Darling Ingredients Inc.

Good morning and welcome to the Darling Ingredients Incorporated conference call to discuss the company's third quarter 2022 results. After the speaker's prepared remarks, there will be a question and answer period and instructions to ask a question will be given at that time. Today's call is being recorded. I would now like to turn the call over to Ms. Sue Ann Guthrie. Please go ahead.

Good morning and thank you for joining the Darling Ingredients third quarter 2022 earnings call. Here with me today are Mr. Randall C. Stewie, Chairman and Chief Executive Officer, Mr. Brad Phillips, Chief Financial Officer, Mr. John Bullock, Chief Strategy Officer, and Ms. Sandra Dudley, Executive Vice President of Renewables and U.S. Specialty Operations. There's a slide presentation available on the investors page under the events and presentations on our corporate website. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results can materially differ because of factors discussed in yesterday's press release and the comments made during this conference call and the risk factor section of our Form 10-K, 10-Q, and other reported filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now I will turn the call over to Randy.

Thanks, Joanne. Good morning, everybody, and thanks for joining us for our third quarter 2022 earnings call. Darling Ingredients reported a strong third quarter financial result. This was created by more than 14,000 employees around the globe. I'm so proud of the Darling Ingredients family, particularly those who are new to us from Ooptabek, Valley Proteins, and the Faza Group. In August, I took our board of directors to visit several of our new facilities that came with the Valley Proteins acquisition. I cannot be more proud of the dedication, pride, and transparency I saw from our new Darling employees as they work hard to integrate into our business. A few weeks ago, I was at our new Ooptabek facility in Belgium, the green energy facility we acquired last spring. I was able to see firsthand the ingenuity, the entrepreneurship, and commitment from our new employees, and it's truly remarkable. While I have not yet had the chance to personally see our new employees at the Faza Group in Brazil, I know how hard they are working as we bring our businesses together. The success of our company begins with our people. As I made my way to many of our factories across the U.S. and Europe this summer, I saw a tremendous amount of energy from our employees who are constantly looking for ways to make our company safer, our plants more efficient, better for the environment, and ultimately more profitable. I can absolutely say our team now understands their role in an evolving ESG world. Now, turning to the third quarter. Extremely hot weather in North America, escalating energy prices in Europe, a one-time inventory step-up charge from the FAS acquisition, and foreign currency translations impacted our base earnings this quarter. Our global ingredients business came in at $274.4 million in EBITDA. The feed ingredients segment ended the quarter at $198.6 million. Our specialty food ingredients segment had another record quarter, posting $68.2 million in EBITDA. And our fuel segment earned $143.4 for the third quarter, with $120.3 coming from Diamond Green Diesel. Turning to the feed ingredients segment, globally, raw material volumes were up 39.6% quarter over quarter and 21.8% year to date. Summer heat and regional droughts made raw material quality a challenge and processing difficult. The results were lower grade fats with DGD not ready to accept, and these fats had to be discounted to be sold in North America. However, both domestic and export demand for North American and European proteins was exceptional in the third quarter. We continue to see strong export demand for our Brazilian and European fats as demand for low carbon intensity feedstock for renewable diesel continues to grow. Container availability improved in the third quarter and is expected to continue to improve in the fourth quarter. Energy costs in Europe continue to be challenging, more than doubling year over year. However, we have made raw material procurement adjustments and have recovered 85% to 90% of these costs now going into fourth quarter. Valley protein facilities struggled during the quarter. As we have openly discussed, we are making progress bringing these facilities up to our standards But converting from a run-to-fail mode will take a bit of time. Summer was brutal. Ultimately, as we bridged the margin variance in the feed segment, it was valley proteins, plants, animal fat price discounts, foreign exchange, and the FASA inventory step-up. All of this is behind us going into fourth quarter. On November 2nd, we announced that we entered into a definitive agreement to purchase the Polish rendering company Mirapaz Group for approximately 110 million euros. Mirapaz processes around 250,000 metric tons annually through three large poultry rendering plants in southeast Poland and has around 225 employees. The acquisition will provide a nice bolt-on to our existing three plants in central and western Poland and displays our commitment toward building out our global supply of low-carbon feedstocks as global demand for low-carbon intensity renewable diesel continues to grow. Our specialty food ingredients segment had another record quarter, earning $68.2 million in EBITDA. Our continued product mix shift from gelatin to collagen peptides helped drive margin and EBITDA improvements. We are very encouraged about the future growth in our food ingredients business. We expect the collagen peptides market to double in the next five years. We have additional collagen capacity coming online in early 2023. If you reference the chart in our earnings slide deck, you will see a performance in the food segment that tells the story of why we are growing with our global customers in the peptide space. On October 18th, we announced that we entered into a definitive agreement to acquire all the shares of Gelnex, a leading global producer of collagen products for approximately $1.2 billion in cash. Headquartered in Brazil, Gelnex has six facilities, four in Brazil, one in Paraguay, and one in Portage, Indiana in the USA. with a capacity of around 46,000 metric tons to produce gelatin and collagen peptide products. Gelnex is a very well-run business and will increase our production capacity for grass-fed bovine collagen in South America. When this acquisition is completed, most likely in the first quarter of 2023, Darling Ingredients will operate 17 state-of-the-art collagen facilities on our four continents around the world. Now, moving to our fuel segment. We saw strong volumes this summer from our European brand, Remdac, which collects fallen animal stock and converts it into green energy. In our food waste to energy business, expansion plans at our newest green energy facility, Ooptabek, are now underway. On October 31, we closed the acquisition of Jejong Recycling, a collector and trader of organic waste based in the Netherlands. This strategic acquisition provides Darling Ingredients with additional feedstock for its four biogas plants in the Netherlands and Belgium. Our green energy business in Europe is delivering as planned, and we continue to believe in green energy in Europe, and it will provide superior returns and help diversify our European assets. In the third quarter of 2022, Diamond Green Diesel sold 190 million gallons of renewable diesel and recorded $1.26 per gallon in EBITDA. Year-to-date, the joint venture has sold 545.5 million gallons of renewable diesel at $1.09 average EBITDA. Now, we have begun commissioning the unit at Diamond Green Diesel III in Port Arthur, Texas. The catalyst is loaded, and we expect to be online in mid-November with a ramp-up to capacity shortly thereafter. For the full year, we are forecasting approximately 800 million gallons of renewable diesel to be sold at Diamond Green Diesel I, II, and III, and are estimating $1.10 EBITDA for the final part of the full year. Now, with that, I'd like to turn it over to Brad to take us through the basics on financials, and I'll come back and talk about our outlook for 2022 and beyond. Brad?