Randall C. Stuewe, Chairman and CEO Brad Phillips, EVP Chief Financial Officer Melissa A. Gaither, VP IR and Global Communications
2 This presentation contains “forward - looking” statements regarding the business operations and prospects of Darling Ingredients I nc. and industry factors affecting it. These statements are identified by words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “could,” “may,” “will,” “ sho uld,” “planned,” “potential,” “continue,” “momentum,” and other words referring to events that may occur in the future. These statements reflect Darling Ingredient’s current view of future events and are based on its assessment of, and are subject to, a variety of risks and uncertainties beyond its control, each of which could cause actual results to differ materially from those indicated in the forward-looking statements. These factors include, among others, existing and unknown future limitations on the ability of the Company's direct and indirect subsidiaries to make their cash flow available to the Company for payments on the Company's indebtedness or other purposes; global demands for bio-fuels and grain and oilseed commodities, which have exhibited volatility, and can impact the cost of feed for cattle, hogs and poultry, thus affecting available rendering feedstock and selling prices for the Company’s products; reductions in raw material volumes available to the Company due to weak margins in the mea t production industry as a result of higher feed costs, reduced consumer demand or other factors, reduced volume from food service establishments, or otherwise; reduced demand for animal feed; reduced finished product prices, including a decline in fat and used cooking oil finished product prices; changes to worldwide government policies relating to renewable fuels and greenhouse gas(“GHG”) emissions that adversely affect programs like the U.S. government’s renewable fuel standard, low carbon fuel stand ard s (“LCFS”) and tax credits for biofuels both in the Unites States and abroad; possible product recall resulting from developments relating to the discovery of unauthorized adulterations to food or food additives; the occurrence of 2009 H1N1 flu (initially known as “Swine Flu”), Highly pathogenic strains of avian influenza (collectively kno wn as “Bird Flu”), bovine spongiform encephalopathy (or "BSE"), porcine epidemic diarrhea ("PED") or other diseases associated with animal origin in the United States or elsewhere, such as the recent African Swine Fever (“ASF”) outbreak in China; unanticipated costs and/or reductions in raw material volumes related to the Company’s compliance with the existing or unforeseen new U.S. or foreign (including, without limitation, China) regulations (including new or modified animal feed, Bird Flu, PED, BSE or ASF or similar or unanticipated regulations) affecting the industries in which the Company operates or its value added products; risks associated with the DGD Joint Venture, including possible unanticipated operating disruptions and issues relating to the announced expansion project; risks and uncertainties relating to international sales and operations, including imposition of tariffs, quotas, trade barriers and other trade protections imposed by foreign countries; difficulties or a significant disruption in our information systems or failure to implement new systems and software successfully, including our ongoing enterprise resource planning project; risks relating to possible third party claims of intellectual property infringement; increased contributions to the Company’s pension and benefit plans, including multiemployer and employ er-sponsored defined benefit pension plans as required by legislation, regulation or other applicable U.S. or foreign law or resulting from a U.S. mass withdrawal event; bad debt write-offs; loss of or failure to obtain necessary permits and registrations; continued or escalated conflict in the Middle East, North Korea, Ukraine or elsewhere; uncertainty regarding the likely exit of the U.K. from the European Union; and/or unfavorable export or import markets. These factors, coupled with volatile prices for natural gas and diesel fuel, climate conditions, currency exchange fluctuations, general performance of the U.S. and global economies, disturbances in world financial, credit, commodities and stock markets, and