Shares up Over 30 Percent as Darling’s Gelatin Business Excites Investors
03 Mar 2016 --- Darling Ingredients, the food, feed and biodiesel company, has reported its fourth quarter profits were up 21 percent to $84.4 million, driven by an improved performance of its gelatin business. Revenues slipped 19 percent to $809 million in the quarter, due to the sustained weakness in global commodity markets but the company offered an upbeat outlook for the future.
Randall C Stuewe, chairman and chief executive of Darling, said: “While still early in 2016, our current view is that we will see improved conditions for fats and oils demand globally as we proceed into the spring.”
“We continue to be focused on areas that we can control across all levels of the organization. We believe that the significant cost savings we achieved in 2015 position us for success in 2016.”
A standout performer for Darling – which started out as a rendering company and has expanded into a developer of organic ingredients – in the quarter was its Food Ingredients unit.
Food Ingredients saw operating income jump 71 percent to $23.3 million, helped by improved margins across its gelatin business Rousselot- a key supplier for the US and European confectionery industry- and a stronger showing across its European edible fats business.
Sales, however, in Food Ingredients dropped by 16 percent to $272.2 million in the quarter.
Over the year operating income across Food Ingredients was up $34.3 million to $61.2 million, as Darling’s gelatin business witnessed increased demand in China while the division was also helped by lower raw material prices in Europe.
Darling’s biggest division in terms of sales, Feed Ingredients, saw sales fall over 22 percent to $472.2 million and operating income plunge over 70 per cent to $10 million in the quarter, as the division was hurt by lower fats and protein prices.
Fat prices have heavily pressurized the US market but are now recovering and stabilizing in Europe.
Protein prices also came under pressure due to large grain supplies leading to an excess market supply.
Within Feed Ingredients, Bakery Feeds and Speciality Proteins, performed as expected and Darling is hoping that its new bakery plant in Texas will prove a lucrative venture.
Sales fell at Darling’s Fuel Ingredients unit in the quarter by over nine percent to $65.3 million, but operating income was up over 13 percent to $12.4 million.
Darling’s rendering operation in Europe, Rendac, delivered a solid performance during 2015, as did its Canadian biofuels unit.
The fire at Darling’s bio-phosphate operation in Europe in the fourth quarter had limited impact on business and the cost will be mitigated by insurance cover.
Darling’s Diamond Green Diesel joint venture with Valero- the largest green diesel plant in the US- pumped out 159 million gallons of renewable diesel during the year.
Stuewe added: “2015 was a year characterized by continued global commodity deflation. Our team delivered solid execution led by international businesses with growth and cost savings efficiencies achieved around the globe.”
“While challenging conditions persisted through the fourth quarter, we delivered respectable quarterly results and exit 2015 a stronger company, highlighted by lower debt, strong cash flows and strategic investments in new plants and operating efficiencies.”
Shares in Darling jumped by over 30 percent on the back of the results.
by John Reynolds
