Q2 2025 Darling Ingredients Inc Earnings Call

July 24, 2025

It 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.

Speaker Change: I would now turn the call over to MS Sue and Guthrie Senior Vice President of Investor Relations. Please go ahead.

Speaker Change: Thank you for joining the Darling ingredients second quarter 2025 earnings call here with me today are Mr. Randall C Stuewe, Chairman and Chief Executive Officer, Mr. Bob Day, Chief Financial Officer.

Speaker Change: Mr. Matt Janssen, Chief operating Officer North America.

Speaker Change: Our second quarter 2025 earnings news release, and slide presentation are available on the Investor page of our corporate web site and will be joined by a transcript of this call. Once it is available.

Speaker Change: During this call we will be making forward looking statements, which are predictions projections or other statements about future events.

Speaker Change: These statements are based on current expectations and assumptions that are subject to risks and uncertainties.

Speaker Change: Actual results could materially differ because of factors discussed in today's press release and the comments made 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.

Good morning and welcome to the darling ingredients Inc. Conference call to discuss the company's second quarter 2025 Financial results.

Speaker Change: We do not undertake any duty to update any forward looking statements.

Speaker Change: After the speaker's 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 Miss Sue and Guthrie. Senior vice president of investor relations. Please go ahead.

Randy: Now I will hand, the call off to Randy.

Randy: Good morning, Thanks, Suzanne and thanks, everybody for joining us for our second quarter 2025 earnings call. This quarter. We saw early signs of momentum building across their businesses, even as we continue to navigate a complex renewable fuel environment, we delivered positive earnings maintain strict capital discipline and enhanced our.

Speaker Change: Thank you for joining the darling ingredients. Second quarter 2025 earnings call here with me today are Mr. Randall. C Stewie chairman and chief executive officer, Mr. Bob day. Chief Financial Officer and Mr. Matt Jansen Chief, Operating Officer North America.

Randy: Financial flexibility through a successful refinancing we locked in our borrowing costs for the next five plus years and we've positioned ourselves to invest confidently in long term growth.

Speaker Change: Our second quarter, 2025 earnings news, release, and slide presentation are available on the investor page at our corporate website and will be joined by a transcript of this call. Once it is available,

Randy: Also advanced our strategic agenda with the announcement of our intention to form next title.

Speaker Change: During the call, we will be making forward-looking statements which are predictions projections or other statements about future events.

Randy: Our new joint venture focused in the health and wellness space. This move aligns with our strategy to diversify and grow in high margin high growth like health and wellness.

Speaker Change: These statements are based on current expectations and assumptions that are subject to risks and uncertainties.

Randy: Combined adjusted EBITDA for the quarter came in at $2 49, 5 million, while the regulatory environment has been a headwind in recent quarters. We are now seeing signs of clarity and constructive market changes, particularly in our feed segment setting us up for a stronger performance in the second half of 2025.

Speaker Change: Actual results could materially differ because of factors discussed in today's press release and the comments made during this conference call. And in the risk factors section of our form 10K, 10 q and other reported filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements.

Randy: Now, I will hand the call off to Randy.

Randy: Into 2026.

Randy: <unk> continues to face near term pressure, but we remain confident in its long term value as policy support begins to take hold across the board. We're focused on execution and believe the fundamentals are now moving in the right direction.

Randy: Good morning, thanks Suzanne and thanks everybody for joining us for our second quarter 2025 earnings call this quarter. We saw early signs of momentum building across our businesses. Even, as we continue to navigate a complex Renewable Fuel environment, we delivered positive earnings maintain strict Capital discipline and enhance our financial flexibility.

Randy: Through a successful refinancing.

Randy: Now turning to the feed ingredients segment global rendering volumes were steady and in line with our expectations. We saw margin expansion both quarter over quarter and year over year, reflecting focused execution operational efficiency and improved premium ingredient pricing rising fat prices supported by <unk>.

Randy: We locked in our borrowing costs for the next 5 plus years and we've positioned ourselves to invest confidently in long-term growth.

Randy: We also Advanced our strategic agenda with the announcement of Our intention to form next title.

Randy: Public policy that favors domestic sources are creating a favorable pricing environment, which we expect to continue and expand.

Randy: As a result, a larger portion of our domestic that portfolio is now headed to D. G tariff volatility and increased domestic oilseed crush has put pressure on protein prices, especially on our sales into Asia. However, fat prices are outweighing, the higher protein supply and softer prices now turning to <unk>.

Randy: Our food segment.

Randy: As I mentioned, we signed a non binding term sheet with the center load a form next title, we're concluding due diligence and expect to sign a definitive agreement and this quarter. We believe this platform already has a meaningful contributor to earnings has the potential to grow at an accelerated rate as we increase our presence in the health and wellness.

Randy: And nutrition market.

Randy: Global demand for collagen and gelatin continues to strengthen driven by health wellness and functional nutritional needs. We are advancing scientific validation for next tied to GC or glucose control product. These studies are near complete and early results are showing strong potential and we are beginning to see repeat orders for this.

Randy: Product as well.

Randy: In our fuel segment, the renewables environment remains difficult the overhang on small refinery exemptions and delayed 2020 for RIN compliance enforcement is preventing mandates from reflecting real demand and continuing to put pressure on renewable fuel margins. However, <unk> remains a leader consistently.

Randy: Offering best in class performance.

Randy: If volumes continue to demonstrate flexibility and resilience and are helping us to balance the difficult market dynamics, we are seeing the feedstock supply chain rebalance itself due to tariffs and regulatory and tax changes all benefiting darlings core business. In addition changes implemented by carb to increase mandated.

Randy: Greenhouse gas reductions in California as of July one and we expect CFS premiums will strengthen and support margin recovery over time. Meanwhile, the proposed RVO framework represents a major tailwind for the renewables market and <unk> as long as mandated volumes net of Smes or anywhere close to what it's been.

Randy: Proposed it will reinforce long term demand and support a healthy margin environment.

Randy: D. J D. One however will remain offline until margins show some meaningful improvement. Meanwhile, <unk> is scheduled for a turnaround starting here in third quarter, the timing aligns well with our outlook position us for full utilization as policy rules are clarified later in 2025 and enabling <unk>.

Randy: <unk> to run full in 2026, when we anticipate a significantly stronger margin environment, we have.

Randy: We believe the groundwork were laying now through operational discipline and strategic timing positions us well when the margin environment improves now with that I'd like to hand, the call over to Bob to take us through the financials and I'll come back and give you. The my thoughts on the balance of 2025 Bob.

Randy: Randy Good morning, everyone for second quarter of 2025, Darlings combined adjusted EBITDA was $249 $5 million versus $273 6 million in the second quarter of 2024 and adjusting for <unk> second quarter 2025, EBITDA was approximately $207 million versus approximately 190.

Randy: $7 million in the second quarter of 2024 year to date combined adjusted EBITDA totaled $445 3 million as compared to $553 7 million for the same period of 2024.

Randy: Total net sales in the second quarter of 2025, and $1 48 billion versus $1 46 billion in the second quarter of 2024, while raw material volume was almost the same at 374 million metric tons in 376 million metric tons year to date volumes for 2025 or 753 million metric.

Randy: <unk> compared to 756 million metric tons for the same period for 2024 gross margins improved to 23, 3% for the second quarter of 2025 compared to 22, 5% in the second quarter of 2024. We also saw a nice gross margin improvement year to date at 23.0% for the first six.

Randy: Months of 'twenty five.

Randy: Compared to 21, 9% for the first half of 2024 looking.

Randy: Looking at the feed segment total net sales increased and EBITDA improved on relatively unchanged volumes total sales for the second quarter of $2025 to $936 $5 million versus $934 1 million in the second quarter of 2024 for the six months of 2025 total sales were $1 83 billion.

Randy: Compared to 182 billion for the same time in 2024.

Randy: Feed raw material volumes were approximately $3 1 million metric tons for both quarters and materially unchanged year over year at roughly $6 2 million metric tons.

Randy: For second quarter 2025, gross margins improved nicely to 22, 9% versus 21.0% in the second quarter of 2024.

Randy: Meanwhile, lower protein values created a slight headwind when that will alleviate as we continue to find better markets for premium protein products.

Randy: And while fat prices move considerably higher during the second quarter the lag between raw material procurement and finished fat sales resulted in lower margins than we expect to see as prices flattened.

Randy: All things considered we are pleased with the improvement in gross margins for the quarter and as Randy said the outlook is very positive year to date gross margins were also better at 21, 6% compared to 29% in the first six months of 2024.

Randy: Moving to the food segment the margin environment continued to show healthy signs as we were able to maintain gross margins per unit sold while increasing sales volumes total sales for the second quarter of 2025 or $386 1 million higher than second quarter 2024 at $378 8 million.

Randy: Second quarter 2025 gross margins for the foods segment were unchanged from quarter. Two of 2024 at 26, 9% year to date gross margins for 2025 or 28, 1% versus 25, 3% from the same time, a year ago raw material volumes increased to 323.

Randy: <unk> thousand 900 metric tons versus 304700 metric tons year to date raw material volumes for food. The food segment were 653400 metric tons compared to 604400 metric tons, reflecting an increase in global demand.

Randy: EBITDA for the second quarter of 2025 was slightly down at $69 $9 million versus $73 2 million in the second quarter of 2024.

Randy: While year to date 2025, EBITDA was $140 9 million versus $134 9 million from the same period a year ago looking.

Randy: Looking at the fuel segment as Randy mentioned, the renewable fuel environment continued to be challenging.

Randy: <unk> share of <unk> EBITDA was approximately $42 6 million for the second quarter of 2025 versus approximately $76 6 million of EBITDA for the second quarter of 2024 year to date 2025 Darling share of <unk> EBITDA was $48 7 million versus $191 7 million for the first.

Randy: Six months of 2024 in the second quarter of 2025, the impact of Darling for LIFO was negative $31 1 million and it included a lower of cost or market or LCM benefit of $55 6 million year to date LIFO for darlings half of <unk> was negative $59 5 million while LCM.

Randy: EBITDA for the second quarter of 2025 was slightly down at $69 $9 million versus $73 2 million in the second quarter of 2024.

Randy: Generated a positive $101 1 million.

Randy: Overall fuel segment sales for the second quarter of 2025, which does not include <unk> were $158 8 million versus $142 3 million in the second quarter of 2024 year to date sales in 2025 were $293 9 million versus $281 5 million in 2024.

Randy: While year to date 2025, EBITDA was $140 9 million versus $134 9 million from the same period a year ago looking.

Randy: Looking at the fuel segment as Randy mentioned, the renewable fuel environment continued to be challenging.

Randy: Raw material volumes in the second quarter of 2025, or 337600 metric tons versus 362000 metric tons in the second quarter of 2024 year to date raw material volumes in 2025% or 711700 metric tons versus 718900 metric tons for the same period in two.

Randy: Thousand 24.

Randy: Combined adjusted EBITDA for the full fuel segment was $61 3 million in the second quarter of 2025 versus $96 8 million in the second quarter of 2024 and year to date.

Randy: 25 fuel segment combined adjusted EBITDA was $85 5 million compared to $229 9 million in 2024.

Randy: Generated a positive $101 1 million.

Randy: During the second quarter, we accomplished several important objectives related to our credit and balance sheet, providing the company with a significant amount of flexibility and stability for the next five years to seven years.

Randy: First we refinanced and Upsized, our eurobond from $515 million euro to $750 million for seven years at a fixed rate of four 5% second we paid off our revolving credit facility and the four remaining term loan a facilities, replacing them with $2 9 billion in credit facilities through two senior <unk>.

