Global commodity inflation affected performance, company says
“2015 was a year characterized by continued global commodity deflation,” said Randall C. Stuewe, Darlings Ingredients chairman and CEO. “Our team delivered solid execution led by international businesses with growth and cost saving 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.”
Adjusted EBITDA for Darling for the three months ended January 2, 2016 was $102.7 million compared with adjusted EBITDA of $108.7 million for the three months ended January 3, 2015. The $6.0 million decrease in adjusted EBITDA is attributable to lower finished product prices in the U.S. and Canadian rendering businesses and the impact of foreign exchange rates as a function of the strengthening U.S. dollar as compared mainly to the euro and Canadian dollar.
Net sales were $809.7 million, compared with $1 billion for the fourth quarter of 2014. The $190.5 million decrease in net sales is attributable to sustained weakness in global commodity markets and continued FX translation impacts. Overall, global raw material volumes were stronger year over year. For fiscal 2015, the company reported net sales of $3.40 billion, compared with net sales of $3.96 billion for fiscal 2014.
The company’s ongoing capital allocation initiatives resulted in $42.4 million in debt reduction in the fourth quarter and $118.0 million for fiscal 2015. Darling continued its emphasis on organic growth in 2015 with the completion of two wet pet food plants, one bakery recycling plant and a major expansion at its Dubuque, Iowa, gelatin plant.
Feed Ingredients segment
Global rendering experienced a volatile commodity environment throughout 2015; presenting challenging deflationary pricing and continued strong slaughter volumes. The segment’s performance proved resilient through third quarter with stable margins followed by a fourth quarter demonstrating short-term challenges. Fat prices felt heavy pressure in the U.S., but are now recovering with pricing stabilizing in Europe. Protein felt some pressure worldwide as large grain supplies and strong slaughter resulted in market surpluses. Restaurant services continued to improve spreads, but pricing pressure remained through fourth quarter. Bakery Feeds and Specialty Proteins delivered consistent performances.
Feed Ingredients operating income for the fourth quarter 2015 was $10.0 million, a decrease of $23.6 million as compared to the fourth quarter of 2014. The decrease in operating income is mainly attributable to overall lower finished product pricing and start-up costs related to two new wet pet food plants.
Feed Ingredients operating income for fiscal year 2015 was $116.5 million, a decrease of $75.8 million as compared to fiscal year 2014. Lower earnings in Feed Ingredients segment were due to significant decline in proteins, fats, used cooking oil and bakery finished product prices attributable to overall lower feed ingredient prices as a result of the global record-setting grain production and increased volumes from the slaughter industry, which increased supply above demand levels.