Darling Ingredients Inc.

Good morning and welcome to the Darling Ingredients Incorporated conference call to discuss the company's fourth quarter and the fiscal year 2025 financial results. After the speaker's prepared remarks, there will be a question and answer period and instructions to ask the question will be given at that time. Today's call is being recorded and I would now like to turn the call over to Ms. Sue Ann Guthrie, Senior Vice President, Investor Relations. Please go ahead.

fourth quarter and fiscal year 2025 earnings call. Here with me today are Mr. Randall C. Stewie, Chairman and Chief Executive Officer, and Mr. Bob Day, Chief Financial Officer. Our fourth quarter and fiscal year 2025 earnings news release and slide presentation are available on the investor page of our corporate website and will be joined by a transcript of this call once it is available. During this call, we will be making forward-looking statements which are predictions, projections, and 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 today's press release and the comments made during this conference call and in the risk factors 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 statements. Now I will hand the call over to Randy.

Thanks, Sue Ann. Good morning, everyone. As we close out 2025, I want to acknowledge our employees for continuing to execute on our vision of being the world's largest, most profitable, and most respected processor of animal byproducts. For every end, we believe there is a new beginning as 2025's performance clearly demonstrates. Our 2025 results reflected the uncertainties created by evolving renewables public policy, along with the turbulent globalization related to tariffs and trade. Yet our team remained committed to the fundamentals that matter the most. We meaningfully improved our debt leverage, took steps to rationalize and improve our portfolio, and focused on our core strengths and advanced our operational excellence. These actions throughout the year strengthened our platform, assisted in generating concrete results, and position us for continued growth and profitability in the future. In the fourth quarter, we delivered solid EBITDA growth and sequential gross margin improvement. Despite a challenging year for Diamond Green Diesel, our best-in-class operations led the industry in results. Darling's combined adjusted EBITDA for Q4 was $336.1 million, and our global ingredients business performed strong with $278.2 million of EBITDA. In our feed ingredients segment, exceptional operational execution drove meaningful margin expansion for the fourth quarter in a row, a clear sign of the momentum our operations team continues to build as they remain laser focused on driving efficiency and delivering strong results each quarter. The additional week in our fiscal year, combined with a favorable lag in fat prices, supported higher volumes in sales in the fourth quarter for the year. In the US, demand for domestic fats remains robust as we continue to operate within agricultural and energy policy direction that is increasingly favorable to Darling, to American agriculture, and to American energy independence. Internationally, our global rendering business in Europe, Canada, and Brazil delivered solid year-over-year growth. Turning to our food segment, global collagen and gelatin demand continues to rebound, And our previously announced joint venture with PB Liner and Ticenderlo is advancing as planned, with regulatory reviews now underway. Across the business, we're seeing positive global demand trends that give us a very encouraging outlook for 2026. In our fuel segment, Diamond Green Diesel delivered its strongest quarter of the year with $57.9 million of EBITDA, or 41 cents per gallon. For the full year 2025, DGD earned 103.7 million of EBITDA or 21 cents EBITDA per gallon and sold approximately 1 billion gallons. This performance reinforces DGD's position as the lowest cost operator with an unmatched supply chain and superior logistics. Even in an uncertain time for the industry, DGD continued to generate positive EBITDA and consistent operations, highlighting the strength of our people and the deep expertise behind our operations. Now, looking ahead, we are increasingly optimistic. The policy backdrop is moving in a direction that we believe will soon enhance DGD's earning potential and create a more constructive environment for domestic renewable fuels. Now, as I mentioned earlier, we have taken steps to sharpen our portfolio and focus on our core strengths, which may result in some asset sales in the near future. At the same time, we are open to opportunities that strengthen and expand our core business where it makes sense. Darling was identified as a stocking horse bidder in the bankruptcy proceedings for three rendering facilities from the Potense Group in Brazil, the second largest rendering company in Brazil. Bob will share more details on the financials and timing, but these are high-quality assets with strong operational capability and fits naturally alongside our existing footprint. This is an incredibly strategic acquisition of assets that offers important synergies with the rest of our network in Brazil. Now with this, I'd like to hand over the call to Bob, take us through the financials, then I'll come back and discuss my thoughts for 2026.