Randy: Our debt agreements first a five year $2 billion revolver and second a six year $900 million farm credit term loan a.

Randy: While the euro bond at four 5% replaced the previous eurobond at three and five 8% the upsizing of the bond allowed us to maintain an average cost of borrowing materially unchanged, while ensuring a stable financial position for many years. The company's total debt net of cash and other items as of June 28, 2025 was $3.

Randy: <unk> thousand 24.

Randy: Combined adjusted EBITDA for the full fuel segment was $61 3 million in the second quarter of 2025 versus $96 8 million in the second quarter of 2024 and year to date.

Randy: 25 fuel segment combined adjusted EBITDA was $85 5 million compared to $229 9 million in 2024.

Randy: Eight 9 billion versus $3 97 billion on December 28, 2020 for helping lower the preliminary leverage ratio to 334 times at the end of quarter. Two 2025 from 393 times at the year end 2024. In addition, we ended the second quarter of 2025.

Randy: <unk> won $2 7 billion available on our revolving credit facility capital expenditures totaled $71 million in the second quarter of 2025 and $134 million for the six months of 2025.

Randy: The company recorded an income tax expense of $4 1 million for the three months ended June 28, 2025, yielding an effective tax rate of 22, 2%, which is slightly higher than the federal statutory rate of 21% due primarily to certain losses that provided no tax benefit offset by the producers tax credit.

Randy: Secured debt agreements first a five year $2 billion revolver and second a six year $900 million farm credit term loan a.

Randy: While the euro bond at four 5% replace the previous eurobond at three and five 8%. The upsizing of the bond allowed us to maintain an average cost of borrowing materially unchanged, while ensuring a stable financial position for many years. The company's total debt net of cash and other items as of June 28, 2025 was 380 <unk>.

Randy: The effective tax rate, excluding the impact of the producers tax credit and discrete items was 33.

Randy: 4% for the three months ended June 28, 2025. The company also paid $22 8 million of income taxes in the second quarter and $32 million year to date for 2025, we expect the effective tax rate to be around 15% and cash taxes of approximately $40 million for the remainder of the year for our projected total of around <unk>.

Randy: $1 billion versus $3 97 billion on December 28, 2020 for helping lower the preliminary leverage ratio to 334 times at the end of quarter. Two 2025 from 393 times at the year end 2024. In addition, we ended the second quarter of 2025 with approximately one.

Randy: $72 million overall, the company's net income was $12 7 million for the second quarter of 2025 or <unk> <unk> per diluted share compared to net income of $78 9 million or <unk> 49 per diluted share for the second quarter of 2024 and year to date 2025 Darling had a net loss of $13 5 million.

Randy: $2 7 billion available on our revolving credit facility capital expenditures totaled $71 million in the second quarter of 2025 and $134 million for the six months of 2025.

Randy: Or negative <unk> <unk> per diluted share now I will turn the call back over to Randy. Thanks, Bob now as we look ahead, we remain confident in the strength of our business, particularly our core ingredients platform, which continues to benefit from a favorable public policy.

Randy: The effective tax rate, excluding the impact of the producers tax credit and discrete items.

Randy: Outlook, we expect sequential improvement across the board with rising fat prices supporting our feed segment, while premium proteins remain a modest headwind, we're seeing signs of stabilization at PGD, although the current environment remains challenging and volumes will be lower in the third quarter due to a planned turnaround we believe.

Randy: This sets us up well for full utilization in 2026, while the timing of RIN recoveries remains uncertain due to ongoing small refinery exemption issues, we anticipate a more constructive market environment ahead based on what we see today, we expect full year combined adjusted EBITDA in the range of $1 5 billion.

Randy: To $1 1 billion with that now let's go ahead and open it up to questions.

Randy: Or negative <unk> <unk> per diluted share now I will turn the call back over to Randy Thanks, Bob.

Randy: Of course, we will now begin the question and answer session.

Randy: We ask that all participants only ask one question and one follow up.

Randy: Now as we look ahead, we remain confident in the strength of our business, particularly our core ingredients platform, which continues to benefit from a favorable public policy.

Randy: You'd like to ask a question. Please press star followed by one on your telephone keypad.

Randy: The reason you would like to note that question. Please press star followed by Kim.

Randy: To ask a question press star one.

Randy: As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking a question.

Manav Gupta: Our first question comes from the line of Manav Gupta with UBS.

Randy: Your line is now open.

Manav Gupta: Yeah.

Speaker Change: Good morning, guys. My first question is when we look at the revised RVO much higher operating with 50%.

Speaker Change: Falling feedstock and no PTC part important IV business data.

Speaker Change: Dana can you talk about some of the policy benefits, which warrant more domestic renewable diesel meet more domestic feedstock.

Randy: To $1 1 billion with that now let's go ahead and open it up to questions.

Speaker Change: That really benefits Darling ingredients.

Speaker Change: Okay.

Randy: Of course, we will now begin the question and answer session.

Speaker Change: Okay.

Speaker Change: Hi, Good morning. This is Matt I'll start off and maybe ask Randy or Bob to kick in but Youre absolutely right in terms of this we see this going forward in the us.

Randy: We ask all participants only ask one question and one follow up.

Randy: You'd like to ask a question. Please press star followed by one on your telephone keypad.

Speaker Change: More of an evolving into a domestic oriented market more so than what we have seen in the past.

Speaker Change: The reason you would like to note that question. Please press star followed by Kim.

Randy: To ask a question press star one.

Speaker Change: We expect a drop in imported raw materials and as a result, we're seeing the benefit of that in our U S pricing.

Randy: As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.

Moderator: Our first question comes from the line of Manav Gupta with UBS.

And through the quarter that prices were moved up significantly and we see that continued trend and vet prices maintain being well supported so our focus right now in the U S is on reliability and making sure our our processing plants that the on the raw material side, Ken can run as planned and as expected. So we can.

Randy: Your line is now open.

Randy: Hi.

Speaker Change: Good morning, guys. My first question is when we look at the revised RVO much higher operator with 50% plus.

Speaker Change: Feedstock and no PTC part important IV.

Speaker Change: <unk> can you talk about some of the policy benefits, which want more domestic renewable diesel meet more domestic feedstock and all of that really benefits Darling ingredients.

Speaker Change: To maximize the production of the U S that too to supply the RT market.

Bob Day: Yeah I'll just add this is Bob.

Speaker Change: No I agree with that it is very supportive to U S or north American fat values.

Speaker Change: Okay.

Matt Jansen: Hi, Good morning. This is Matt I'll start off and maybe ask Randy or Bob to.

Speaker Change: That's great for Darling it doesn't really hurt us so much outside of the U S. Because of the dynamics of the regional markets. There. So overall that's good for the feed segment.

Matt Jansen: To kick in but Youre absolutely right in terms of this we see this going forward in the us.

Speaker Change: Also if the RVO.

Matt Jansen: More of an evolving into a domestic oriented market more so than what we have seen in the past.

Speaker Change: And the stated mandate holds as a mandate net of Fsrus withdrawal.

Speaker Change: Waiting to see but if it if it does hold us a mandate then it's very positive in our view for renewable diesel margins just based on the supply and demand and capacity availability to produce renewable diesel and biodiesel in the United States relative to that demand number so.

Matt Jansen: We expect a drop in imported raw materials and as a result, we are seeing the benefit of that in our U S debt pricing and through the quarter that prices were moved up significantly and we see that continued trend and vet prices maintain being mill supported so our focus.

Speaker Change: We still see those things as positive.

Speaker Change: The 50% return.

Matt Jansen: Right now in the U S is on reliability and making sure our our processing plants at the on the raw material side, Ken can run as planned and as expected. So we can continue to maximize the production of the U S that too to supply the RT market.

Speaker Change: And interesting policy dynamic if we see that hole and it would it would support those things it would eliminate access to foreign feedstocks, which is some flexibility we like but.

Speaker Change: The other positive impacts outweigh the negative impact of that.

Bob Day: Yeah I'll just add this is Bob.

Bob Day: So I agree with that it is very supportive to U S or north American fat values.

Speaker Change: Perfect and my quick follow up headed amendment.

Speaker Change: That's great for Darling it doesn't really hurt us so much outside of the U S. Because of the dynamics of the regional markets. There. So overall that's good for the feed segment.

Speaker Change: Gone into effect carbon prices are already moving up I think that close to $55.

Speaker Change: The prices are higher for Oems.

Speaker Change: And kind of blocked.

Speaker Change: It's also if the RVO.

Speaker Change: Wanted to understand guidance and expect that we could get to like $70 a ton by year end and if everything gets valued than maybe even $80 in 2020. Thanks Bill.

Speaker Change: Stated mandate holds as a mandate net of Fsrus, which are all kind of waiting to see but if it if it does hold us a mandate then it's very positive in our view for renewable diesel margins just based on the supply and demand and capacity availability to produce renewable diesel and biodiesel in the United States relative to that demand number so.

Speaker Change: Recall that in CFS prices again, Holly benefits doubling in median thank you.

Speaker Change: So I think.

Speaker Change: The first thing I'd say is.

Speaker Change: <unk>.

Speaker Change: What we view as very positive as now that with the increased greenhouse gas obligations elimination of greenhouse gas obligation in California, we're starting to see the bank finally coming down and that's that's a very positive sign.

Speaker Change: We still see those things as positive.

Speaker Change: The 50% return.

Speaker Change: An interesting policy dynamic if we see that hole and it would it would support those things it would eliminate access to foreign feedstocks, which is some flexibility we like but.

Speaker Change: Based on where we are today and what we see playing out that will this bank will continue to decrease how that results exactly in price per ton of Lcs credits, it's very hard to estimate that that's going to depend on obligated parties from California, the sense of urgency they feel they need as far as <unk>.

Speaker Change: The other positive impacts outweigh the negative impact of that.

Speaker Change: Perfect and a quick follow up heading amendment.

Speaker Change: We have gone into effect carbon prices are already moving up I think that's close to $55.

Speaker Change: During those credits.

Speaker Change: The prices are higher for Oems and kind of block on this mine to understand we fully expect that we could get to like $70 a ton by year end and if everything gets valued than maybe even $80 in 2026.

Speaker Change: <unk>.

Speaker Change: We agree that it's moving in a positive direction and likely to head higher.

Speaker Change: Yeah.

Speaker Change: Thank you for your question.

Speaker Change: Our next question comes from the line of Heather Jones with Barrington Research.

Speaker Change: Cortes DFS Piper and again, how it benefits Darling ingredients. Thank you.

Speaker Change: It is now open.

Speaker Change: Good morning, Thanks for the question.

Speaker Change: So I think.

Speaker Change: My first one is on <unk>. So in your slide deck can you talk about I think it was a roughly 13 million year on year hit from lower UK pricing, whereas spot pricing for the last two to three quarters. So it suggests that would've been higher. So just wondering if you could explain to us what happened in the quarter.

Speaker Change: The first thing I'd say is.

Speaker Change: <unk>.

Speaker Change: Based on where we are today and what we see playing out that will this bank will continue to decrease how that results exactly in price per ton of Lcs credits, it's very hard to estimate that that's going to depend on obligated parties with California, the sense of urgency they feel they need as far as <unk>.

Speaker Change: And maybe the year ago quarter comparison.

Speaker Change: That would have caused that and when we should expect to see the current pricing we're seeing come through.

Heather: Yes, thanks Heather.

