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2020 Annual Report
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To Our Shareholders

2020 was an interesting and challenging year for Darling Ingredients and for all of us as members of the world community. In the face of the worst pandemic in modern times, we are all doing things differently than we have done in the past. Darling’s operations are no exception to that rule as COVID-19 invoked us to enact policies and procedures to keep our work environment as safe from this virus as possible for all of our 10,000+ employees around the globe.

Financially, we ended 2020 in a strong position posting one of our best earning years in the company’s history. Our reported combined adjusted EBITDA totaled approximately $842 million, led by our global ingredients business. Diamond Green Diesel (“DGD”), our 50/50 joint venture with Valero Energy Corporation produced $337 million of EBITDA (Darling’s share) and ran at full capacity selling 288 million gallons of renewable diesel, while earning $2.34 EBITDA per gallon sold. With the receipt of the $430 million of retroactive blender’s tax credit in 2020 for the years of 2018 and 2019, DGD distributed $205 million (Darling’s share) in cash distributions to us last year.

Overall for 2020, raw material volumes in our global ingredients business increased 2.4 percent year-over-year and delivered annual adjusted EBITDA of $504 million. We successfully completed three new Peptan facilities located in Ghent, Belgium, Angouleme, France and Presidente Epitacio, Brazil which has provided us with expanded capacity in our food segment globally.

Some additional key financial highlights in 2020 include:

  • Reduced term loan B balance by $195 million to $300 million outstanding
  • Ended 2020 with a leverage ratio as measured by our bank covenant of 1.9x, an improvement of approximately 1.3 points over the 3.18x at the end of 2019
  • Amended and extended $1.0 billion revolver until September 2025
  • Repurchased 2.2 million shares of common stock

The Impact of a Pandemic

Our priorities during the COVID-19 pandemic continue to be protecting the health and safety of our employees, while continuing to provide our essential services to the industries and communities we serve. In this regard, we implemented significant changes and safety protocols across our global operations to protect our employees, serve our customers and ensure business continuity, including, but not limited to, staggered shifts, a work from home strategy and the use of collaboration tools to stay connected, the result of which allowed us to continue our operations during fiscal 2020 with minimal disruptions. Our employee safety has been and remains a top priority for the Board and the management team of Darling. We spent approximately $7.5 million on direct costs in 2020 on efforts to protect our employees from the ongoing pandemic.

Our Disciplined Approach to Capital Allocation

With the uncertainty the pandemic brought to our business in the first half of 2020, we tightly managed our spending on maintenance and growth capital, investing approximately $280 million last year. This was $79 million lower than the capital invested in 2019. We will continue to take a disciplined approach and know that maintaining our facilities and truck fleet are essential to growing and maintaining our company’s assets. We look to invest approximately $300 million for 2021.

Diamond Green Diesel

We are very pleased with the continued growth of DGD. The current 400 million gallon expansion at the Norco, LA facility remains on schedule, and we believe this expansion will be operational in the fourth quarter of 2021. DGD Norco will be able to produce approximately 700 million gallons of renewable diesel heading into 2022.

Darling and Valero have both approved the construction of another facility, DGD Port Arthur in Texas. Adding an additional 470 million gallons of renewable diesel production capacity when this project is completed, will increase DGD’s capacity to approximately 1.2 billion gallons of renewable diesel annually and nearly 50 million gallons of renewable naphtha annually. DGD Port Arthur will cost approximately $1.45 billion ($725 million Darling’s share) to build. We anticipate this expansion to be funded from the operating cashflow generated at DGD. The current timeline has the construction of this facility completed in the second half of 2023.

Our ESG Efforts (environmental, social and governance)

Our ESG team worked diligently this past year, delivering our updated ESG report on September 1, 2020. We have raised the bar and set a standard to reduce water and energy intensity 5% by 2025 from our new baseline year of 2020. Darling’s dedicated men and women found themselves once again committed to working beyond the level of compliance. As a critical and essential service to the world’s food supply, it was important for Darling to provide a safe work environment and remain dedicated to our customers and suppliers. Our performance shows that navigating through these challenging times is second nature to our business model and family culture. I am pleased with the near term goals, and we will continue to look for innovative ways to reduce our carbon emissions and water withdrawal at our locations. This innovation could be in expanding the number of plants that have land application capabilities for water discharge or installing more capacitor banks and upgrading broiler controls to improve electrical efficiency and lower emissions while increasing fuel burning productivity.

Growth that Matters

Over the past three years, Darling has made organic investments to grow our business across the feed, fuel and food segments. One of the investments I would like to point out to you is in our food segment and the commitment we made to growing our production capacity to produce collagen peptides or our Peptan® products offering. We expanded our footprint in this market significantly in 2020 with the addition of Peptan facilities in Belgium, France and Brazil. We believe these additional facilities position us well to capture the exciting growth we see for this on-trend product. Our Peptan is the world’s leading collagen peptides brand, and its popularity is rapidly growing around the world. Peptan collagen peptides are bioactive collagen peptides for which many scientific studies have demonstrated the ability to promote healthy living, with proven benefits in the following key areas: healthy aging, joint and bone health, beauty from within and sports nutrition.

We also made two acquisitions in 2020 to grow our feed segment, as Darling acquired a private company in October that owned rendering plants located in Belgium. This acquisition adds approximately 50 million pounds of protein meals and 50 million pounds of animal fats to Darling’s capabilities, increasing the company’s position in rendered poultry products in Belgium. We also acquired a tank manufacturer in December, thereby allowing us to manufacture our own indoor used cooking oil collection tanks for use at restaurants and other food service establishments. We believe both of these acquisitions, increase our ability to provide more low carbon feedstock for the production of renewable diesel.

More Innovation

Darling is a company that has been around for a long time and probably not many think of us as innovative. First, our DGD JV employs one of the most advanced processes for turning waste animal fats and oils into the greenest hydrocarbon in the world. But we have other exciting projects and products we are working on for the future. Since the beginning of 2020, Darling has had 100% ownership of EnviroFlight. EnviroFlight, is a leader in sustainable insect ingredients designed for animal and plant nutrition, aiming to drive transformative change in the global food supply. We continue to expand our operations of EnviroFlight and we believe this project will position us as the leading developer of proprietary technologies with the first commercial scale black soldier fly larvae manufacturer in the U.S.

We are also very pleased with the development work going on in Europe with our biomedical technology team. Our X-Pure® GelMA is our latest addition to our biomedical range of ultra-pure gelatins and collagens to the medical industry, and we anticipate that product offerings will grow as we move forward with new products bringing added value to the industry.

Our X-Pure products are unique on the market, as they come with ultra-low levels of impurities and fully validated traceability of raw materials. Our innovative spirit grows as we continue to look for ways to improve our product offerings across the spectrum of the markets we service.

I write this letter to you with a heavy heart as one of my dearest friends, mentor and the person who helped me build Darling into the company that it is today passed away in the middle of February 2021. Mr. Charles Macaluso “Mac” was most recently our Lead Director at Darling and had been a member of the Board since 2002. Mac was always a phone call away to provide advice or guidance as we grew Darling 10 fold over the last two decades. Mac will be truly missed. On behalf of the board of directors and the management team, we offer his wife Lynn and the entirety of the Macaluso family our sincerest condolences.

We appreciate the ongoing support of our shareholders, employees, business associates, suppliers and customers and hope we can all commemorate our success for 2020 during trying times, as we look forward to celebrating better times in our future.

Randall C. Stuewe

Chairman and Chief Executive Officer


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