Bob? Thank you, Randy. Good morning, everyone. As Randy mentioned, third quarter momentum continued nicely into the fourth quarter as combined adjusted EBITDA was $336 million versus $289 million in fourth quarter 2024. and $245 million last quarter. Core ingredients improved both year-over-year and sequentially. For fourth quarter 2025, core ingredients EBITDA was $278 million versus $230 million in fourth quarter 2024 and $248 million last quarter. And for all of 2025, core ingredients EBITDA was $922 million versus $790 million in 2024. While 2025 was a 53-week year for Darling, The added week's impact added only around 20 million EBITDA, so by any measure, 2025 for the core business realized significant improvement over the previous year. For the fourth quarter 2025, total net sales were 1.7 billion versus 1.4 billion in 2024. Raw material volume was 4.1 million metric tons versus 3.8 million tons from the fourth quarter a year ago. And for the full year, raw material volume was 15.4 million metric tons versus 15.2 million tons in 2024. Meanwhile, gross margins for the quarter improved to 25.1% compared to 23.5% in fourth quarter of last year. Looking at the feed segment for the quarter, EBITDA improved to 193 million from 150 million a year ago, while total sales were 1.13 billion versus 924 million and raw material volume was approximately 3.4 million tons compared to 3.1 million tons. Gross margins relative to sales improved nicely to 24.6% in the quarter versus 22.6% in the fourth quarter from 2024. As Randy mentioned earlier, we successfully participated in an auction to acquire three assets formerly owned by the Patense Group in Brazil. We are currently working through terms in the purchase agreement and expect to close later this quarter. The cost of acquiring those assets translates to around $120 million, and we expect to fund that with cash flows generated in first quarter of this year. In the food segment, total sales for the quarter were $429 million, a significant increase over fourth quarter 2024 at $362 million. Gross margins for the segment were 27.2% of sales compared to 25.7% a year ago, and raw material volumes increased to 350,000 metric tons versus 320,000 tons. EBITDA for fourth quarter 2025 was up significantly compared to the fourth quarter of 2024 at 82 million versus 64 million. Moving to the fuel segment, specifically Diamond Green Diesel, Darling's share of DGD EBITDA for the quarter was 58 million, which includes an unfavorable LCM inventory valuation adjustment of 24 million at the DGD entity level. This was the best quarter of the year for DGD as confidence in policy and more disciplined market behavior led to an improved margin environment. For fiscal year 2025, Darling's share of DGD EBITDA was approximately 104 million, which included a favorable LCM inventory valuation adjustment of 140 million at the entity level. Darling contributed approximately 328 million to DGD in 2025. These contributions were offset by 368 million in dividends received, a significant amount of which came from 285 million in production tax credit sales, 255 million of which were paid during 2025, and the balance will be paid in 2026. Other fuel segment sales, not including DGD, were 153 million for the quarter versus 132 million in 2024 on relatively flat volumes of around 390,000 metric tons. Combined adjusted EBITDA for the full fuel segment, including DGD, was $85 million for the quarter versus $84 million in the fourth quarter of 2024. For fiscal year 2025, combined adjusted EBITDA was $192 million versus $374 million a year ago. As of January 3rd, 2026, total debt net of cash was approximately $3.8 billion versus $4 billion ending December 28th, 2024. Capital expenditures totaled $156 million in the fourth quarter of 2025 and $380 million for the fiscal year. Our bank covenant preliminary leverage ratio at year end was 2.9 times versus 3.9 times at year end 2024. In addition, we ended the year with approximately $1.3 billion available on our revolving credit facility. For the three months ended January 3, 2026, we recorded an income tax benefit of $11 million, primarily due to the net impact of production tax credits, and we paid $6.9 million of income taxes during the quarter. For the 12 months ended January 3, 2026, the company recorded an income tax benefit of $9.4 million. Similar to last year, the company's effective tax rate when including production tax credit sales was negative 15.3%, and we paid a total of $58.4 million of income taxes in 2025. Overall net income was $57 million for the quarter, or 35 cents per diluted share, compared to net income of $102 million, or 63 cents per diluted share for the fourth quarter of 2024. As we continue to evaluate each business and position the company to maximize value, we restructured and impaired some of the portfolio in the quarter, resulting in charges of $58 million. Adjusting for the restructuring and impairment charges and to provide some perspective regarding earnings per share in the fourth quarters from 2025 and 2024, an adjusted non-GAAP earnings per share would have been 67 cents per diluted share in the fourth quarter of 2025 and 66 cents per diluted share in the fourth quarter of 2024. With that, I will turn the call back over to Randy. Hey, thanks, Bob.

In 2025, we focused on executing for today so we can build for tomorrow. That discipline has put us in a strong position as we move into a period of meaningful opportunity. We're beginning to see tailwinds forming across our markets, and public policy is on the cusp of becoming tangible and beneficial for our businesses. We believe we are at an inflection point, one where the foundation we have built and the momentum we have created will move us forward. We're excited about 2026 and believe we are well positioned to deliver long-term value for our shareholders. Now, looking forward to first quarter, we estimate that DGD will produce about 260 million gallons at improved margins. For the core business, When you adjust for our fourth quarter performance for the 13-week period and exclude some minor year-end cleanup, the quarter was solid. In January, severe weather in the southeast and eastern shore created some moderate operational challenges. Even with that, when considering fat prices and volumes, we only expect a modest pullback relative to Q4. As a result, I'm estimating our core ingredients adjusted EBITDA to fall in the range of around $240 to $250 million for first quarter. Now with that, let's go ahead and open it up to questions.