Heather: I'm trying to get to that slide in the deck I think the let me just address the last part of your question first.

Speaker Change: Securing those credits.

Speaker Change: But.

Heather: The dynamics of that market.

Speaker Change: We agree that it's moving in a positive direction and likely to head higher.

Heather: It's very fluid and so.

Speaker Change: Yeah.

Heather: As we are pricing with suppliers.

Speaker Change: Thank you for your question.

Speaker Change: Our next question comes from the line of Heather Jones with Barrington Research.

Heather: The timing at which we're pricing relative to.

Speaker Change: Your line is now open.

Heather: The indication we use.

Heather Jones: Good morning, Thanks for the question.

Heather: Let's say the timing at which we sell product relative to the timing at which we price for suppliers those can be different and in a rising market like we've had in the last quarter.

Heather Jones: The first one is on <unk>. So in your slide deck can you talk about I think it was a roughly $13 million.

Heather: That can work against us.

Heather Jones: Year on year hit from lower UK pricing, whereas spot pricing for the last two to three quarters that suggests it would have been higher. So just wondering if you could explain to us what happened in the quarter and maybe the year ago quarter comparison.

Heather: What what tends to what we expect is as prices.

Heather: Latin at a higher level, where we are today than then the margin is higher because of our percentage that we keep the total price, but I think during the quarter. What we saw was we're selling out in front.

Heather Jones: That would have caused that and when we should expect to see the current pricing we're seeing come through.

Heather: Fixing prices as the index continues to go higher when we set the price that we're paying it's higher than what it was at the time, we sold and so that's that's the biggest impact that we had on that yes, that's well said, Bob I mean really and what Youre looking at Heather is in a rising raw material procurement market, which we're in with forward.

Speaker Change: Thanks Heather.

Speaker Change: I'm trying to get to that slide in the deck I think the let me just address the last part of your question first.

Speaker Change: The dynamics of that market.

Speaker Change: It's very fluid and so as.

Heather: Sales, it's always the lag effect as things go accelerated here I think what's most important today is as we lay the the.

Speaker Change: As we are pricing with suppliers.

Speaker Change: <unk>.

Speaker Change: The timing at which we're pricing relative to.

Heather: The outlook is Q3 fat prices really you got to look at yellow grease and Yuko as both of those go to Diamond Green diesel a bigger share of our our mix now in North America as go into Diamond Green diesel and the prices are up anywhere from 10 to 14 cents a pound over Q2 and Q2 you.

Speaker Change: The indication we use.

Speaker Change: Let's say the timing at which we sell product relative to the timing at which we price for suppliers those can be different and in a rising market like we've had in the last quarter.

Speaker Change: That can work against us.

Speaker Change: What what tends to what we expect is as prices.

Speaker Change: Flatten at a higher level, where we are today than then the margin is higher because of our percentage that we keep the total price, but I think during the quarter. What we saw was we're selling out in front.

Heather: Really only saw versus Q1 about $60 a ton or three cents a pound price rise between the <unk> and the yellow grease.

Heather: As it flowed through the P&L and that's just that's just the typical lag factor.

Speaker Change: Fixing prices as the index continues to go higher when we set the price that we're paying it's higher than what it was at the time, we sold and so that's the biggest impact that we had on that yes, that's well said, Bob I mean really and what Youre looking at Heather is in a rising raw material procurement market, which we're in with Ford.

Heather: Okay. Thank you and my second question is with the exception of that change in fair value of contingent consideration that was noted in the press release in the feed segment. Just wanted to know is there anything unusual in this quarter's results whether it be inventory Johnson insurance recoveries or whatever.

Speaker Change: <unk> sales its always the lag effect as things go accelerate here I think what's most important today is that as we lay the the outlook is Q3 fat prices really you got to look at yellow grease and Yuko as both of those go to Diamond Green diesel a bigger share of our our mix now.

Heather: Or that would affect the comparability of Q3 and later quarters to this quarter and just like wondering if this is micah.

Heather: I guess, a clean quarter for us to build.

Heather: Below the line going forward.

Heather: Yes, Thanks, Heather I think the flat.

Speaker Change: In North America is going into Diamond Green diesel and the prices are up anywhere from 10 to 14 cents a pound over Q2 and Q2, you really only saw versus Q1 about a $60 a ton or three cents a pound price rise between the <unk> and the yellow grease.

Heather: The price lag in fats it affected us across all the fabs in the segment so.

Heather: I would say it wasn't.

Heather: To use your term a clean quarter from that standpoint, I think as we get into the third quarter here.

Heather: We are sort of operating at a higher level environment. We're not we're not seeing a situations so far where we're pricing our suppliers at a higher value than what we had to sell and so this will probably be more reflective of that but that was a that was a pretty significant.

Speaker Change: As it flowed through the P&L and that's just that's just the typical lag factor.

Speaker Change: Okay. Thank you and my second question is with the exception of that change in fair value of contingent consideration that was noted in the press release in the feed segment.

Heather: Impact in the second quarter other than that.

Speaker Change: Wanted to know is there anything unusual in this quarter's results whether it be inventory Johnson cerus recoveries or whatever that would affect the comparability of Q3 and later quarters to this quarter and just like wondering if this is like a.

Heather: We did have some deferred profit losses that will come back in the third quarter from related party sales.

Heather: The contingent valuation Heather is related to the.

Heather: Brazilian.

Heather: Acquisition that had an earn out attached to it the completed or will complete here at the end of July and that's just an adjustment and Thats representative of that business operating now really well.

Speaker Change: I guess, a clean quarter for us to build on going forward.

Heather Jones: Yes, Thanks, Heather I think.

Speaker Change: Flat.

Speaker Change: The price lag in fats it affected us across all the fabs in the segment so.

Heather: Yeah.

Speaker Change: I would say it wasn't.

Heather: Thank you for your questions.

Speaker Change: To use your term a clean quarter from that standpoint, I think as we get into the third quarter here.

Heather: Our next question comes from the line of Vishal.

Ronnie: Ronnie with Jefferies. Your.

Speaker Change: We are we are sort of operating at a higher level environment. We're not we're not seeing a situations so far where we're pricing our suppliers at a higher value than what we had to sell and so this will probably be more reflective of that but that was a that was a pretty significant.

Speaker Change: Your line is now open.

Deane: Hi, Deane good morning, and thanks for taking my questions maybe the first one.

Speaker Change: Could you talk about the opportunities for Darling.

Deane: <unk> are there outside of California.

Speaker Change: Margins in Guyana, Oregon.

Deane: You also seem to be flowing up some so could.

Speaker Change: So you're going to share how much of you know.

Speaker Change: Impact in the second quarter other than that.

Speaker Change:

Speaker Change: <unk> you are exporting outside of California shipping outside of California versus within California, and how that's going.

Speaker Change: We did have some deferred profit losses that will come back in the third quarter from related party sales.

Speaker Change: And evolve.

Heather Jones: The contingent valuation Heather is related to the.

Speaker Change: Alright.

Speaker Change: This is Matt I would say that California is a big market in the RV space, but it's by far not the only market.

Speaker Change: Brazilian Act.

Speaker Change: Acquisition that had an earn out attached to it that completed or will complete here at the end of July and that's just an adjustment and Thats representative.

Speaker Change: And we still a lot of our product on an ongoing basis.

Speaker Change: In various other states.

Speaker Change: That business operating now really well.

Speaker Change: Our.

Speaker Change: And here in the U S. But we also export quite a bit and predominantly to the U K and Europe and so we're.

Speaker Change: Yeah.

Speaker Change: Thank you for your questions.

Speaker Change: As these.

Speaker Change: Tariffs and.

Speaker Change: Our next question comes from the line of Vishal.

Speaker Change: And all the different.

Speaker Change: Moving parts, let's say that.

Arnie: Arnie with Jefferies. Your.

Speaker Change: Come on come about.

Speaker Change: Your line is now open.

Deane: Hi, Deane good morning, Thanks for taking my questions, maybe the first one.

Speaker Change: Continue to play out that mix may shift from one to the other but we continue to be a significant exporter of Rd.

Deane: Could you talk about the opportunities for Darling.

Speaker Change: Hardy to Europe.

Speaker Change: <unk> are there outside of California.

Speaker Change: In the U K.

Deane: Margins in Guyana, Oregon.

Speaker Change: Yes, and I think the other thing I would add to what Matt sooner that spot on is I think this morning you saw.

Deane: Also seem to be firming up some so.

Deane: Could you share how much of you know.

Speaker Change: The next day release.

Deane: Already you are exporting outside of California shipping outside of California versus within California, and all of that is going to evolve.

Speaker Change: The positive takeaways for me there is there's always been some consternation that demand is diminishing out there and it's absolutely not.

Deane: Alright.

Speaker Change: Growing for R&D around the world and it's growing for Saf and margins are improving.

Deane: This is Matt I would say that California is a big market in the RV space, but it's by far not the only market.

Speaker Change: Got it thank you and then.

Speaker Change: And we still a lot of our product on an ongoing basis.

Speaker Change: My next one and I think you guys have wholesale that's on it some on just the sras.

Deane: And various other states.

Deane: Our.

Speaker Change: And what are your expectations for what the EPA could do with your <unk> I mean, just based on the conversations that you guys have been having with folks in the industry.

Deane: And here in the U S. But we also export quite a bit and predominantly to the U K and Europe and so.

Deane: As these.

Speaker Change: So that's the million dollar question.

Deane: Tariffs and in all the different.

Matt Janssen: This is Matt again Thats the million dollar question.

Deane: Moving parts, let's say that.

Speaker Change: The <unk> that we expect will come sometime in the next lets say 60 days.

Deane: Come on come about.

Deane: Continued to play out that mix may shift from one to the other but we continue to be a significant exporter of Rd.

Speaker Change: Exactly when that announcement will will become public.

Deane: Hardy to to Europe.

Speaker Change: But frankly, we don't have.

Deane: In the U K.

Speaker Change: A clear view on what that number is going to be there's lots of chatter out there, but frankly as far as I'm concerned no one really knows.

Speaker Change: Yes, and I think the other thing I would add to what Matt sooner that spot on is I think this morning you saw.

Deane: The next day release.

Speaker Change: What that number is going to be so were decently anxiously awaiting that.

Deane: The positive takeaway for me there is there's always been some consternation that demand is diminishing out there and it's absolutely not.

Speaker Change: And how that how the is not only the number but also how they get treated whether they are.

Deane: Growing for R&D around the world and it's growing for Saf and margins are improving.

Speaker Change: Let's see reallocated back or not and so that's still to come and like I mentioned, we think that's imminent here in the next.

Deane: Got it thank you and then.

Speaker Change: A few weeks, but we're.

Deane: My next one I think you guys have wholesale that's on it some on just the sras.

Speaker Change: We're anxiously awaiting that and I would add to what Matt soon there I mean at the end of the day, we've modeled the two or three different scenarios here and really the RVO is big enough to accept and adapt to whatever whatever avenue they take and so in the end of the day. It is a bit of a hangover.

Deane: Expectations for what the EPA could do with your <unk> I mean, just based on the conversations that you guys have been having with folks in the industry.

Deane: That's the million dollar question.

Matt Jansen: This is Matt again Thats the million dollar question.

Speaker Change: The <unk>, we expect will come sometime in the next lets say 60 days.

Speaker Change: Out there and I think that's why we in a sense just to clarify for everybody on the call why we lowered guidance, it's not because of the core ingredient business core ingredient business is as exciting as it's ever been it's just we don't know the timing of when the marketplace is going to react, meaning <unk> and <unk> two.

