Record Quarter and a Deleveraging Inflection Point at Darling Ingredients

Core ingredients and Diamond Green Diesel deliver record EBITDA, while debt falls toward investment-grade and Nextida advances.

DAR · Earnings Call · 2026-07-30

The Quarter That Changed the Picture

Darling Ingredients reported a blowout second quarter: combined adjusted EBITDA of $742 million versus $250 million a year ago, and net income of $387 million, or $2.41 per diluted share. The leverage ratio dropped from 2.9x at year-end to 2.3x after the company paid down $223 million of debt, and management is now aiming to end 2026 with net debt below $3 billion and leverage well below 2x. As CEO Randy Stuewe put it,

This is a true inflection point for our company, and will create multiple opportunities for the future.
Randall C. Stuewe, Chairman and Chief Executive Officer · 2026-07-30

The quarter’s strength came from both legs of the model. Diamond Green Diesel delivered $389 million of EBITDA, its best performance since the volatile 2022 peak, helped by $51 million of IEEPA tariff recoveries. The core ingredients business contributed $353 million, up from $207 million. Operating income reached $227 million, versus a $2 million loss in the prior-year quarter, and operating margin expanded to 14.6%.

Core Ingredients: The Quiet Engine

Management emphasized that the core business, not just DGD, is now delivering. Fat prices rallied on robust biofuel demand, protein values strengthened on tight global fish meal supplies and growing poultry production, and the recent acquisitions—Valley Proteins, Gelnex, and FASA—are finally showing their value. "We're just seeing very strong demand on all continents for proteins," Randy said on the call (“We're just seeing very strong demand on all continents for proteins.” — Randall C. Stuewe, Chairman and Chief Executive Officer · 2026-07-30). In Food, collagen sales are improving as whey prices rise, and the Nextida portfolio is gaining traction: the glucose-control product is seeing repeat orders and is now selling in Asia, with a brain-health product slated for launch. CFO Bob Day explained the collagen opportunity: “collagen can act as a replacement for that, we're finding a home there.” — Bob Day, Chief Financial Officer · 2026-07-30

Balance Sheet and Inflection

The balance sheet is the other side of the story. The company used $280 million of DGD cash distributions to cut debt, buy back $73 million of stock, and close the Potenze plant acquisition in Brazil. It also sold most of its trap business for ~$90 million and signed a deal to sell its European casings business. Management reiterated its commitment to a 2.5x leverage ceiling and hinted that once net debt is below $3 billion, capital allocation could shift toward shareholder returns. This is a marked change from earlier in the year, when Bob Day said on the prior call: “we've been pretty clear in recent quarters that we're focused on paying down debt.” — Robert Day, Chief Financial Officer · 2026-04-30 The shift is also reflected in the cash generation narrative—free cash flow of $145 million despite DGD feedstock builds and CapEx timing.

Outlook and Risks

For Q3, core ingredients EBITDA is guided to $325–$340 million, roughly in line with Q2 ex-IEEPA recoveries, and DGD is expected to produce 335 million gallons. Management remains constructive on the RVO and RIN market, arguing that the industry needs strong margins to meet the mandate. They also expect tariff recovery opportunities to continue as IEEPA refunds are realized. The main risk is policy uncertainty—SREs and RIN prices could swing either way—but the company believes it is better positioned than ever to weather volatility. As Bob noted, "We're not in a midcycle environment right now... it's more towards that upcycle as we sit here today" (“We're not in a midcycle environment right now... it's more towards that upcycle as we sit here today” — Bob Day, Chief Financial Officer · 2026-07-30).