Certainly. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad. To remove that question, please press star followed by two. If you are using a speakerphone, please pick up the handset before using the keypad. Once again, if you would like to ask a question, please press star followed by one. The first question comes from the line of Derek Whitfield with Texas Capitol.

You may proceed. Hey, good morning, all, and congrats on a strong close to the year.

Thanks, Derek.

Thanks. So maybe just start now with guidance. So while I understand why you're not guiding DGD for 1Q, it seems like to us that the margins are materially stronger than where you were in 4Q, given the strength of recent credit prices and the softness of FAS and UCO relative to SBO. So that's kind of part one. And then part two is, if you guys look forward and let's assume we get a constructive RVO, would you likely then put DGD back in guidance at that point? Would love your thoughts on those two.

Yeah. Hey, Derek. This is Bob. I guess to answer the first the last question directly, it's going to depend. I mean, you know, I think that there's, you know, just going to depend on the kind of clarity and certainty we have. But as we look at the first quarter, you know, we first of all, we saw strong results in the second quarter or fourth quarter of 2025. Much better. And we, you know, we continue to see that momentum carry forward into the first quarter. But yeah, we aren't providing guidance. And we'll reconsider that, you know, after we get a final ruling on the RVO.

Terrific. And then maybe just one follow-up, perhaps for you, Bob. When we think about the feed business, it is clearly sensitive to the final absolute RVO. But how would you characterize your business's potential sensitivity to the half-run concept for imported products and feedstocks?

Yeah, I think, you know, it's hard to answer as it relates specifically to the half-REN concept because there's so many other factors. We've got origin tariffs on feedstocks that are already having a big impact. I mean, I think the bottom line is if policy is supportive to U.S. or even just broader North American feedstock values, That's certainly constructive to our rendering businesses in the United States and Canada. And, you know, based on what we've heard, we're likely to see it manifest in some way that's supportive like that.

Thank you. The next question comes from the line of Thomas Palmer with J.P. Morgan. You may proceed.

Good morning and thanks for the question. Given where you sit in the biofuels supply chain, I wondered if you might have some insight into what's happening so far in 2026 versus maybe how it might evolve here as we get clarity on the RBO and specifically to what extent maybe we're starting to see more production from biofuels operators that maybe had pulled back? And to what extent you're starting to see increased pull in terms of feedstocks from the biofuels industry? Thank you.

So if I didn't understand the question correctly, Tom, let me know. This is Bob again. I think, you know, we haven't seen a significant increase in biofuel production yet. in the United States. And, you know, despite better margins, which suggests to us that margins need to get better in order to incentivize more. And so if we have an RVO ultimately that is, you know, results in an increase in demand, we're going to need to see, you know, better margins in order for that to happen. But if I, yeah, let me know if I didn't answer your question.

No, no, you understood it right. I was really just trying to understand if we're seeing anything kind of happening in the background versus what we're seeing with pricing so far. Second, I did just want to touch on the food business. There was some constructive commentary in the prepared remarks. This is maybe less tethered to the RBOs, so I wondered if you would be comfortable maybe talking at a high level about expectations for EBITDA as we think about the coming year.

Yeah, Tom, this is Randy. I mean, the collagen and gelatin business globally is performing very nicely at a really nice fourth quarter, carries that momentum into Q1 right now. You know, as we look around the world, demand, you know, a year ago today, we were talking of destocking of, you know, people that have built too much inventory. The industry had added quite a bit of capacity through new players. And the only thing the new players knew how to do was to reduce price to try to move the product. And it built inventories. Those have been worked through pretty much around the world. And so ultimately, we look for a year similar to this year, if not better. It'll depend on really how it really comes down to trade flows again. Keep in mind, there's still lots of tariffs issues around the world and we're a heavy Brazilian producer. And at the end of the day, you know, we were able to navigate that with our customers and suppliers. And I think we'll be in better shape as we come on into the year 2026 here. Also, our next TIDA product line has been launched. The GLP-1 alternative glucose moderation product is getting a lot of repeat orders now. building momentum. And then this spring, we are hoping summer to bring on our brain health next title product. So we're getting momentum with the higher value products here. And then the commodity gelatin part has, what I'd say, leveled off and improved from where it was a year ago.