Speaker Change: No exactly when that announcement will will become public.

Speaker Change: But frankly, we don't have.

Speaker Change: A clear view on what that number is going to be there's lots of chatter out there, but frankly as far as I'm concerned no one really knows.

Speaker Change: What that number is going to be so were decently anxiously awaiting that.

Speaker Change: Whatever the SRU had adjustments it's going to be.

Speaker Change: And and how that how the is not only the number but also how they get treated whether they are.

Speaker Change: Thank you for your questions.

Speaker Change: Our next question comes from the line of Derrick Whitfield with Texas capital.

Speaker Change: Let's see reallocated back or not and so that's still to come and like I mentioned, we think that's imminent here in the next.

Speaker Change: Your line is now open.

Derrick Whitfield: Good morning, all and thanks for taking my questions.

Derrick Whitfield: Beginning on 45, the policy as approved places a cap on the.

Speaker Change: A few weeks, but we're.

Derrick Whitfield: The $1 per gallon level.

Speaker Change: As you guys think about this how does it impact your view on margins relative to R&D.

Speaker Change: Given the state of the voluntary market and are likely an environment, where we will see less SASSA glide.

Speaker Change: Yes. Thanks, Derik this is Bob.

Speaker Change: So ultimately when when when D. G D is looking at selling SaaS.

Speaker Change: At all components to inputs and sales price when they negotiate the price that they're selling and ultimately the margin that we're shooting for.

Speaker Change: Today, it's made up of many different things.

Speaker Change: Whatever the SRU adjustment, it's going to be.

Speaker Change: The port we get from 45 Z today.

Speaker Change: Thank you for your questions.

Speaker Change: Starts it.

Speaker Change: $1 75, Max would land somewhere $1 in that range.

Speaker Change: Our next question comes from the line of Derrick Whitfield with Texas capital.

Speaker Change: Your line is now open.

Speaker Change: With the change probably around $35 40, less would come from the PTC, which then means if we're still shooting for the same margin, we're going to have to get it in the premium that SaaS sells at relative to renewable diesel.

Derrick Whitfield: Good morning, all and thanks for taking my questions.

Derrick Whitfield: Beginning on 45 Z the policy as approved places a cap on that.

Derrick Whitfield: The $1 per gallon level.

Derrick Whitfield: As you guys think about this how does it impact your view on margins relative to R&D.

Speaker Change: We'll just see how that all plays out ultimately SaaS really the price of SaaS and the margins for staff should be determined based on the supply and demand for SaaS and and so we're not really uncomfortable with the changed so much. We just are more focused on the overall supply and demand for SaaS and getting fair value for the product.

Derrick Whitfield: Given the state of the voluntary market and the likely an environment, where we will see less supply.

Yeah. Thanks, Derrick this is Bob.

Speaker Change: So ultimately when when when <unk> is looking at selling SaaS.

Speaker Change: At all components to inputs and sales price when they negotiate the price that they're selling and ultimately the margin that we're shooting for.

Speaker Change: And the margin.

Speaker Change: And I would just add that flexibility that we have and we're not we're not there yet, but we do have the flexibility to choose between whether we produce R&D more staff in our line and so right now we're running.

Speaker Change: Today, it's made up of many different things.

Speaker Change: Port we get from 45 Z today.

Speaker Change: As much as we can and we expect that to.

Speaker Change: Starts it.

Speaker Change: $1 75, Max had land somewhere $1 or in that range.

Speaker Change: But we do have that additional flexibility.

Speaker Change: Great and then with respect to food and your plans to advance the next sighted JV. This quarter. It appears your conversations are progressing better than expected.

Speaker Change: With the change, it's probably around $35 40, less would come from the PTC, which then means if we're still shooting for the same margin, we're going to have to get it in the premium that SaaS sells at relative to renewable diesel.

Speaker Change: I guess could you offer some color on the degree of synergy and growth acceleration youre seeing across the combined company.

Speaker Change: We'll just see how that all plays out ultimately SaaS really the price of SaaS and the margins for SaaS should be determined based on the supply and demand for SaaS and and so we're not really uncomfortable with the changed so much.

Speaker Change: Yes, I think.

Bob Day: Yes. Thanks this is Bob.

Speaker Change: We're really excited about it and we're encouraged by what we're seeing there's really we're limited in what we can say today, because we haven't signed definitive agreements.

Speaker Change: Our more focused on the overall supply and demand for SaaS and getting fair value for the product in the margin.

Bob Day: The next step will be.

Bob Day: Filing for antitrust. So we just want to be really cautious there, but I think what we see with the two different companies is very.

Speaker Change: And I would just add that one flexibility that we have and we're not we're not there yet, but we do have the flexibility to choose between whether we produce R&D or is that an online and so right now we're running.

Bob Day: Very complementary geographic spread.

Bob Day: So they are in some countries that were not that diversifies, our portfolio and thats, especially helpful. In let's say the current environment where.

Speaker Change: <unk>.

Speaker Change: As much as we can and we expect that to continue but we do have that additional flexibility.

Bob Day: The cost of trading between countries differs from country to country and so that diversification is worth more than what it might otherwise have been.

Speaker Change: Great and then with respect to food and your plans to advance. The next site JV. This quarter. It appears your conversations are progressing better than expected.

Bob Day: And then there is a there is also just.

Bob Day: A practical capacity access.

Bob Day: That comes with that transaction that we're really excited about this.

Speaker Change: I guess could you offer some color on the degree of synergy and growth acceleration youre seeing across the combined company.

Bob Day: They bring some very important extraction capacity and some hydrolyzed collagen capacity that's important in the in the fast growing hydrolyzed collagen market. So when we put all those things together.

Speaker Change: Yes, I think.

Bob Day: Yeah. Thanks This is Bob.

Speaker Change: We're really excited about it and we're encouraged by what we're seeing there's really we're limited in what we can say today, because we haven't signed definitive agreements.

Bob Day: There are some really exciting synergies, there's always sort of the cost side of it.

Bob Day: It's more straightforward, but the more exciting part is sort of the increased revenue opportunity.

Bob Day: The next step will be.

Bob Day: Thank you for your questions.

Bob Day: Billing for antitrust. So we just want to be really cautious there, but I think what we see with the two different companies is.

Ryan Todd: Our next question comes from the line of Ryan Todd with Piper Sandler Your line is now open.

Bob Day: Very complementary geographic spread.

Bob Day: So they are in some countries that were not that diversifies, our portfolio and thats, especially helpful. In let's say the current environment where.

Ryan Todd: Hey, thanks.

Speaker Change: Good morning, maybe first can you can you maybe walk through what's assumed in your updated EBITDA guidance for 2025.

Bob Day: The cost of trading between countries differs from country to country and so that diversification is worth more than what it might otherwise have been.

Speaker Change: It implies roughly 25% improvement in quarterly EBITDA in the second half compared with what we saw in the second quarter or so.

Speaker Change: What do you see as the primary drivers of improvement and can you maybe walk through what you've seen today that provide confidence in that number.

Bob Day: And then there's also just a.

Bob Day: Kind of a practical capacity access.

Bob Day: It comes with that transaction that we're really excited about they bring some very important extraction capacity and some hydrolyzed collagen capacity that's important in the in the fast growing hydrolyzed collagen market. So when we put all those things together there are some really exciting synergies.

Randy: Yeah, Ryan this is Randy and.

Randy: Obviously, the number is a reflection of an improvement in the core ingredient business as related to flow through of higher fat prices in a sense catching up and leveling off relative to.

Bob Day: There is always sort of the cost side of it.

Randy: Raw material prices moving up.

Bob Day: That's more straightforward, but the more exciting part is sort of the increased revenue opportunity.

Randy: The higher pay to the slaughterhouses the challenge in Q2 was while the higher fat prices, even though de Minimis, we're flowing through we were playing catch up but.

Bob Day: Thank you for your questions.

Speaker Change: Our next question comes from the line of Ryan Todd with Piper Sandler Your line is now open.

Randy: The higher premium proteins as we refer to them, let's call. It low ash chicken meal that goes to Aqua culture that was that a tariff on one day of tariff off one day, whether its Vietnam or China, and just trying to adjust markets and customers.

Ryan Todd: Hey, thanks.

Speaker Change: Good morning, maybe first can you can you maybe walk through what's assumed in your updated EBITDA guidance for 2025.

Speaker Change: I think it implies roughly 25% improvement in quarterly EBITDA in the second half compared with what we saw in the second quarter. So what do you see as the primary drivers of improvement and can you maybe walk through what you've seen today that provide confidence in that number.

Randy: Really a negative and there we see that kind of steady now I'm not telling you a giant improvement there, but it feels like the disruption is less than it was in Q2 now so higher flow through.

Speaker Change: Yeah, Ryan this is Randy and obviously the the number is a reflection of an improvement in the core ingredient business has related to flow through of higher fat prices in a sense catching up and leveling off relative to raw.

Randy: Fat prices and then as my comments were earlier.

Randy: We're going to have DGB three offline here in August it'll be on ready to run in September I believe some timing. So we'll have all plants with new catalyst ready to rock and roll.

Speaker Change: Raw material prices moving up.

Randy: September one if you will.

The higher pay to the slaughterhouses the challenge in Q2 was wildly higher fat prices, even though de Minimis, we're flowing through we were playing catch up but.

Randy: If that RIN market starts to normalize and reflect what it's going to take from a variable profitability perspective.

Randy: The guidance that we threw out there could be extremely conservative or if it delays till January one the market doesn't react and then I think we're really pretty much in the fairway here, saying that we will have.

Speaker Change: The higher premium proteins as we refer to them, let's call. It low ash chicken meal that goes to Aqua culture that was that a tariff on one day of tariff off one day, whether its Vietnam or China, and just trying to adjust markets and customers.

Randy: Minimal but.

Randy: Some type of contribution from <unk>, especially the SaaS side through the end of the year here.

Speaker Change: Really a negative and there we see that kind of steady now I'm not telling you a giant improvement there, but it feels like the disruption is less than it was in Q2 now so higher flow through.

Speaker Change: Great. Thanks, David.

Randy: Good segue.

Randy: Follow up question on <unk>.

Randy: Yes, I mean you are.

Randy: What seven eight plus months into operation there can you maybe talk about.

Speaker Change: Fat prices and then as my comments were earlier.

Randy: What you've learned so far how would you characterize demand is there anything that's been surprising on the SaaS front.

Speaker Change: We're going to have DGB three offline here in August it'll be on ready to run in September I believes the timing. So we will have all plants with new catalyst ready to rock and roll.

Randy: In terms of geographic mix of demand or pricing et cetera, and that it's still a pretty young market.

Speaker Change: September one if you will.

Randy: What as you look at what Kingston challenges do things still remain that may need to get ironed out over over the coming months or years.

Speaker Change: If that RIN market starts to normalize and reflect what it's going to take from a variable profitability perspective.

Randy: Yes.

Speaker Change: Guidance that we threw out there could be extremely conservative or if it delays till January one the market doesn't react and I think we're really pretty much in the fairway here, saying that we will have.

Ron: Hey, Matt This is Ron this is Matt.

Speaker Change: I would say from what we've learned we started off running in last November and operationally.

Speaker Change: We have I would tell you as.

Speaker Change: Minimal but.

Ron: As expected and done well.

Speaker Change: Some type of contribution from <unk>, especially the SaaS side through the end of the year here.

Ron: The the thing that I would say surprising for example.

Ron: The reduction in the in the PTC.

