Oct 29, 2026 earnings call — Diamond Green Diesel cash and debt reduction
Company reaffirmed full-year combined adjusted EBITDA guidance of $2.2 billion to $2.3 billion.
Revenue $1.8B (est $1.8B) · EPS $1.67 (est $1.70)
Key quotes
"While there was noise this quarter around capture, feedstock timing and hedging, DGD's structural competitive advantages have not changed."
"In total, we reduced net debt by around $420 million and bought back around $76 million in shares."
"Raw material volumes are stable, demand for proteins remains strong and global fat prices will most likely rebound as the RVO will require biofuel producers to run full in the fourth quarter and all next year."
Analyst Q&A 9
hedging margin risk and EPA policy
Q (Derrick Whitfield · Texas Capital Bank): How will you manage hedge risk given volatile diesel/HOBO spreads and Iran conflict? Also, how will the EPA handle deficit carryforwards and Set 3 policy?
A: They said they have many hedging options and that hedging feedstock with diesel or oil futures is attractive when replacement margins are wide. They do not use mark-to-market accounting, so hedge gains and losses can lag quarter-to-quarter; they are not concerned about their ability to limit hedging risk. On policy, they view EPA's market estimates as reasonable, see RIN supply/demand balanced for 2026 and tight into 2027, and expect the EPA to finish a supplemental ruling before moving to Set 3.
"We have lots of options as it relates to hedging." — Robert Day (CFO)
cash, leverage and dividend
Q (Manav Gupta · UBS): How much cash would you like to hold before considering a dividend, and could Darling pay a dividend in 2027?
A: They said their Board has a target near $2.5 billion of net debt. They expect to be at or below $3 billion into 2027 and close to $2.5 billion by Q1, after which excess cash could be returned via buybacks or a potential dividend; the Board is discussing options.
"And then that cash from there would then either be distributed via buybacks or a potential dividend." — Randall Stuewe (CEO·CHAIR)
4Q core business outlook
Q (Thomas Palmer · JPMorgan): Can you give a view of core ingredients EBITDA for 4Q? Also, is rising fat price embedded in the outlook or upside?
A: They guided full-year EBITDA in the $2.2 billion to $2.3 billion range, saying the core business is around $1.250 billion plus or minus $10 million and they modeled DGD capture between $1.50 and $2.00 a gallon on 1.2 billion gallons. They noted the core was affected by DGD-related accounting items (deferred profit, LTIs), so they provided the consolidated outlook; fat price increases were not embedded in the outlook but they expect momentum into November and December and see fats fair value near $0.65 to $0.70.
"And that's a combination of the core business at really around $1.2250 billion (sic) [ $1.250 billion ], plus or minus $10 million there." — Randall Stuewe (CEO·CHAIR)
LCFS growth and business mix
Q (Conor Fitzpatrick · BofA): As LCFS demand grows, how will profit split between feed (ingredients) and fuel (renewable diesel/SAF)? Also, are you planning more DGD capacity?
A: They said today the RVO is slightly bigger than cumulative LCFS programs, so RVO carries the day, while LCFS provides a safety net if Set 3 underwhelms. They expect a robust Set 3 and LCFS premiums to layer on top but not recreate 2021/22 margins; they also said the major cash investment in DGD has largely been made and future cash will be reinvested in core ingredients, which should grow and represent a larger share of Darling's EBITDA over time.
"By far and large, the cash investment in DGD has largely been made." — Robert Day (CFO)
legacy DAR Q4 and fats inventory
Q (Heather Jones · Heather Jones Research): Can you clarify the legacy DAR Q4 assumptions and whether the guide is conservative? Also, are producers drawing down inventories and are fats starting to firm?
A: They clarified $1.250 billion assumes a $320 million to $340 million Q4 for the legacy piece. They said the long-term incentive accrual is a real additional cost that won't reverse, while a small deferred profit item could reverse depending on year-end prices. On fats, they said they can't speak for other producers, but replacement margins are attractive, RINs are lower, and that incentivizes producers to maximize production and work through inventories; DGD is maximizing production.
"So let me clarify that. $1.250 billion that assumes a $320 million to $340 million Q4." — Randall Stuewe (CEO·CHAIR)
protein prices and hydrogen outage
Q (Pooran Sharma · Stephens): Do you expect protein/feed prices to stay higher into 2027? And was the hydrogen outage an isolated supplier issue or a broader Gulf Coast vulnerability?
A: They said fishmeal and protein prices are very elevated due to El Niño effects and growing aquaculture demand, and they expect strong protein prices into 2027. On the hydrogen outage, they said it affected everyone in the Louisiana Gulf, cost them about 20 million gallons versus guidance, but it was short-lived, not a frequent event, and operations recovered quickly so they don't expect a lasting material impact.
"The hydrogen outage affected everyone in the Louisiana Gulf." — Robert Day (CFO)
Food tariffs and 4Q assumptions
Q (Andrew Strelzik · BMO): What caused pressure in the Food segment and can you improve it? Also, what assumptions drive the high versus low end of 4Q guidance and recapture expectations?
A: They said tariffs have short-term effects on the Food segment because key raw materials (like beef hide collagen) come from long lead suppliers abroad, so buyers draw down inventories and suppliers may slow sales until supply chains normalize; demand remains strong with near double-digit growth for water-soluble collagen. For guidance, they reiterated consistent core results, noted many moving parts from tariffs and global raw material flows, and see a consistent quarter finishing around $1.250 billion, with a possible range of $1.225 billion to $1.250 billion but feeling toward the higher end.
"But overall, fundamentally, the demand for those products remains strong." — Robert Day (CFO)
SAF volumes and RINs
Q (Matthew Blair · TPH): How are SAF vs RD spreads and volumes trending, are you at max SAF rates, and are there export opportunities? Why did D4 RIN prices fall this quarter?
A: They said SAF sales have shifted more to the U.S. because duties make Europe less attractive; SAF sells at a higher netback margin than renewable diesel, volumes are consistent and slightly growing, and DGD is near max production so only modest volume increases are possible. On D4 RINs, they said replacement margins are already attractive due to diesel and feedstock spreads, so RINs don't need to be higher today to incent needed production, which explains the sell-off.
"All of our SAF sales are made at a higher netback margin to DGD than RD sales." — Robert Day (CFO)
capital allocation and Set 3 timing
Q (Jason Gabelman · TD Cowen): After you hit net debt targets, would you support the stock more (buybacks/dividend) and what are capital priorities? Also, what's the timeline for Set 3 and how long would the RVO cover?
A: They said once net debt is near $2.5 billion and they build cash, the Board will consider dividends versus opportunistic buybacks; they have already been buying shares and will decide by year end. On timing, they expect the EPA to complete the supplemental ruling on Set 2 before starting Set 3, likely mid-first quarter for the supplemental ruling and midyear next year for Set 3, and they are hearing Set 3 may cover 2 to 3 years, with a leaning toward 3 years.
"So I think our understanding is it's likely that they will complete the supplemental ruling on Set 2 and the reallocation of SREs before they really get into the process around Set 3." — Robert Day (CFO)