Thank you. The next question comes from the line of Manav Gupta with EBS, eBay Proceeds.

Good morning, guys. My first question is going to go a little bit on the policy side first. As this RVO comes out, net of SREs, what would be looked as a constructive number from the perspective of Darling? Like, is there an absolute number, five plus or whatever, which if it's the net number, you would say, okay, that is constructive. And then on the LCFS part, finally, things are moving in absolutely the right direction. And I'm just trying to understand if based on the revised, you know, the mandate going in, that you actually see that carbon bank deplete, which will be a major positive for you.

Thanks, Manav. This is Bob. So I'll go on record saying we support an RVO for advanced biofuels that translates to 5.25 billion gallons or 5.61 billion gallons. Those are kind of the numbers that have been thrown out there. You know, we'll go on records continuing to support those numbers. I think what we would add to that is just anything that resembles anything close to that is extremely supportive and we believe results in higher margins than what we see in the market today. But I guess I'll leave it at that. On the LCFS question, it's an interesting situation because We have the greenhouse gas emission requirements that are more stringent than they were. We're seeing the bank come down considerably, and we expect that we'll continue to see that happen. One interesting aspect about that market is over the last several quarters, we've actually seen less renewable diesel going into California despite better margins. And so that tells us that in order for California to satisfy its mandates, either LCFS credit prices have to go up or RIN prices have to go up, but it's got to incentivize more domestic production to eventually go into California. So the rate at which we're drawing that bank down starts to slow down. We haven't talked about it in those terms for a long time, but so it's absolutely constructive what we're seeing there.

Perfect, Bob. I'm just going to quickly ask a question on the food JV side. Obviously, you've highlighted multiple benefits of that JV, but you've also in the past said, look, once the JV really takes off, there could be a re-rating for the stock, right? Can you talk about the multiple expansions that can happen as the JV comes to fruitation and some of those benefits, which will lead to a higher re-rating for Darling Ingredients?

Yes.

Thanks, Manav. So I think, first of all, you know, we're in a process there. We've signed definitive agreements, we've done our regulatory filings, and we can't predict exactly when this joint venture will close. But it's sometime we expect in the next 12 months or so. Once that happens, we will focus on integrating plants, maximizing synergies and opportunities. And then, as Randy talked about, throughout all of this, we are very focused on increasing the sales volume of the Next Data portfolio products, which really move that business into the health and nutrition and wellness segment of the market that trades at significantly higher multiples. You know, we believe this is a business that can move into a space that's trading 12 to 16 times EBITDA. And if we accomplish that, and when we accomplish that, we'll have to evaluate what's the best way for us to monetize that if we're not being recognized for that kind of a multiple for that business.

Thank you. The next question comes from the line of Heather Jones. With Heather Jones Research, you may proceed.

Good morning. Thanks for the question. Thinking about the RVO and the probable impact on DARS feed business, it's just setting up the expectations for 26. Have there been any changes in how you price the lags, et cetera, that we should be aware of as we're thinking about the potential impact later in the year?

Heather, just to clarify the question, so how we price the, did you say the lags or the legs?

The lags. So like in the past, it's been like a 60 to 90 day lag between what we see. Yeah. Have there been any changes in that or how you pay your suppliers as far as like your formulas? Not to give us specifics, but just things like that that we should be aware of as we're trying to figure out the impacts for Darlington.

No, not at all, Heather. I mean, what, what we saw in fourth quarter was, is the team executed well, they had some forward sales on, um, prices came down here and, and, you know, we, we benefited it, um, as the, uh, you know, we were kind of lagging all the way up all year in 25 here. And so got a little bit of a downturn that's, that was kind of the reason for the guidance in, uh, in for q1 here at 240 to 250 fat prices are lower it's winter time but they're going to come back sharply here as the industry powers back up bean oils back showing near 58 cents on the board today and i'm starting to see you know sales now back of fats fob the plants uh with a in a 50 plus range now so you know it's coming back for us right now but there's there's no change in how we do business there

Okay, awesome. And then I was wondering, just given the recent proposal, 45Z proposals from the Treasury, and then just I guess a more liquid market as far as monetizing those credits, is there any change, any update that you would give as far as what we should be assuming for the average credit value for Diamond Green?

Yeah, this is Bob. I would say, you know, we've seen, We've seen a maturation somewhat of that market where there's recognition of the validity of the credit. It's making it easier to have discussions and make sales. There is some more supply on the market, so that maybe counters that a little bit. All in all, we don't expect any significant change to the value of the credits that we're able to sell, you know, in 2026 versus what it looked like in 25.

Okay. Thanks so much. Appreciate it.

Thank you. The next question comes from the line of Huron Sharma with Stevens Inc. You may proceed.