Speaker Change: Great. Thanks, David.

Ron: That wasn't necessarily in the cards when we when we plan this but we've learned logistically we've moved to move the product around again as expected.

Speaker Change: A good segue to <unk>.

Speaker Change: Follow up question on <unk>.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: Seven eight.

Speaker Change: Plus months into operation there and can you maybe talk about.

Ron: I would say over the last few months, maybe some of the conversations have gone a little bit acquired.

Speaker Change: What you've learned so far how would you characterize demand is there anything that's been surprising on the SaaS front.

Ron: In terms of new business, just because of all of the associated.

Ron: Associated noise related to the things that we all know about but with the army OS and the and the PTC and the <unk>.

Speaker Change: In terms of geographic mix of demand or pricing et cetera, and then its still a pretty young market.

Speaker Change: What as you look at what Kingston challenges do you think still remain that may need to get ironed out over over the coming months or years.

Ron: So all of those things.

Ron: Slow things down a little bit, but we continue to see solid lifting demand, we're running well making deliveries on contracts.

Speaker Change: Yes.

Matt Jansen: Hey, Matt This is Ron this is Matt.

Ron: We've got a good good sales book on so we're looking at the.

Matt Jansen: I would say from what we've learned we started off running in last November and operationally.

Ron: Returns are meeting or exceeding the expectations of the project. So we're very satisfied with it.

Matt Jansen: We have I would tell you.

Ron: Thank you for your question.

Matt Jansen: As expected and done well.

Speaker Change: Our next question comes from the line of Matthew Blair with <unk> your.

Matt Jansen: The the thing that I would say surprising for example for.

Speaker Change: Your line is now open.

Matt Jansen: The reduction in the <unk>.

Speaker Change: Hey, good morning, and thanks for taking my question, maybe circling back to next data could you talk a little bit more about what the scientific studies are showing here we've run some of our own tests and it appears to be quite quite impactful quite quite an improvement.

Matt Jansen: And the PTC.

Matt Jansen: It was something that wasn't necessarily in the cards when we when we plan this but we've learned.

Matt Jansen: Logistically, we've moved it move the product around again as expected.

Matt Jansen: I would say over the last few months, maybe some of the conversations have gone a little bit quire.

Speaker Change: Then also.

Speaker Change: I appreciate that you probably can't talk too much about what the EBIT contribution.

Matt Jansen: In terms of new business, just because of all of the.

Speaker Change: It's going to look like and what the potential there is but but I guess in terms of timing do you think the next data, which start to make a material impact in 2020 fixtures. This the longer dated timeframe. Thank you.

Matt Jansen: Associated noise related to the things that we all know about that.

Matt Jansen: With the Army OS and the and the PTC and the tariffs and all of those things.

Matt Jansen: <unk> slowed things down a little bit, but we continue to see solid demand, we're running well making deliveries on contracts.

Speaker Change: Yeah. Thanks, Matthew this is Bob.

Speaker Change: So.

Speaker Change: <unk> of the trials.

Matt Jansen: Good good sales book on.

Speaker Change: We're completing this summer.

Matt Jansen: So we're looking at the returns are meeting or exceeding the expectations of the project. So we're very satisfied with it.

Speaker Change: Second round of trials with a much larger sample size.

Speaker Change: That is what the larger CPG companies have asked for in order for them to get comfortable marketing the product and really pushing it onto market.

Matt Jansen: Thank you for your question.

Matthew Blair: Our next question comes from the line of Matthew Blair with T H.

Speaker Change: Line is now open.

Speaker Change: We're seeing the same thing that you've talked about so ultimately what what that product does is that it.

Speaker Change: Hi, Yes, good morning, and thanks for taking my question.

Speaker Change: Circling back to next data could you talk a little bit more about what the scientific studies are showing here we've run some of our own tests and it appears to be quite quite impactful quite quite an improvement.

Speaker Change: It stimulates.

Speaker Change: GOP once accretion into the blood.

Speaker Change: That leads to a.

Speaker Change: Controlling the post meal sugar spike and the symptoms around that are curved appetite and.

Speaker Change: And then also.

Speaker Change: Appreciate that you probably can't talk too much about what the EBIT contribution.

Speaker Change: And just more stable blood sugar those are those are really positive.

Speaker Change: It's going to look like and what the potential there is but but I guess in terms of timing do you think the next either which start to make a material impact in 2026 or is this the longer dated timeframe. Thank you.

Speaker Change: We're seeing the same thing with all the all the trials.

Speaker Change: The timeline on when we could see a big impact would be as we finish these trials in the summer we kind of go out and we.

Speaker Change: We present, all this to the large CPG companies and hopefully by the end of the year, we're talking about much more significant volumes. So in 2026. It can have a much bigger impact on EBITDA.

Bob Day: Yeah. Thanks, Matthew this is Bob.

Speaker Change: The status of the trials.

Bob Day: We were completing this summer.

Bob Day: Round of trials with a much larger sample size.

Speaker Change: It's really just going to depend on kind of what the what this next round of trials shows and how compelling it is but.

Speaker Change: That is what the larger CPG companies have asked for in order for them to get comfortable.

Speaker Change: Like you pointed out in the tests that you've done yourself. It is really it is really powerful.

Bob Day: Getting the product and really pushing it onto market.

Speaker Change: We're seeing great results, Bob do you want to talk about the brain side real quick, yes, and I guess the interesting thing here is we were rolling out a portfolio of products.

Bob Day: We're seeing the same thing that you've talked about so ultimately what what that product does is that it.

Bob Day: It stimulates.

Bob Day: GOP once accretion into the blood.

Speaker Change: Ultimately what our team is able to do as they identify what's the molecule that would would cause the body to have a natural reaction that generates a helpful targeted health benefit.

Bob Day: That leads to the.

Bob Day: Controlling the post meal sugar spike and the symptoms around that are curved appetite and.

Bob Day: And just more stable blood sugar those are those are really positive.

Speaker Change: And so by using a different mix of enzymes in the collagen.

Speaker Change: We can create a peptide profile that's unique and one that we can patent and it causes that natural reaction in the human body.

Bob Day: We're seeing the same thing with all the all the trials.

Bob Day: The timeline on when we could see a big impact would be as we finish these trials in the summer we kind of go out and we.

Speaker Change: So we've identified what that what that combination looks like in order to help with memory retention.

Bob Day: We present, all this to the large CPG companies and hopefully by the end of the year, we're talking about much more significant volume. So in 2026. It can have a much bigger impact on EBITDA.

Speaker Change: Health Women's health and all these products are in different stages of development, but but it's a great process that our R&D team has been able to iron out and so as we're excited about next.

Bob Day: It's really just going to depend on kind of what the what this next round of trials shows and how compelling it is but.

Speaker Change: <unk> GC, but we're really excited about what the portfolio of products can mean for the company over the next several years.

Speaker Change: Like you pointed out in the tests that you've done yourself. It is really it is really powerful.

Speaker Change: Matt.

Speaker Change: We're seeing great results, Bob do you want to talk about the brain side real quick.

Speaker Change: I think Youre one of your question was contribution.

Speaker Change: Clearly 26, we're going to get some acceleration here.

Speaker Change: I guess the interesting thing here is we were rolling out a portfolio of products.

Speaker Change: We were requested.

Speaker Change: This health and wellness.

Speaker Change: Sector in the World is a very very large piece out there 60 or $80 billion, you don't need much for it to be significant into your portfolio here.

Speaker Change: And so by using a different mix of enzymes in the collagen.

Speaker Change: Clinical's are key on that we're seeing reorder.

Speaker Change: We can create a peptide profile that's unique and one that we can patent and it causes that natural reaction in the human body.

Speaker Change: Reorders now of the GOP, one or next titled GC product now, which is really really good news.

Speaker Change: We're excited about it if you look at the history and I've always said.

Speaker Change: So we've identified what that what that combination looks like in order to help with memory retention.

Speaker Change: The <unk> is that the history of the food segment, which is really anchored by Rousselot Slash next tired to hear and that business has been built off of the hydrolyzed collagen business out there that we developed.

Speaker Change: <unk> GC, but we're really excited about what the portfolio of products can mean for the company over the next several years.

Speaker Change: And this.

Speaker Change: This is really hydrolyzed collagen 2.0, now and if we're half as successful in volume there.

Speaker Change: Matt.

Matt Jansen: I think Youre one of your question was contribution.

Speaker Change: We can double the earnings in that segment now Thats, probably a three to five year window to get there.

Speaker Change: Clearly 26, we're going to get some acceleration here.

Speaker Change: Six should accelerate 27 should be really meaningful.

Matt Jansen: We were requested.

Matt Jansen: This health and wellness.

Speaker Change: Yeah.

Matt Jansen: Sector in the World is a very very large piece out there 60 or $80 billion, you don't need much for it to be significant into your portfolio here.

Speaker Change: Great great. Thanks for all the helpful commentary and then.

Speaker Change: I guess turning to the Brazil rendering outlook.

Speaker Change: There's been a lot of chatter that but U S. Rendering outlook is excellent after the RVO in the 45 day tax changes, but could you talk about what youre expecting for Brazil, do you think there'll be pressure from things like the RVO and tariffs.

Matt Jansen: Clinical's are key on that we're seeing.

Matt Jansen: Reorders now of the GOP, one or next titled GC product now, which is really really good news.

Matt Jansen: We're excited about it if you look at the history and I've always said.

Speaker Change: Do you expect to kind of reorient your your exported rendering volumes.

Matt Jansen: And the <unk> is that the history of the food segment, which is really anchored by Russolillo Slash next tired to hear and that business has been built off of the hydrolyzed collagen business out there that we develop and this.

Speaker Change: In Brazil to other markets.

Speaker Change: And finally could you remind us just the overall split between U S rendered volumes in Brazil rendered volumes for Darling is that I don't know roughly.

Matt Jansen: This is really hydrolyzed collagen 2.0, now and if we're half a successful in volume there.

Speaker Change: 80 20.

Speaker Change: Thank you.

Speaker Change: Yes, good good question number one.

Speaker Change: The Brazil for us in the rendering side has been a truly wonderful experience.

Matt Jansen: We can double the earnings in that segment now Thats, probably a three to five year window to get there.

Matt Jansen: Six should accelerate 27 should be really meaningful.

Speaker Change: The challenge there has been taken a private company and making it public and making profits versus tax avoidance of a priority here.

Speaker Change: Great great. Thanks for all the helpful commentary and then.

Speaker Change: Getting raw material procurement margin management as part of the culture I would say, we check the box now and we're doing very very well there on that.

Speaker Change: I guess turning to Brazil rendering outlook.

Speaker Change: There's been a lot of chatter that but U S vendors outlook is excellent after the RVO and a 45 day tax changes, but could you talk about what youre expecting for Brazil, do you think there'll be pressure from things like the RVO and tariffs.

Speaker Change: <unk> is an incredible place because right now is the U S. Cattle numbers are down although cattle feedlot margins are way up Brazil's numbers are moving sharply up and so we've got a pile of raw material as we call. It down there. So life is pretty good the the reality of the arbitrage.

Speaker Change: Do you expect to kind of reorient your your exported rendering volumes from Brazil to other markets and then finally could you remind us just the overall split between U S rendered volumes in Brazil rendered volumes for Darling is that I don't know roughly.

Speaker Change: The facts out of there is Brazil has really developed a very strong biofuel market and ultimately.

Speaker Change: 80 20.

