country has seen and clearly you know there is clearly some you're hearing it from the food can.
Youre filling some inflationary recessionary pressures here and abroad.
But at the end of the day, it's really it's not a giant deal for us, but yes, we have picked up some volume moved around as different people that were going to some some of these plants have now decided to move to image around we're always looking to optimize tonnage out there and lower freight costs. When it's available. So the answer is yes, we have.
<unk>.
And just.
Second question, Randy I know you.
<unk> got a number of initiatives going on with expand are you expanding your rendering capacity with new plants, Brazil.
Other areas can you or.
Quantify or give some color.
Is there what kind of impact this could have on your overall capacity when those plants are completed what kind of increase that volume processing capacity.
Take place and some kind of a timetable or when do you think all of that will be completed.
It's hard to put a real number on that at this moment I you know the one thing we we continue to wait on the Polish Andy.
Antitrust authorities to close on the Threep poultry plants in Poland and that should happen hopefully this quarter.
We got a couple of plants coming online just starting up in Brazil, a couple more plants expanding in Brazil, butterball won't be on until 'twenty, five cattlemen's heritage and wont be until 'twenty five so it's a pretty good slug of growth around the country.
But you know, it's really a late 'twenty four 'twenty five timeframe for most of that before it would be transparent. So I mean, you know you look at the last five years I think.
Acquisitions Aside you know we've been averaging growth between five and 7%. It feels like we're back you know one to two right now as the world kind of retraced, there's a little bit, but we're still growing.
Yeah.
This concludes our question and answer session I would like to turn the conference back over to Randy for any closing remarks.
Hey, Thanks, everybody for your questions today as you know we'll be attending a few conferences in September which are listed on our website as always any questions feel free to reach out to Suzanne and stay safe have a great day and appreciate everybody being on the call that concludes our call.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.