Good morning and thanks for the question and congrats on posting some strong results here. I wanted to maybe start off and get a sense as to Q1 fuel production. I think in the deck you have it at 260 million gallons. kind of low, just given your capacity utilization. And I thought you you're going to have DGD one back online. So I was hoping to maybe get some color on on the volume expectations for for fuel.

Yeah, thanks for on. You know, I guess we're we are you know, we've been opportunistic in terms of the way we've managed capacity at Diamond Green Diesel over the last several quarters. In certain cases, we've been able to run at less than full capacity and increase our distal yields. We've seen wider spreads in some cases, and so a benefit to doing that. I think that as we look at the first quarter and what we're really doing is anticipating ultimately a final ruling on the RVO, which which would impact the market second quarter and beyond. So we just really want to position the business to maximize production as we get into the second quarter and through the end of the year.

Okay, makes sense. Thanks for the call there. And in the past, I think you've given a percentage split on the core business guide. Of that 245 mil at the midpoint, are you able to give us a rough sense on on the split between feed, food, and fuel for the core business?

So this is Randy. So let's do Randy math here. If you were 278 in Q4, remember there was an extra week in there. So you got to divide by 14 and times 13. So you come up with 250 something there, 258, 259. We had a few balance sheet cleanup items that you always do. at year end so that's where we kind of came in at the 250 mark for the quarter 240 250. remember that does not include dgd dgd margins are are improving from q4 volumes are pretty steady down a little bit here as we get ready to run harder for the balance of the year so that that's really but trying to split it between food and feed kind of impossible at this time You know, food for the most part is very, very consistent. So you can kind of back into it yourself.

Thank you. The next question comes from the line of Connor Fitzpatrick with Bank of America. You may proceed.

Good morning. Thanks for taking my question. In the fourth quarter, feed ingredients processing volume set a record and feed revenue per ton and gross margin percentage were the best prints since 2023. Could you maybe break down what has been driving this momentum in the feed ingredient segment and help us understand which drivers are more rateable?

Yeah, Connor, this is Randy, and Bob can help me out here if I leave something out. I mean, Clearly, tonnage around the world, raw material tonnage, is very strong. If we look at it, you know, there's no surprise. Beef tonnage in the U.S. is at a relatively low point in my career right now, but it feels like it's rebuilding. But offsetting that is very, very strong poultry tonnage in the east and southeast. Now you go south to Brazil, beef tonnage is pretty It's large, very large now. We're extremely full at all plants down there. Europe is very consistent as we look around orange. So tonnage is really kind of as expected and doing very, very well. Margin management is what we pride ourselves on in the business and really spread management to try to deliver returns that reflect what it costs to both operate and replace these plants. T. John McCune, M.D.: : You know, it was a 25 you know kind of focus for us, and it was one that it's kind of hard to talk about to get out there, because there's no. T. John McCune, M.D.: : Specific thing it's each customer, whether it's free, whether it's you know the products were making it plants, the markets that we're selling the the 25 year was was very challenging because, especially on the protein side you didn't know. was china open was china closed you know and so it becomes very difficult for some of the high-end proteins the fats remember a lot of fat was moving up out of brazil to diamond green diesel and with the trump terrorists that makes it pretty much impossible now at this time so we've had to move spreads and and raw material costs around there so it's a whole bunch of little things that are out there that the team really executed well on.

Okay, thanks. And going back to the LCFS, you talked about credit prices needing to rise in order to redirect renewable diesel and biodiesel supply back into California. But maybe could you help us understand what credit price would be required for DGD specifically to redirect product toward California and away from other current end markets?

Yeah, hey, Connor, this is Bob. It's hard to answer that because all these markets around the world that we're selling into are consistently changing. And so it's really a relative question. You know, what I would say is, I guess in a static environment, you know, how much would the credit price have to increase into California for us to sell into California? I'm not really sure exactly. You know, I think that it, but it would have to be, Yeah, I can't. It's hard to answer that exactly just because the markets are so dynamic and they're moving around so much. But, you know, what it has demonstrated is that it just it's going to have to be higher than where we are in order for it to happen. You know, there are better alternatives today, you know, for diamond green diesel, at least, you know, in order in order to to sell into California.

Thank you. The next question comes from the line of Dushant Aliini with Jefferies. You may proceed.

Good morning, guys. Thanks for taking my question. My first one is just wanted to touch on the Brazil rendering facility, the stockinghouse bed. Could you talk about the rationale for that some more? And then maybe how do you think of deals like these going forward? Is it going to be a one-time thing that is an opportunity? Could we see more of these? And then also, just one last piece on that is also, how much do you think that could add to the capacity and the margin profile for the feed segment change going forward?