Speaker Change: The percentage inclusion I suspect will rise again here in 2026, I mean, there is no lack of attention here right now between the U S and Brazil, and we acknowledge that but there is no problem with that being a domestic oriented business, Matt anything you want to add there I would just say that the market's going to dictate where.

Speaker Change: Thank you.

Speaker Change: Yeah. Good good question number one.

Speaker Change: The Brazil for us in the rendering side has been a truly wonderful experience.

Speaker Change: The challenge here has been taken a private company and making it public.

Speaker Change: Making profits versus tax avoidance of a priority here.

Speaker Change: Are these products slow and from a quality standpoint, the Brazilian quality.

Speaker Change: Getting raw material procurement margin management as part of the culture I would say we check the box now and we're doing very very well there on that Brazil is an incredible place because right now is the U S. Cattle numbers are down although cattle feedlot margins are way.

Speaker Change: For R&D is I think very good preferred but at the same time, Brazil. They can.

Speaker Change: As Randy mentioned their biodiesel program inside the U S can change even with 1% change in that which is expected.

Speaker Change: That that can shift a whole lot more of the volume to stay at home. There. So that will continue to play out and the market's going to dictate where the flow.

Speaker Change: Brazil's numbers are moving sharply up and so we've got a pile of raw material as we call. It down there. So life is pretty good the the reality of the arbitrage of fats out of there is Brazil has really developed a very strong biofuel market and ultimately.

Speaker Change: Goes on what gets exported.

Speaker Change: Historically, a fair bit of that has come to the U S, but maybe that shifts towards Europe.

Okay.

Speaker Change: Thank you for your questions.

Speaker Change: Our next question.

Speaker Change: Yes.

Speaker Change: Alright is now open.

Speaker Change: Hey, good morning, Thanks for taking the questions.

Speaker Change: My first one I was curious if you could comment on what Youre seeing in terms of biofuels industry utilization rates and demand for feedstocks. It seems from the feedstock pricing like things are moving in the right direction, but you've talked about <unk> being offline I'm sure. There are others as well. So so just curious to what extent you've actually seen production.

Speaker Change: Or are these products low and from a quality standpoint, the Brazilian quality.

Speaker Change: For R&D is I think very good preferred but at the same time, Brazil. They can.

Speaker Change: <unk> utilization rates pick up across the industry and kind of related to that where do you really need to get to in order to encourage production to ramp more materially.

Speaker Change: As Randy mentioned Theyre biodiesel program inside the U S can change even with 1% change in that which is expected.

Speaker Change: That that can shift a whole lot more of the volume just to stay at home. There. So that will continue to play out the market's going to dictate where that.

Speaker Change: Yeah. Thanks, Andrew This is Bob I think one thing we're seeing is.

Speaker Change: A lower capacity utilization rate for biodiesel across the board.

Speaker Change: Goes on what gets exported.

Speaker Change: About half of capacity, roughly and that Hasnt changed very much throughout the year.

Speaker Change: Historically, a fair bit of that has come to the U S, but maybe that shifts towards Europe.

Speaker Change: Okay.

Speaker Change: And we're seeing renewable diesel capacity utilization.

Speaker Change: Thank you for your questions.

Speaker Change: Our next question.

Speaker Change: Move slightly higher month to month through the year.

Speaker Change: Yes.

Speaker Change: I think our view on that is that that's more about.

Speaker Change: Alright is now open.

Speaker Change: The market's view of where rins are going.

Speaker Change: Hey, good morning, Thanks for taking the questions.

Speaker Change: Then where they are today and so if you think about it if youre an obligated party and you can generate rins and you believe that the rins are going higher.

Speaker Change: You will use this opportunity to make more rins and so while margins aren't great for renewable diesel. There is we've got enough information about future policy to suggest that margins in RIN values should be higher in the future and so that is what we believe is encouraging the production of renewable diesel today to slightly go up months.

Speaker Change: <unk> utilization rates pick up across the industry and kind of related to that where do you really need to get to in order to encourage production to ramp more materially.

Speaker Change: A month and we'll probably continue to see that at least until we get final clarification on <unk> and what the actual mandate is.

Bob Day: Yeah. Thanks, Andrew This is Bob I think one thing we're seeing is.

Bob Day: A lower capacity utilization rate for biodiesel across the board.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: <unk>.

Bob Day: About half of capacity, roughly and that Hasnt changed very much throughout the year.

Randy: The RVO holds we're going to see we're going to need. The addition to the capacity did return online to meet that obligation. Yes. Andrew. This is Randy that was Matt. This is Randy I think it's going to be interesting at least from my chair.

Bob Day: And we're seeing renewable diesel capacity utilization.

Bob Day: Move slightly higher month to month through the year.

Bob Day: I think our view on that is that that's more about.

Randy: Over the next 10 days to see some reporting of our second quarter earnings for some of these R&D plants that had been running.

Bob Day: The market's view of where rins are going.

Bob Day: Were they arent today and so if you think about it if youre an obligated party and you can generate rins and you believe that the rins are going higher.

Randy: And that will kind of tell you are they running for fun or or not.

Randy: Got it okay that makes sense and then.

Bob Day: You will use this opportunity to make more rins and so while margins aren't great for renewable diesel there is weak.

Speaker Change: My other question was just around your Capex plans, you're tracking solidly below last year's so far this year. It seems like from your commentary there is greater focus on capital discipline.

Bob Day: Got enough information about future policy to suggest that margins in RIN values should be higher in the future and so that is what we believe is encouraging the production of renewable diesel today to slightly go up month to month, and we'll probably continue to see that at least until we get final clarification on <unk> and what the actual mandate is.

Speaker Change: So how should we be thinking about capex for your business for the remainder of this year, maybe even into next year is there any reason that that should accelerate or.

Or how should we be thinking about that thanks.

Bob Day: Yeah.

Speaker Change: Yes, I mean look I think we've been really clear about this andrew that.

Bob Day: Okay.

Bob Day: <unk>.

Randy: The RVO holds we're going to see we're going to need the additional capacity to return online to meet that obligation. Yes. Andrew. This is Randy that was Matt. This is Randy I think it's going to be interesting at least from my chair.

Speaker Change: We're committed to paying down debt and getting our debt coverage ratio down below 3.0 by the end of the year, what you see in the form of our Capex year to date is exactly that.

Randy: Over the next 10 days to see some reporting of second quarter earnings for some of these R&D plants that had been running.

Speaker Change: You will see it go higher here in the summer.

Speaker Change: Winter projects or slowed down because of weather, but we're committed to keeping our capex at $400 million or lower for the year and we'll see where we are and what what our markets look like.

Randy: And that will kind of tell you are they running for fun or or not.

Randy: Got it okay that makes sense and then.

Speaker Change: We achieve our goals as far as.

Speaker Change: Debt coverage ratios and decided what to do at that point, but our goal is to continue to pay down debt.

Randy: My other question was just around your Capex plans, you're tracking solidly below last year. So far this year. It seems like from your commentary there is greater focus on capital discipline.

Speaker Change: This is Randy I mean, the reality is as I want to be clear about a couple of things. One we are not capital starving any of the assets out there today by any means we have delayed some growth projects here nothing thats material.

Randy: So how should we be thinking about capex for your business for the remainder of this year, maybe even into next year is there any reason that that should accelerate or.

Speaker Change: But at the end of the day I think we're focused on getting below 3.0.

Randy: Or how should we be thinking about that thanks.

Randy: Yes, I mean look I think we've been really clear about this andrew that.

Speaker Change: We're waiting for the Sun to Shine in 2006 here.

Randy: We're committed to paying down debt and getting our debt coverage ratio down below 3.0 by the end of the year, what you see in the form of our Capex year to date is exactly that.

Speaker Change: Thank you for your question.

Speaker Change: Our next question comes from the line of Benjamin Carroll with Bank.

Speaker Change: Your line is now open.

Speaker Change: Hey, good morning, guys just following up on that.

Randy: You will see it go higher here in the summer.

Randy: Winter projects or slowed down because of weather, but we're committed to keeping our capex at $400 million or lower for the year and we'll see where we are and what what our markets look like.

Speaker Change: Question.

Speaker Change: You know in the past you guys have talked about.

Speaker Change: Maybe you have a dividend or repurchasing shares.

Speaker Change: And then also.

Speaker Change: So to.

Speaker Change: Just thinking about the capital allocation as we move into 'twenty six.

Randy: When we achieve our goals as far as.

Randy: Debt coverage ratios and decided what to do at that point, but our goal is to continue to pay down debt.

Speaker Change: Your debt targets that I have a follow up.

Randy: This is Randy I mean, the reality is as I want to be clear about a couple of things one we're not capital starving any of the assets out there today by any means.

Bob Day: Well, yes, thanks, Ben this is Bob.

Speaker Change: I think SaaS too.

Speaker Change: We need more much more clarity around the market before we move down that path, so whether we get that or not in 2026, and whether we would move towards that in 2026 is entirely dependent on clarification of policies and near term margin environment that.

Randy: We have delayed some growth projects here nothing thats material, but at the end of the day.

Randy: We're focused on getting below 3.0.

Randy: We're waiting for the Sun to Shine in 2006 here.

Speaker Change: That would be required to justify something like that we're not we're not there today. So as we look at 2026, it's not currently.

Randy: Thank you for your question.

Speaker Change: Our next question comes from the line of bitumen Carrol with bank.

Speaker Change: And the plans to move forward those things can change.

Speaker Change: As we look at everything else.

Randy: Your line is now open.

Randy: Yeah.

Speaker Change: We want to I mean, I think first of all if I look at the food segment, we have a great plan there with the formation of next data and the joint venture.

Randy: Hey, good morning, guys.

Randy: Showing up on that last question.

Speaker Change: You know in the past you guys have talked about.

Speaker Change: Maybe you have a dividend or repurchase shares.

Speaker Change: That will allow us to continue to move to grow in that industry and space.

Speaker Change: And then also.

Speaker Change: And that's a noncash transaction that provides access to that new capacity. So that's that's very convenient and it sounded like this where we can continue growing and it doesn't require capital so that really leaves us with the feed segment.

Speaker Change: South too.

Speaker Change: Just thinking about the capital allocation as we move into 'twenty six.

Speaker Change: Your debt targets that I have a follow up.

Bob Day: Well, yes, thanks, Ben this is Bob.

Speaker Change: There are opportunities for us to continue to grow our platform globally in the feed segment.

Speaker Change: I think SaaS too.

Speaker Change: We need more much more clarity around the market before we move down that path, so whether we get that or not in 2026, and whether we would move towards that in 2020 six is entirely dependent on clarification of policies and near term margin environment.

Speaker Change: We are focused on getting to the right leverage ratios and getting our balance sheet in the right place before we move on any of those things but.

Speaker Change: Well, we'll get to that point and then look at those opportunities.

Speaker Change: But right now I think 2026 is likely to be maybe not as conservative as twenty-five, but but continue to be focused on paying down debt.

Speaker Change: That would be required to justify something like that we're not we're not there today. So as we look at 2026, it's not currently.

Speaker Change: And the plans to move forward those things can change.

Speaker Change: Okay, great and just going back to the food segment.

Speaker Change: As we look at everything else.

Speaker Change: In the interim between when we get to the next item on the growth there.

Speaker Change: We want to I mean, I think first of all if I look at the food segment, we have a great plan there with the formation of next data and the joint venture.

Speaker Change: Last year, there was some weakness in calls and sales it looks like.

Speaker Change: That will allow us to continue to move to grow in that industry and space.

Speaker Change: Bottomed out there.