any decline in consumer confidence and discretionary spending, including the inability of consumers and companies to obtain credit due to lack of liquidity in the financial markets, among others, could negatively impact the Company's results of operations. Among other things, future profitability may be affected by the Company’s ability to grow its business, which faces competition from companies that may have substantially greater resources than the Company. The Co mpany’s announced share repurchase program may be suspended or discontinued at any time and purchases of shares under the program are subject to market conditions and other factors, which are likely to change from time to time. Other risks and uncertainties regarding Darling Ingredients Inc., its business and the industries in which it operates are referenced from time to time in the Company’s filings with the Securities and Exchange Commission. Darling Ingredients Inc. is under no obligation t o (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
3 Consolidated Earnings Q3 2018 Overview Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 US$ (millions) except per share price 2017 2017 2017 2017 2017 2018 2018 2018 Revenue Total global volumes up 5.0% year over year • $ 878.5 $ 894.9 $ 936.3 $ 952.6 $ 3,662.3 $ 875.4 $ 846.6 $ 812.6 Gross Margin 190.5 195.7 193.8 206.8 786.8 197.3 193.6 164.5 Fat pricing significantly weaker year over year. Ample • Gross Margin % 21.7% 21.9% 20.7% 21.7% 21.5% 22.5% 22.9% 20.2% supplies globally, DGD off line. Seeing improvement in Q4. SG&A 86.9 84.5 82.1 90.0 343.5 86.9 78.6 67.4 SG&A Margin % 9.9% 9.4% 8.8% 9.4% 9.4% 9.9% 9.3% 8.3% Protein pricing slightly weaker year over year. Trade • disruptions due to China tariffs influencing end markets. Restructuring and impairment charges 0.0 0.0 0.0 0.0 0.0 0.0 (15.0) 0.0 Seeing improvements coming from non-traditional Operating Income 32.5 38.2 34.4 36.1 141.2 31.8 22.1 18.2 markets. Adj. EBITDA (2) 103.6 111.2 111.6 116.9 443.3 110.4 115.1 97.0 Adj. EBITDA Margin % 11.8% 12.4% 11.9% 12.3% 12.1% 12.6% 13.6% 11.9% Collagen/Gelatin sales stable year over year with • improved margins in Brazil and higher demand for Interest Expense (21.7) (22.4) (22.5) (22.3) (88.9) (23.1) (23.0) (20.1) specialty products globally Debt Extinguishment costs 0.0 0.0 0.0 0.0 0.0 0.0 (23.5) 0.0 Foreign Currency loss (0.3) (2.1) (2.1) (2.4) (6.9) (1.5) (3.5) (2.1) Board increases Share Repurchase Program to $200 • Gain/(Loss) on Disposal of Subsidiaries 0.0 0.0 0.0 0.0 0.0 0.0 (15.5) 3.0 million of common stock Other Expense (3) (2.0) (4.0) (2.5) (1.3) (9.7) (2.6) 1.2 (2.7) Debt paydown of $12 million during the quarter Equity in net income/(loss) of • 0.7 8.3 7.7 11.8 28.5 97.2 15.2 (2.8) unconsolidated subsidiaries Income Tax (Expense)/Benefit (1.8) (7.7) (6.3) 85.0 69.2 (3.7) 1.7 1.4 Diamond Green Diesel (DGD) completes expansion • turnaround and announces phase III growth to 675 million Net income attributable to noncontrolling (1.6) (1.2) (0.9) (1.2) (4.9) (0.8) (1.3) (0.9) interests annual gallons of renewable diesel plus renewable Naphtha gallons Net income/(loss) attributable to Darling $ 5.8 $ 9.1 $ 7.8 $ 105.7 $ 128.5 $ 97.3 $ (30.0) $ (6.0) Earnings per share (fully diluted) $ 0.04 $ 0.05 $ 0.05 $ 0.63 $ 0.77 $ 0.58 $ (0.18) $ (0.04) (1) Includes $12.6M of 2017 BTC in Q1 2018 and revenue recognition for Q1 and Q2 2018 (2) Does not inlcude Unconsolidated Subsidiaries EBITDA. (3) Rounding captured in Other Expense.
Third Quarter 2018 Financial Summary 4 Gross Profit and Margin Q3 2018 Overview $ in millions Net sales - $812.6 million • Net income - $(6.0) million • EPS at $(0.04) per diluted share • Adjusted EBITDA - $97.0 million • DGD joint venture Adjusted EBITDA - $0.5 million (Darling’s share) • Strong Free Cash Flow Generation Quarterly Adjusted EBITDA $ in millions $ in millions $140 $25 $120 $120 $116.9 $115.1 $100 $115.1 $115 $116.9 $110.4 $111.6 $111.6 $110.4 $80 $110 $60 $82.5 $105 $77.8 $22.4 $74.6 $68.6 $97.0 $40 $53.8 $56.6 $57.6 $100 $97.0 $43.0 $39.1 $20 $95 $0 $90 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 3Q17 4Q17 1Q18 2Q18 3Q18 Adjusted EBITDA is a Non-U.S. GAAP Measure (See slide 17) Adjusted EBITDA Capex Free Cash Flow (Adjusted EBITDA plus DGD cash dividend after Capex) 2Q 2018 DGD cash dividend
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