Randy Manion, Yeah, Deshaun, this is Randy. The Potense group, the Goncalves family, we've worked closely with over the years. They found that we had them acquired years ago and it fell apart. It's somebody we've always had our eyes on. These are really first-rate, world-class facilities that, long story short, is he spent too much money and was unable to maintain his balance sheet, which is the most important thing in this business, through the volatility that happened and happens in Brazil. So we're doing a combination of things in Brazil. As I said, the tonnage is very large. We're doing a lot of organic expansion and de-bottlenecking at our current facilities. And these facilities were just perfect within our footprint to bolt on and give us some arbitrage and margin enhancement opportunities. So we were excited to get these, and we're excited to get them closed and integrated.

Awesome. Thank you. And then just a quick follow-up. I think in your prepared remarks, you talked about potential for incremental asset sales. Could you maybe talk a little bit about the magnitude of those asset sales and then from which segment we could see that?

Yeah. Thanks, Shashank. This is Bob. We're intentionally vague about that as we negotiate different options. I think that, you know, what we've said previously is that when we look back at, you know, where we've been most successful, it's clearly in areas that, you know, where we've got core capabilities and our core business and some of the peripheral areas where we're operating, you know, we can look at it a bit more opportunistically. With some of the impairment that we did, it just repositions our balance sheet so that We're really valuing things based on fair market value, and that allows us to be more agile if we choose to do so. But we're not forced to do anything in any case, and I think that's an important position that we need to have as we look at different opportunities.

Thank you. The next question comes from the line of Andrew Streslik with BMO. You may proceed.

Hey, good morning. Thanks for taking the questions. My first one, Randy, I appreciate, you know, you're not giving me annual guidance and certainly understand that, but so I'm not looking for numbers, but I guess I'm just wondering, you know, when you think about kind of a post-RVO environment, is there anything, any analogous year that that setup kind of feels like? Is there anything from your career in the past from a supply-demand perspective that maybe kind of feels like the setup we could get into in kind of a post-RBO environment.

Yeah, you know, we look historically at DGD as, you know, having a first mover capability and the success that it had. I mean, I think everybody knows that the machine is capable of making 1.3 billion gallons plus out there, you know, You know, as I look back at 25, as Bob and I sat here and tried to give and what we thought the business would do, you know, we looked at it and said, well, we don't think 25 could be any worse than 24. And we were very, very wrong with that belief and assumption. We didn't get an RVO soon enough. We didn't get an LCFS increased guidance soon enough. You know, if we think of this time last year to kind of give the courage in the industry. And then we had some competitors, oil company competitors out there. Some have shut down now that decided to, as I call it, run for fun. And so pretty interesting environment that we were in last year. Clearly, people are tempering their kind of behavior now. which you would expect. I mean, in all business school things, when you get below variable cost, it just takes longer for rationalization and improved behavior. You know, as we look at 26 here, you know, clearly we can make you a case for an easy 50 cents a gallon. We can make you a case for a dollar a gallon at that. But it all hinges on, like we said, on the RVO. Which we, as Bob said, you know, five, two to five, six. So we think anything with a five is very, very positive and constructive. And, and ultimately, you know, you've got the drawdown and the LCFS coming back and you've got robust world demand for, for RD right now. So, you know, it's a, it's a hard thing to sit here and say, you can, you can say 50 cents a gallon or a dollar a gallon. You know, we ran 41 in Q4. We, we said, we think Q1 is, is better. And so, you know, that's the 50. And then to go on up to a dollar, we'll see what happens. It's going to take, you know, behavior in the industry, and it's also going to take a very robust RVO around the world.

Okay, that's helpful perspective. And then I just wanted to ask a capital allocation question. You've done a nice job from a leverage perspective. this past year, not too far off from some of the targets. I guess, how are you thinking about the timeline to achieving the leverage targets and then kind of capital allocation priorities once you get there? Thanks.

Thanks, Andrew. Let me say first, I think capital allocation priority continues to be paying down debt. You know, how quickly we sort of achieve our goals is It's going to depend in large part on how much cash DGD generates. And so, you know, we'll see what that picture looks like once we finally get a final ruling on the RVO. And once that happens, I think we can be a bit more specific about what our plans are. But as we sit here today, you know, we like the trend and the direction we're headed. We're going to continue to pay down debt. We'll reassess as we have a little bit more clarity on what the cash flow situation looks like going forward.

Thank you. The next question comes from the line of Matthew Blair with TPH. You may proceed.

Thanks, and good morning. Hopefully you can hear me okay. I had a question on the SAF market. So one of your major European competitors talks about how European SAF prices are actually below European RD prices, and they're kind of pulling back on their SAF production. What's the picture like on SAF for DGD? Do you have term contracts to to, I guess, essentially, like stabilize that staff contribution? You know, what are you seeing on US staff prices versus USRD prices? Thank you.