Speaker Change: Is that the trend or could you just talk more about the trend in collagen sales that youre seeing and how we should look forward to the second half of the year.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Yes, I think so just kind of.

Speaker Change: I would sort of rephrase it a little bit from last year, what we saw was.

Speaker Change: There are opportunities for us to continue to grow our platform globally in the feed segment.

Speaker Change: Slight oversupply in the market more so of gelatin, we did see some collagen.

Speaker Change: We are focused on getting to the right leverage ratios and getting our balance sheet in the right place before we move on any of those things but.

Speaker Change: Yeah.

Speaker Change: I think what's important to understand is in order to make hydrolyzed collagen you have to have.

Speaker Change: Well, we'll get to that point and then look at those opportunities.

Speaker Change: Let's call it gelatin extraction capacity that you're building it on top of.

Speaker Change: But right now I think 2026 is likely to be maybe not as conservative as 25, but but continue to be focused on paying down debt.

Speaker Change: What we what we've experienced throughout this entire period is a consistent increase in demand for hydrolyzed collagen. What we saw last year was just a lot of our competitors putting capacity in the market short on a short term basis, there was a bit more supply of hydrolyzed collagen relative to demand and there had been prior to that but now.

Speaker Change: Okay, great and just going back to the food segment.

Speaker Change: In the interim between we would get to the next item on the growth there.

Speaker Change: Last year, there was some weakness in calls and sales it looks like it's.

Speaker Change: Quickly, we're starting to reverse that trend and what's exciting about college and going forward is the.

Speaker Change: Bottomed out there.

Speaker Change: The investment required to add new hydrolyzed collagen capacity is significant because you've got to have the extraction capacity behind it. That's a that's a that's a very large investment to make.

Speaker Change: Is that the trend or could you just talk more about the trend in collagen sales that you're seeing and how we should look forward to the second half of the year.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: So overall, what we see is a tightening of the gelatin supply and demand gelatin is not a fast growing category, but it sort of grows at population rates.

Speaker Change: Yes, I think so just kind of.

Speaker Change: I would sort of rephrase it a little bit from last year, what we saw was.

Speaker Change: Slight oversupply in the market more so of gelatin, we did see some collagen.

Speaker Change: Hydrolyzed collagen on the other hand is continuing to grow at very strong rates and so we're encouraged by that and ourselves we're well positioned with.

Speaker Change: Yeah.

Speaker Change: I think what's important to understand is in order to make hydrolyzed collagen you have to have.

Speaker Change: With all of the hydrolyzed collagen capacity that we have to continue to grow into that market and as we form the joint venture.

Speaker Change: Let's call it gelatin extraction capacity that you're building it on top of.

Speaker Change: With PV liner, that's going to give us access to more capacity.

Speaker Change: Thank you for your questions.

Speaker Change: Our next question comes from the line of <unk> Sharma with Stephens.

Speaker Change: Your line is now open.

Speaker Change: Thanks for the question.

Speaker Change: Now very quickly, we're starting to reverse that trend and what's exciting about college and going forward is the.

Speaker Change: Just wanted to.

Speaker Change: Start off and.

Speaker Change: The investment required to add new hydrolyzed collagen capacity is significant because you've got to have the extraction capacity behind it. That's that's that's a very large investment to make.

Speaker Change: Hone in on guidance, just a tad bit more.

Speaker Change: I think in prior calls you had given us a split of.

Speaker Change: The core business versus <unk>.

Speaker Change: So overall, what we see is a tightening of the gelatin supply and demand gelatin is not a fast growing category, but it sort of grows at population rates.

Speaker Change: Wanted to understand second half DVD doesn't it doesn't sound like there's too much benefit in there as you mentioned youll be offline.

Speaker Change: Hydrolyzed collagen on the other hand is continuing to grow at very strong rates and so we're encouraged by that and ourselves we're well positioned with.

Speaker Change: For <unk> you did mention that.

Speaker Change: You'll be running in September so I just wanted to understand is are you baking in.

Speaker Change: With all of the hydrolyzed collagen capacity that we have to continue to grow into that market and as we form the joint venture.

Speaker Change: The margin uplift in <unk> from the current environment.

Speaker Change: With PV liner, that's going to give us access to more capacity.

Speaker Change: Just wanted to understand guidance was a bit finer detail.

Speaker Change: Thank you for your questions.

Speaker Change: Yeah.

Randy: Brian This is Randy.

Speaker Change: Our next question comes from the line of <unk> Sharma with Stephens.

Speaker Change: Yes, I think.

Speaker Change: You framed it.

Speaker Change: Your line is now open.

Speaker Change: Okay, but I think what I want to clarify for you is clearly the.

Speaker Change: Thanks for the question.

Speaker Change: Core ingredients business is accelerating.

Speaker Change: Just wanted to.

Speaker Change: Start off and.

Speaker Change: All the way through the end of the year here.

Speaker Change: Hone in on guidance, just a tad bit more.

Speaker Change: I mean, if you look at the cash prices when you back into them. We were up about three cents a pound in fact in the mid forty's versus the low <unk>. In Q1, we are now well above 55, a pound on most F O b plants in North America now.

Speaker Change: I think in prior calls you had given us a split of.

Speaker Change: The core business versus <unk>.

Speaker Change: Wanted to understand second half DVD doesn't it doesn't sound like there's too much benefit in there as you mentioned youll be offline.

Speaker Change: That's a big number now you got you got you know kind of.

Speaker Change: For <unk> you did mention that.

Speaker Change: Balanced that with the raw material price rise that happens during that process.

Speaker Change: You'll be running in September so I just wanted to understand is it are you baking in.

Speaker Change: Proteins are stabilized demand for global collagen is really consistent feels like the destocking is done.

Speaker Change: More of a margin uplift in <unk> from the current environment.

Speaker Change: We've talked about in prior quarters.

Speaker Change: The big unknown in the in the guidance here is.

Speaker Change: Just just wanted to understand guidance was a bit finer detail.

Speaker Change: Do we get a RIN boost once that SRV announcements out there.

Randy: Brian This is Randy.

Speaker Change: Yes, I think.

Speaker Change: When does the market wake up I think we use a lot of discussion around the table here with the team.

Randy: You framed it.

Randy: Okay, but I think what I want to clarify for you is clearly the.

Speaker Change: The RIN market the <unk> market because of the number of obligated parties does not react like a dynamic futures market. That's out there that reflects daily views and guidance and delivery and et cetera et cetera. So.

Randy: Core ingredients business is accelerating.

Randy: All the way through the end of the year here.

Randy: I mean, if you look at the cash prices when you back into them. We were up about three cents a pound in fact in the mid <unk> versus the low <unk> in Q1, we're now well above 55 cents a pound on most F O b plants in North America now.

Speaker Change: The reality in our guidance here as we went forward was we said we're confident in our core our core business and we love it and we prefer to always talk about our core business I think for the last five years. All I've done is talk about the Gd and.

Randy: That's a big number now you've got you've got to kind of.

Randy: Balanced that with the raw material price rise that happens during that process.

Speaker Change: And we'll see we'll see if <unk> becomes a meaningful contributor the table is set with the our view there is no doubt about it.

Randy: Proteins are stabilized demand for global collagen is really consistent feels like the destocking is done.

Speaker Change: The question is timing here. The Guy is always look at me and they know what line I'm about to bring you here and that is I've never made a bad trade, but I've lost a fortunate and timing and so right now it's really a timing issue as to when this kicks in and all starts to react I mean, youre seeing the bean oil complex youre seeing.

Randy: We've talked about in prior quarters.

Randy: The big unknown in the in the guidance here is.

Randy: Do we get a RIN boost once that SRV announcements out there.

Randy: When does the market wake up I think we use a lot of discussion around the table here with the team.

Speaker Change: Crush margins reactor there now above the five year average I mean, this is a pretty darn good setup now as we enter the fourth quarter Q3 set offline now we're down in August and we're ready to run full September one if margins are there, we're not going to run for fun and burnup catalyst until.

Randy: The RIN market the <unk> market because of the number of obligated parties does not react like a dynamic futures market. That's out there that reflects daily views and guidance and delivery and et cetera et cetera. So.

Randy: The reality in our guidance here as we went forward was we said we're confident in our core our core business and we love it and we prefer to always talk about our core business I think for the last five years all I've done is talk about <unk>.

Speaker Change: All the times ready.

Speaker Change: Okay.

Speaker Change: Got it got it I appreciate that color.

Speaker Change: Just real quickly on the follow up wanted to understand the the SaaS opportunity kind of in Europe, obviously.

Randy: And we'll see we'll see if <unk> becomes a meaningful contributor the table is set with the our view there is no doubt about it.

Speaker Change: They have.

Speaker Change: Strong mandate.

Speaker Change: But wanted to.

Randy: The question is timing here. The Guy is always look at me and they know what line I'm about to bring you here and that is I've never made a bad trade, but I've lost a fortunate timing and so right now it's really a timing issue as to when this kicks in and all starts to react I mean, youre seeing the bean oil complex youre seeing.

Speaker Change: Understanding operationally I think there's some nuances with with the classifications that they allow.

Speaker Change: Could you help me understand that a little bit finer detail and.

Speaker Change: Also just wanted to understand if theres any regulations and process that would make feedstock U S product a little bit easier to get into those markets.

Randy: Crush margins react they're now above the five year average I mean, this is a pretty darn good.

Matt Janssen: I'll jump in quick and Matt.

Randy: Setup now as we enter the fourth quarter Q3 is set offline now we're down in August and we're ready to run full September one if margins there, we're not going to run for fun and burn up catalyst until the time is ready.

Matt Janssen: Add to this I think you're highlighting something that's important here and that's.

Speaker Change: All of these different.

Speaker Change: Destination markets they have different requirements as far as the feedstocks you can use in order to make the fuel.

Randy: Okay.

Speaker Change: Certification body, that's required in order to do that.

Speaker Change: Got it got it I appreciate that color.

Speaker Change: These have presented challenges since the since sort of the implementation of the policies that were seeing.

I guess just real quickly on the follow up wanted to understand the SaaS opportunity kind of in Europe, obviously.

Speaker Change: Because it takes time to get those certifications in place and also to sort of get your supply chain sorted. So you've got the right feedstocks coming in the door I think one thing I would say and this is a bit of an add on to the last answer Randy gave us when we look at Diamond Green diesel and our.

Speaker Change: They have.

Speaker Change: Strong mandate.

Speaker Change: But wanted to.

Speaker Change: Understand it operationally I think there's some nuances with with the classifications that they allow.

Speaker Change: Turning around catalyst in Port Arthur.

Speaker Change: Could you help me understand that a little bit finer detail and.

Speaker Change: That really allows us to position that business well in the fourth quarter.

Speaker Change: Also just wanted to understand if there is any regulations and process that would make feedstock U S product a little bit easier to get into those markets.

Speaker Change: Because we can use that as an opportunity to put the right feedstocks in place that allow us to maximize the destination markets that we're going to earn duty drawbacks that we've got and reserve all of these kinds of things.

Speaker Change: Yeah.

Speaker Change: I'll jump in quick and Matt.

Matt Jansen: Add to this I think you're highlighting something that's important here and that's.

Speaker Change: And so as time goes on all.

Speaker Change: All of that gets better and better because you've got those certifications in place you've got the right supply chain the supply chain coming in the door and.

All of these different.

Matt Jansen: Destination markets they have different requirements as far as the feedstocks you can use in order to make the fuel.

Speaker Change: But all of that takes time to put in place.

