Darling Ingredients Q2 Earnings Call Highlights

Key Points

• Darling Ingredients reported a sharp second-quarter improvement: Net income rose to $387 million from $13 million a year earlier, while adjusted EBITDA nearly tripled to approximately $742 million on stronger ingredient markets and operational gains.
• Diamond Green Diesel was the largest earnings driver, contributing $389 million of EBITDA and generating approximately $280 million in cash distributions, supported by healthy renewable diesel margins and favorable tariff recoveries.
• The company reduced debt by more than $220 million, repurchased $73 million of shares and expects leverage to fall below two times by the end of 2026. Management projects third-quarter Core Ingredients EBITDA of $325 million to $340 million and plans to prioritize organic growth over major acquisitions.

Darling Ingredients NYSE: DAR reported sharply higher second-quarter earnings and cash generation, citing stronger finished-product markets, rising fat and protein prices, operational improvements and favorable trade-related developments.

Net income rose to $387 million, or $2.41 per diluted share, from $13 million, or $0.08 per diluted share, in the second quarter of 2025. Net sales increased to $1.7 billion from $1.5 billion a year earlier. Combined adjusted EBITDA reached approximately $742 million, compared with $250 million in the prior-year period.

For the first six months of 2026, Darling reported net income of $521.6 million, or $3.24 per diluted share, compared with a net loss of $13.5 million, or $0.09 per share, a year earlier. First-half net sales totaled $3.3 billion, while combined adjusted EBITDA exceeded $1.1 billion, up from slightly less than $450 million in the prior-year period.

Core ingredients earnings improve

Darling’s global ingredients business generated approximately $353 million in adjusted EBITDA during the quarter, up from $207 million a year earlier and $256 million in the first quarter. Chairman and Chief Executive Officer Randall C. Stuewe attributed the improvement to global operating performance, margin expansion and commercial execution.

The company said its Feed Ingredients segment benefited from higher fat prices, supported by demand from the biofuel sector, while protein values improved amid tighter global fish meal supplies and increased U.S. poultry production. Stuewe said demand for proteins remained strong across regions and that he did not see factors likely to interrupt that trend through the remainder of the year.

Darling also cited work on operational efficiency, commercial optimization, price-risk management and contract management as contributors to higher gross margins. During the quarter, the company completed the acquisition of three rendering facilities from Potenze Group in Brazil. The assets were acquired for approximately $122 million and are expected to be immediately accretive, according to management.

Chief Financial Officer Bob Day said the company continues to pursue an initiative outlined at its May investor day intended to add $150 million to $300 million in adjusted EBITDA over three years through contract improvements, commercial optimization and a more targeted approach to managing price risk.

Food segment emphasizes collagen mix

In the Food segment, Darling said collagen sales increased year over year as demand grew across food, nutrition and health applications. Management said higher whey prices have led some companies to use collagen as a complementary protein ingredient.

Day said collagen currently produces roughly 2.5 times to three times the margin of gelatin, while targeted ingredients can produce seven to 11 times the margin. Darling is seeking to increase its mix of collagen and targeted health products, including the Nextida portfolio, while using existing Rousselot production infrastructure.

Stuewe said Nextida’s glucose-control product is generating repeat sales and is now being sold in Asia. He also said the company expects to launch and rename a Nextida Brain product after clinical trials. Darling has approved a spray-drying project for collagen in Kaiping, China, and plans to add extraction and spray-drying capacity in Paraguay.

Diamond Green Diesel drives earnings and cash flow

Diamond Green Diesel, Darling’s renewable diesel venture, contributed $389 million of EBITDA to Darling during the second quarter, compared with $43 million in the same period last year. The business produced more than 1.3 million metric tons of renewable fuel and sold approximately 350 million gallons at EBITDA of $2.23 per gallon, according to Stuewe.

Day said DGD produced 356 million gallons during the quarter. Results included approximately $51 million in favorable recoveries related to IEEPA tariffs at the entity level. Darling said it received approximately $280 million in cash distributions from DGD, including about $211 million in dividends and $69 million from sales of 2025 production tax credits.

Management said renewable diesel margins remain attractive, with DGD expected to produce about 335 million gallons in the third quarter. Day said the company expects margins to more closely reflect spot-market conditions as markets stabilize, describing the current spot environment as healthy.

On renewable fuels policy, Day said Darling does not expect meaningful changes in small-refinery exemptions that would materially affect renewable identification number supply and demand. Management said the industry’s June production showed it could produce enough fuel to meet the mandate, though strong margins would need to persist to sustain that output.

Debt reduction and portfolio actions

Darling used second-quarter cash generation to reduce debt by more than $220 million, repurchase $73 million of shares and fund the Potenze acquisition. The company’s leverage ratio improved to approximately 2.3 times at quarter-end from 2.9 times at the end of 2025.

The company expects net debt to be close to or below $3 billion by the end of 2026 and expects leverage to be well below two times. Management said that outlook reflects expected working-capital releases at DGD, expected sales of production tax credits in the second half, continued cash generation from core ingredients operations and portfolio divestitures.

Subsequent to quarter-end, Darling completed the sale of most of its trap business for approximately $90 million. It also signed an agreement to sell its European casings business, which it expects to close by the end of 2026.

Stuewe said the company is not pursuing another large acquisition and instead plans to focus over the next three to five years on organic expansion, debottlenecking, collagen growth and rendering capacity additions. Management said it could evaluate additional shareholder-return initiatives, including dividends and repurchases, after reaching its debt targets.

Third-quarter outlook

Darling expects Core Ingredients adjusted EBITDA of $325 million to $340 million in the third quarter. Second-quarter results included roughly $18 million in net IEEPA tariff recoveries for the Rousselot business; excluding that benefit, management said the third-quarter outlook implies underlying performance generally consistent with the second quarter.

The company said it remains encouraged by growing poultry production, global demand for proteins and specialty products, and demand for low-carbon fuels. Stuewe said Darling sees momentum continuing through the remainder of 2026 and into 2027, though management acknowledged that commodity and renewable fuel markets can remain volatile.

About Darling Ingredients (NYSE:DAR)

Darling Ingredients Inc NYSE: DAR is a global leader in converting edible and inedible bio-nutrient streams into sustainable food, feed ingredients, renewable fuels and specialty products. Founded in 1882 and headquartered in Irving, Texas, the company builds on more than a century of experience in animal rendering and by-product recycling. Over time, Darling has expanded its capabilities beyond traditional rendering to include advanced processing technologies that support a circular economy and reduce waste from food and agricultural industries.

The company's core operations revolve around four primary segments: Feed Ingredients & Services, Food & Nutrition, Fuel Ingredients & Services, and Specialty Ingredients.

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