Yeah, Matthew, this is Bob. I think, you know, to answer the first part of your question first, in Europe, we've seen staff trade at a premium, we've seen a trade at a discount, it's kind of it's fluctuated. You know, as I think everyone knows, DGD has some countervailing duties in order to get into that market, so it isn't as readily accessible to us, although we do have sales into Europe and we can be opportunistic when that market is good and we've been able to take advantage of that. We still have sales on the books in 2026 that we had made previously. Our book is healthy. The market, you know, I think is starting to, well, it is starting to rebound a bit in the United States. In the United States, it's primarily a voluntary credit market. And we've seen more and more interest materialize. And we think we're going to continue to see that as just overall demand for energy continues to increase. So, you know, our book is solid today. There's room to make more sales. We're having really good constructive discussions about that. And, you know, I don't think that, I think staff will, We'll be happy with SEF sales volumes and margins as we look at 26.

Sounds good. And then regarding the contributions to DGD, I believe in 2025 Starling sent DGD $328 million, which of course was more than fully offset by the dividends received back. I think 2025 was a pretty heavy turnaround year for DGD. Do you have an estimate in 2026 how much Darling might be sending DGD? Would it be lower than the 325 number? Thanks.

Yeah, it's a good question. We don't have a precise estimate, but I would say, you know, we expect it will be less. And you're right. We had three catalyst turnarounds in 2025. You know, we did some design work. There were some things that some cost items that needed to be paid for. As we look at 2026, yeah, we anticipate that the contributions will be less. It's going to depend a little bit on the market environment, but based on where we sit here today in the first quarter, we expect it would be considerably less than what it was in 2025.

Thank you. The next question comes from Ryan Todd with Piper Sandler. You may proceed.

It's maybe just a couple of follow-ups on other comments or questions. I mean, we're getting closer to some, well, at least hopefully we're getting closer to some regulatory clarity on some of the renewable fuels issues. Randy, can you maybe talk about, you know, are you hearing anything on timing of the RVO or any of the, you know, anything you might be hearing out of Washington on that? some of the gives and takes that may be going on in that discussion, and then maybe on the 45Z, the preliminary rules that we saw come out, can you, you know, it's generally positive, but maybe mixed in some regards in terms of facts of the relative benefits of running at advantage, low CIC. Can you talk about kind of what you see as the pluses and minuses for you of the proposal?

Hey, Ryan, this is Bob. I think, you know, first question around timing. We've spent a lot of time in DC. I think that our perspective is that all key stakeholders had to get comfortable with what the plans and policies were. And in our view, that's happened. The EPA has a heavy administrative burden to get through as it pertains to responding to comment letters. Prior to them sending over a final proposal to OMB, we believe that's likely to happen soon. And so, you know, hard to say exactly what that means, but probably, you know, it's got a February date to it in our view. As far as 45Z and what we're seeing from that, there's really nothing that was unexpected. We expected some positive things, and we're seeing those positive things. So, you know, we've got a do our due diligence and get our legal opinions and make sure that everything is as it's perceived. But as far as it relates to Darling and Diamond Green Diesel, we're seeing what we thought there and that's positive. I think the biggest thing that could affect us is just what determines a qualified buyer. DGD was the fastest in the market to to to convert to uh producing r100 so that it ensured that it was selling to qualified buyers and that was one of the things that allowed us to sell the production tax credits uh faster than than everyone else and at a higher you know sense on the dollar if we can go back to making r99 and qualify uh that just you know creates some flexibility that we appreciate but we don't we don't depend on so All in all, you know, we see the changes as positive, but either way, not having a significantly, you know, wouldn't have a negative impact on our business.

Great, thanks.

The next question comes from the line of Ben Callow with Baird. You may proceed.

Hey guys, thanks for taking my question. Just to follow up on a couple things. One, in the prepared remarks, you talked about maybe M&A opportunities outside of Brazil. Could you just talk to us about if you have a size limit on them and how you would see a limit to adding debt on the balance sheet for that. And then you talked about SAF a bit, but could you just talk about any more you can on volumes that you're seeing there and any kind of pricing trends there? Thank you.

Thanks, Ben. This is Randy. From an M and a perspective, I think we're, I would still say we're on an M and a holiday. Um, you know, we're working the world. We see what's out there. Um, nothing that, uh, really, um, turns us on at this time per se. Uh, the potentially opportunity was one we were very, very familiar with. And, uh, given that it was a forced liquidation, uh, it was something we couldn't, we couldn't turn down. I think more of our focus around the world is on organic expansion, whether it's in Brazil, Paraguay, China, and the U.S. with the construction of the Mount Olive new rendering plant and then some additional expansion. The poultry side continues to expand here, and we're going to have to use our capital dollars to de-bottleneck and expand some of our facilities here. Not much there. Bob, you want to comment on the SAF?