Matt Jansen: Certification body, that's required in order to do that.

Speaker Change: Thank you for your questions.

Matt Jansen: These these have presented challenges since the since sort of the implementation of the policies that were seeing.

Speaker Change: Our next question comes from the line of <unk>, Zhang with Deutsche Bank.

Matt Jansen: Because it takes time to get those certifications in place and also to sort of get your supply chain sorted. So you've got the right feedstocks coming in the door I think one thing I would say and this is a bit of an add on to the last answer Randy gave us when we look at Diamond Green diesel and.

Speaker Change: Your line is now open.

Speaker Change: Yeah.

Speaker Change: Thank you hi, good morning, Thanks for taking my questions.

Speaker Change: My first question you kind of covered this but I wanted to ask is there a number you could or a range you could provide for the core business.

Matt Jansen: Turning around a catalyst in port Arthur.

Speaker Change: EBITDA for this year.

Matt Jansen: That really allows us to position that business well in the fourth quarter.

Speaker Change: Yes, I mean.

Speaker Change: I think that for that.

Matt Jansen: Because we can use that as an opportunity to put the right feedstocks in place that allow us to maximize the destination markets that we're going to earn duty drawbacks that we've got and reserve all of these kinds of things.

Speaker Change: Thank you Betty for asking that because that's what everybody has been trying to ask but you ask its straight up here.

Speaker Change: It's very funny that I'm going to give you a 900 to a $1 billion.

Speaker Change: So on the 1 billion side Thats, the fat prices flowing through and that means the rins don't react.

Matt Jansen: And so as time goes on all.

Matt Jansen: All of that gets better and better because you've got those certifications in place you've got the right supply chain the supply chain coming in the door.

Speaker Change: If the Rins react we go way above that because the profitability of <unk> will be much more than it has been today.

Matt Jansen: But all of that takes time to put in place.

Speaker Change: Perfect very clear, thank you and thanks for the scenarios.

Matt Jansen: Thank you for your questions.

Speaker Change: Our next question comes from the line of <unk>, Zhang with Deutsche Bank.

Speaker Change: Actually I will just leave it there all my questions have been covered thank you very much.

Speaker Change: Your line is now open.

Speaker Change: Thank you for your questions.

Speaker Change: Thank you hi, good morning, Thanks for taking my questions.

Speaker Change: Our final question comes from the line of Jason <unk> with TD Securities.

Speaker Change: My first question, you've kind of covered this but I wanted to ask is there a number you could or a range you could provide for the core business.

Speaker Change: Your line is now open.

Jason: Hey, good morning, Thanks for taking my questions.

Speaker Change: EBITDA for this year.

Speaker Change: I wanted to go back to the RVO proposal and I understand there'll be more clarity once the small refinery exemptions get announced spot.

Speaker Change: Yeah I mean.

Speaker Change: I think that's fair.

Speaker Change: But.

Betty: Thank you Betty for asking that because that's what everybody has been trying to ask but you ask it straight up here.

Jason:

Jason: There's probably some conservatism among investors just given.

Speaker Change: No.

Speaker Change: Very funny that I'm going to give you a 900 to a $1 billion.

Jason: They have been burnt in recent past on regulation, so I imagine they'd want to see that proposal finalized and to that end there.

Speaker Change: So on the 1 billion side, that's the fat prices flowing through and that means the rins don't react.

Speaker Change: If the Rins react we go way above that because the profitability of <unk> will be much more than it has been today.

Jason: There is a lot in that RVO proposal in you're using conversations with the administration have there been are there things within the proposal that you think are.

Speaker Change: Perfect very clear, thank you and thanks for the scenarios.

Jason: Sacred cows more firm versus.

Speaker Change: Actually I will just leave it there all my questions have been covered thank you very much.

Jason: The items that you think are more trial balloons that that could be.

Jason: <unk>.

Jason: Could not make it into the final rule.

Speaker Change: Thank you for your questions.

Speaker Change: Our final question comes from the line of Jason <unk> with TD Securities.

Jason: Hey, Jason This is Matt and good morning, I would say quickly that.

Speaker Change: Your line is now open.

Jason: First of all there was the public comment period is still ongoing and it's going to run through the first through the early days of August and so that has been with there was a virtual or in person.

Speaker Change: Yeah.

Speaker Change: Hey, good morning, Thanks for taking my questions.

Speaker Change: I wanted to go back to the RVO proposal and I understand.

Speaker Change: There'll be more clarity once the small refinery exemptions get announced spot.

Jason: Amit.

Jason: Went on in a few weeks ago, a lot of written comments are being submitted as we speak so it's hard to say from that if anything comes out.

Speaker Change: <unk>.

Speaker Change: There's probably some conservatism among investors just Kevin.

Speaker Change: They have been burnt in recent past on regulation, so I imagine they'd want to see that proposal finalized and to that end.

Jason: I would say it.

Jason: Headline level.

Jason: The administration remains very supportive of the RVO and the RVO process and is looking for something that is going to support the industries.

Speaker Change: There's a lot in that RVO proposal in you're using conversations with the administration have there been are there things within the proposal that you think are.

Jason: And the AG community and so that's the headline now what is the <unk> is.

Speaker Change: Sacred cows more firm versus <unk>.

Jason: Like I mentioned, we're expecting that to come in the next few weeks and in the RVO to be finalized in October so that's the timeline.

Speaker Change: Items that you think are more trial balloons that that could be.

Speaker Change: That cannot make it into the final rule.

Jason: Are there things in play there I'm sure.

Jason: Which ones and to what extent that remains to be open other than the fact that our view is that the administration is very supportive.

Matt Jansen: Jason This is Matt and good morning, I would say quickly that.

Speaker Change: First of all there was the public comment period is still ongoing and it's going to run through the first are the early days of August and so that has been with there was.

Jason: A solid.

Jason: RVO.

Jason: And on a long term basis.

Bob Day: Yes, Jason This is Bob I, just I would think.

Speaker Change: A virtual or in person comment that went on in a few weeks ago lot of written comments are being submitted as we can.

Jason: When you read the tea leaves.

Speaker Change: It seems like the priorities and we're encouraged by this is that one is this policy needs to support U S farm prices, that's first and foremost second it's got to minimize cost to the federal government. So those are some of the important changes and then third is protecting you know U S industry.

Speaker Change: Pete.

Speaker Change: It's hard to say from that if anything comes out.

Speaker Change: I would say.

Speaker Change: The headline level.

Speaker Change: Administration remains very supportive of the RVO and the RVO process and is looking for something that is going to support the industries.

Jason: <unk> U S biofuel industry.

Speaker Change: And the AG community and so that's the headline now what is the <unk> is I.

Jason: Some of these things the announced policies probably could change, but ultimately we believe theyre going to try to achieve those three goals and whatever that outcome is we think it's going to be positive.

Speaker Change: I think I mentioned, we're expecting that to come in the next few weeks and in the RVO to be finalized and in October So that's the timelines.

Jason: Bob We've got the two issues here sorry, and then the 2020 do you want to comment about I guess the other is that normally 2020 for RIN compliance would be obligated as of March 31 of this year.

Speaker Change: Are there things in play there I'm sure.

Speaker Change: Which ones and to what extent.

Speaker Change: <unk> to be open other than the fact that our view is that the.

Jason: Until they formally.

Speaker Change: The administration is very supportive.

Jason: Revise the D. Three Ren numbers from 2024 that date is not fixed whether thats going to be October one or November 1st it's unclear, but that's the other the other piece to this is that compliance is required in order in our view in order for the real RIN S. Indeed for 2024%.

Speaker Change: A solid.

Speaker Change: <unk>.

Speaker Change: And on a long term basis.

Bob Day: Yes, Jason This is Bob I, just I would I think when we when you read the tea leaves.

Speaker Change: You know it seems like the priorities.

Speaker Change: We're encouraged by this is that one is this policy needs to support U S farm prices, that's first and foremost second it's got to minimize cost to the federal government. So those are some of the important changes and then third is protecting you know U S industry U S U S biofuel industry.

Jason: To kind of show itself, and then 2025 as well in our view of the RIN F&D and when you look at the <unk> <unk> altogether is is we're in a deficit for 25 and certainly we'll be at 26, and so as long as compliance is enforced.

Speaker Change: Yeah.

Speaker Change: Some of these things the announced policies probably could change, but ultimately we believe theyre going to try to achieve those three goals.

Jason: We believe we will see higher Rins and that will result in a in a decent margin for renewable diesel.

Speaker Change: And whatever that outcome is we think it's going to be positive.

Jason: Got it thanks, I appreciate that and my follow ups just on status of the monetization of 45 Z I think on the last call. You were optimistic that you would have something in place by this time just wondering how those conversations are going.

Speaker Change: Bob We've got the two issues here sorry, and then the 2024 you want to comment about I guess the other is that normally 2020 for RIN compliance would be obligated as of March 31 of this year.

Randy: Oh this is Randy I'll take that so.

Speaker Change: Until they formally.

Speaker Change: Revise the D. Three Ren numbers from 2024 that date is not fixed whether that's going to be October one or November 1st it's unclear, but that's the other the other piece to this is that compliance is required in order in our view in order for the real RIN S. Indeed for 2024%.

Randy: We are very close to where we thought we would be right now.

Randy: These are somewhat new and it's kind of unchartered waters out there, but I would just tell you to stay tuned theres nothing thats changed on our side that doesn't say that won't be accomplished here very shortly.

Speaker Change: To kind of show itself, and then 2025 as well in our view of the RIN F&D and when you look at the D. Six day four day five altogether is is we're in a deficit for 25 and certainly we'll be at 26, and so as long as compliance is enforced.

Randy: The land of lawyers, there's too many involved.

Randy: Uh huh.

Randy: Okay.

Randy: Thank you for your question Jason.

Randy: That will be all the questions in our Q&A session today I would now like to turn the call back to Randy for final remarks.

Speaker Change: We believe we will see higher Rins and that will result in a in a decent margin for renewable diesel.

Randy: Alright. Thank you. Thank you everybody great questions today leave you with a couple of thoughts number one we appreciate the interest in the company. We appreciate your patience, we have a positive outlook for the balance of the year, especially in the core ingredients some timing unknowns in diamond Green diesel, but that asset is youll see over the next 10 days.

Speaker Change: Got it thanks, I appreciate that and my follow ups just on status of the monetization of 45 Z I think on the last call. You were optimistic that you would have something in place by this time just wondering how those conversations are going.

Randy: As other people release is still what I believe to be the best in class out there and poised to really deliver for us in 2026. So we say we look forward to talking to you again here I believe in October.

Randy: Oh this is Randy I'll take that so.

Randy: We are very close to where we thought we would be right now.

Randy: These are somewhat new and it's kind of unchartered waters out there, but I would just tell you to stay tuned theres nothing thats changed on our side.

Randy: That concludes today's call. Thank you for your participation and enjoy the rest of your day.

Randy: It doesn't say that won't be accomplished here very shortly.

Speaker Change: The land of lawyers, there's too many involved.

Randy: Uh huh.

Randy: Okay.

Randy: Thank you for your question Jason.

Randy: That'll be all the questions in our Q&A session today I would now like to turn the call back to Randy for final remarks.

Randy: As other people release is still what I believe to be the best in class out there and poised to really deliver for us in 2026, so be safe, we look forward to talking to you again here I believe in October.

Randy: That concludes today's call. Thank you for your participation and enjoy the rest of your day.

Q2 2025 Darling Ingredients Inc Earnings Call

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