Darling Ingredients Q2'25 Earnings Show Resilience Amid Renewable Fuel Headwinds
- Hardik Shah
- 9 minutes ago
- 3 min read
TLDR
Core Ingredients Strength: Feed and Food segments showed margin improvement despite regulatory and tariff-driven headwinds.
Renewables Drag Earnings: DGD EBITDA halved year-over-year; DGD-1 remains offline until margins recover.
Strategic Pivot: Darling launched Nextida, targeting the booming health and wellness space with early traction in GLP-1-related products.
Business Overview
Darling Ingredients Inc. (NYSE: DAR) operates a global platform focused on repurposing animal by-products and food waste into high-value ingredients. The company serves three main segments:
Feed Ingredients: Produces fats and proteins for animal feed, pet food, and renewable fuel markets.
Food Ingredients: Supplies gelatin and collagen to food, pharmaceutical, and wellness sectors.
Fuel Ingredients: Via its Diamond Green Diesel (DGD) joint venture, produces renewable diesel and sustainable aviation fuel (SAF).
The company processes approximately 15% of the world’s animal agricultural by-products and operates across 260+ facilities in over 15 countries.
Darling Ingredients Q2'25 Earnings:
Metric | Q2 2025 | Q2 2024 | YoY Change |
Net Sales | $1.48B | $1.46B | +1.8% |
Net Income | $12.7M | $78.9M | -84% |
GAAP EPS | $0.08 | $0.49 | -83.7% |
Combined Adj. EBITDA | $249.5M | $273.6M | -8.8% |
EBITDA % | 16.8% | 18.7% | -200 bps |
The decline in profitability was driven largely by a steep drop in Darling’s share of DGD EBITDA—down from $76.6M to $42.6M in the quarter.
Gross margin improved to 23.3% vs. 22.5% in Q2 2024, thanks to improved pricing in Feed and volume growth in Food.
Forward Guidance
Darling adjusted its 2025 EBITDA outlook to $1.05–$1.10 billion, reflecting caution over:
Delayed RIN (Renewable Identification Number) pricing reaction.
Uncertainty around small refinery exemptions (SREs).
Lower near-term contributions from DGD, including DGD-1 being offline and a planned DGD-3 turnaround in Q3.
“If [RIN markets] start to normalize… the guidance that we threw out there could be extremely conservative.” — Randall Stuewe, CEO
Operational Performance
Feed Segment: Sales up slightly YoY; gross margin expanded to 22.9% (from 21.0%). Fat prices surged late in Q2, but procurement-to-sale timing created temporary margin drag.
Food Segment: Volumes rose ~6%, driven by collagen demand. Gross margins held steady at 26.9%, and EBITDA was $69.9M (vs. $73.2M).
Fuel Segment: Sales rose 11.6%, but adjusted EBITDA fell sharply due to margin compression at DGD. Darling’s share of DGD EBITDA fell nearly 44% YoY.
“DGD remains a leader… but we’re playing catch-up on fat margins. The real recovery lies in the second half and 2026.” — Randall Stuewe, CEO
Market Insights
Tariffs and global regulatory complexity are disrupting protein exports (notably to Asia), while rising U.S. fat prices are benefiting from biofuel policy tailwinds.
LCFS (Low Carbon Fuel Standard) credits in California are rebounding, which should improve margins as carbon intensity obligations increase.
“We’re seeing the feedstock supply chain rebalance… all benefiting Darling’s core business.” — Randall Stuewe, CEO
Consumer Behavior & Sentiment
Darling’s pivot toward consumer-facing collagen products via Nextida aligns with growing wellness trends:
Nextida GC, a GLP-1 stimulating supplement, shows strong trial results—curbing appetite and stabilizing blood sugar.
The company is seeing repeat orders and preparing for broader CPG adoption following trial completion in summer 2025.
“If we’re half as successful with Nextida GC as we were with hydrolyzed collagen 1.0, we can double the segment’s earnings in a few years.” — Randall Stuewe, CEO
Strategic Initiatives
Nextida JV: Partnered with Tessenderlo to launch Nextida, a collagen and gelatin platform targeting high-margin, health-driven nutrition markets.
SAF Production: Despite lower tax credits, Darling continues to run SAF lines and explore global demand (U.K. and EU exports).
CapEx Discipline: $71M invested in Q2, focused on strategic priorities and maintenance.
Capital Allocation
Debt Refinancing: Replaced $2.9B in loans with new credit agreements, fixed-rate Eurobond at 4.5%, and lower leverage ratio (3.34x vs. 3.93x YE 2024).
Liquidity: $1.27B available under revolving credit agreement; $95M in cash.
The Bottom Line
Darling’s Q2 earnings reflect a business navigating through renewable fuel market uncertainty while gaining strength in core ingredient segments. Strategic investments like Nextida offer long-term upside as consumer wellness trends gain momentum. Investors should watch for DGD margin recovery, regulatory clarity on RINs and SREs, and continued traction in the health & wellness portfolio through 2026.
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