Darling Ingredients released the following statement regarding 2023 guidance and 2024 outlook.
Volumes in its 50/50 joint venture known as Diamond Green Diesel (DGD), were lower in the quarter due to a regularly scheduled turnaround and a minor fire disruption at DGD 2 in St. Charles, La., which resulted in the unit being offline for 37 days. It has seen extreme volatility in the heating oil market, which resulted in a sizeable hedge loss. Additionally, a sell off in D4 RINs coupled with stagnant LCFS prices, produced lower than anticipated margins at DGD. However, DGD performance annualized year-to-date is approximately $1.00 EBITDA per gallon.
Darling Ingredients' core business has delivered as communicated during the Q2 earnings call, slightly lower than Q2 and seasonally normal for Q3. Its global business remains strong. Volumes were similar to Q2 and fat prices improved late in the quarter. Gross margins are solid and reflect the resiliency of its model and the progress it is making on acquisition integration.
For Q4, its anticipates the core ingredients business to improve compared to Q3 and DGD volumes to be much stronger as compared to Q3. DGD faced some strong headwinds in Q3; however, based on spot margins and if market conditions hold (heating oil prices, RINs and LCFS), it anticipates DGD margins in Q4 to improve compared to Q3.
Given current market conditions, it expects the company's combined adjusted EBITDA for fiscal year 2023 to be between $1.6 to $1.7 billion.
It carries good momentum into 2024 and anticipates improved earnings power in its core business and DGD, with significantly improved cash flow allowing us to achieve our target leverage ratio of 2.5X by year-end 2024.
