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Darling Ingredients Mixes Up a Decent Quarter

Darling Ingredients (NYSE: DAR) announced mixed second-quarter 2017 results on Wednesday after the market closed, highlighting a resilient business despite global macro-economic headwinds. Shares of the biodiesel and rendering specialist declined a modest 1.7% in Thursday's trading as the market absorbed the news.

Let's have a closer look at what Darling Ingredients accomplished over the past few months, as well as what investors can expect from the company going forward.

Darling Ingredients results: The raw numbers

What happened with Darling Ingredients this quarter?

  • Darling Ingredients doesn't provide quarterly financial guidance. But for perspective -- and though we don't pay close attention to Wall Street's demands -- consensus estimates predicted Darling would deliver higher earnings of $0.11 per share on lower revenue of $879.6 million.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 11.2%, to $110.1 million.
  • Feed Ingredients net sales rose 1.1%, to $549.1 million, thanks to solid global raw material volumes. Feed segment operating income declined 5.7%, to $39 million, driven by higher depreciation from new plant locations.
  • Food Ingredients net sales grew 2.8%, to $279.8 million, helped by strength in the Rousselot gelatin business in Europe and strong hog-casing demand at CTH casings in China. Food segment operating income fell 44%, to $11 million, given higher raw material prices and macro-economic pressure at Darling's South American gelatin business.
  • Fuel Ingredients net sales -- excluding Darling's Diamond Green Diesel (DGD) joint venture with Valero (NYSE: VLO) -- rose 8.2%, to $67.4 million. Fuel segment operating income declined 68.3%, to $2.1 million, primarily given the absence of the blenders tax credit this quarter as compared to the same period last year.
  • Diamond Green Diesel delivered EBITDA of $0.61 per gallon even without the blenders tax credit. The business' expansion from 160 million to 275 million gallons of annual production remains on schedule to be complete by the second quarter of 2018.
  • Darling's board approved a 24-month extension to the company's $100 million share repurchase authorization.

What management had to say 

Darling Ingredients CEO Randall Stuewe stated:

Looking forward

All things considered, there were no big surprises from Darling Ingredients this quarter as the company continues to weather the ebbs and flows of the markets in which it operates. Darling's core businesses remain on solid financial ground, and its 70% expansion of the DGD joint venture's annual production volume remains on track. With shares already up 25% year to date as of this writing, I think investors should be more than happy with Darling's position today.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Darling Ingredients. The Motley Fool has a disclosure policy.