Yeah. I think, you know, one interesting development in the SAF market in the United States is at the end of the day, the buyers for SAF credits are large companies, often tech times tech companies, banks. The airlines act more as a broker in that case. And so the discussions that we have are we are having are really about how a tech company obtains scope three credits through the acquisition of SAF that, you know, obviously goes through an airline. So the discussions are more strategic in nature, long term, potentially higher volume. They take longer to put together. It's harder to predict exactly when they come together. But as those discussions continue to advance, It's exciting because there's a potential for, you know, more of capacity to be dedicated towards future contracts. And it's hard to say more than that right now today other than the discussions are constructive and we're encouraged by, you know, the direction they're going.

Thank you, guys. Thank you. The next question comes from Betty Zane with Scotiabank. You may proceed.

Hi, good morning. Thanks for taking my question. I wanted to ask about expectations for core EBITDA for the rest of the year. First quarter is looking a little bit softer, but then it seems 2Q is set up to be better with fat prices recovering. What about in the second half? What could that look like?

Betty, this is Randy. So, you know, I did the math earlier. First quarter is not looking softer because of 13 weeks. Um, wintertime rendering is always a challenge in, uh, in, uh, North America. And to a degree, Europe's had some challenges. South America's in the midst of, of, of, of a hot summer. So we're, we're very solid for, for Q1. Um, we're, we're still trying, if you sit there, we, we think that the year will improve as we go forward. Um, we're being a bit cautious because until we see that RVO. You know, it's hard to really put your finger on it. But at the end of the day, you're seeing the futures market for soybean oil really try to project a very strong, you know, RVO here. So that will only provide us tailwinds as we go forward. So, you know, hopefully Q1 is we build momentum through the year. And so hopefully we'll continue to build momentum and even have a better year than we had last year.

Okay, great. And then if you could give us a bit more color on the restructuring and impairments, does that reflect a change in your strategy? And would you say there are other businesses that could also be reviewed?

No, I wouldn't say a change in operating strategy. I would say that, you know, every so often we look at our portfolio and say, can we deliver the returns that we want to in different businesses? Do we have the number one or two position in it? And we have a couple of businesses out there where we don't have that position and we can't get to that position. And so the challenge in this business is always that we're the largest and biggest and best in the world is finding then a fair price to let go of an asset we can't be the best at and so that just takes time and i think you know i just say stay stay tuned and be patient and you'll see them materialize here over the you know hopefully here in the first quarter if not very early second quarter thank you the next question comes from jason gabelman with td securities you may proceed

Yeah, hey, morning. Thanks for taking my questions. The first one, just on CapEx, you know, 4Q was a step up from 3Q. Wondering what drove that and then your expectations on spend for 2026.

Yeah, thanks, Jason. This is Bob. It's not unusual to see a higher spend in the fourth quarter. Some of this is just... the teams wanting to make sure that they get certain things done by the end of the year and paying for the cost of doing that, you know, as bills come due. So that's really, it's really not more than that. As we look at next year, you know, we think it might be a slight increase in terms of total maintenance capital versus this year, but it would be consistent with sort of the range of normal on that. So I'll call it in that ballpark of $400 million

Got it. And then my follow-up is just on the international renewable diesel markets. And, you know, you mentioned there are other markets that are advantageous to sell into versus California. So wondering what you're seeing out of places like Canada and Europe and other markets that are making them more attractive at the moment. Thanks.

Yeah, I think that just generally speaking, we're seeing year on year increases in demand in those markets. We really haven't seen a lot of increase in supply and capabilities come online to compete for that. So it's just proven to be, you know, those proven to be good markets for DGD. And we think that we'll be able to continue to do that. We also think that we're going to have a good market here in the United States. We'd love to supply more into that market as well. So it's hard to say more than that. The S&Ds are balanced and strong, and that's the case for a lot of these markets outside the United States.

Thank you. This now concludes the Q&A session. I would now like to pass the call back to Randy for any closing remarks.

Thanks, John. Thanks to everybody for all your questions today. I think we feel very good about how we finished the year and we feel really good about the momentum we carry into 2026. And if you have additional questions, feel free to reach out to Sue Ann. Stay safe. Have a great day. And thanks again for joining us for the call.

Ladies and gentlemen, thank you for attending today's conference call. This now concludes the conference. Please enjoy the rest of your day. You may now disconnect.