IRVING, TEXAS, U.S. — Darling International Inc. reported on Nov. 7 net income of $27.7 million, or 23¢ per share, for the third quarter ended Sept. 28.
For the third quarter of 2013, the company reported net sales of $425.8 million as compared to $452.7 million for the third quarter of 2012. The $26.9 million decrease in sales is primarily attributable to lower finished product selling prices in both the Rendering and Bakery segments due to the effects of declining prices from competing ingredients. The new industrial residuals business acquired during the quarter contributed to help partially offset lower finished product selling prices.
Net income for the third quarter of 2013 decreased from $37.2 million, or 31¢ per share to $27.7 million, or 23¢ per share, when compared to the 2012 comparable period. The $9.5 million decrease in net income for the third quarter resulted from lower finished product selling prices, primarily within the Bakery segment; costs of $8.3 million related to the August 2013 acquisition of Terra Renewal Services, Inc., the October 2013 acquisition of the Rothsay rendering division of Maple Leaf Foods and the proposed acquisition of the VION Ingredients division of VION N.V.; and a $2.4 million payment made pursuant to the purchase agreement relating to the acquisition of Griffin Industries, Inc. to reimburse Griffin's former shareholders for certain state income tax liabilities resulting from the Company's 338(h) (10) tax election made in connection with that acquisition.
For the quarter, Diamond Green Diesel operated at reduced rates due to metallurgical issues with multiple heat exchangers. The reduced run rate at Diamond Green Diesel, which is being addressed, had an impact of approximately 3¢ per share during the third quarter of 2013. Diamond Green Diesel commenced a shutdown to replace the heat exchangers. The company anticipates the unit will be back on line and operating at or above nameplate capacity by mid-November.
"Our third quarter operating performance remained in line with the second quarter fiscal 2013 performance despite a major resetting of global commodity values to their lowest levels in four years,” said Darling International Chairman and Chief Executive Officer Randall Stuewe.
Rendering raw material volumes remained steady on a sequential basis with improving poultry and yellow grease volumes offsetting a slight decrease in the beef raw material tonnage. Exports continued to be sluggish for fats and greases with reduced global demand for meat and bone meal.
As anticipated, the Bakery segment's operating performance declined significantly in the third quarter of fiscal 2013 as compared to the same period in 2012 and sequentially. The company's corn derivative hedge position protecting the margin spread of Cookie Meal, a proprietary Darling Bakery segment product, helped to partially offset rapidly declining cash corn prices during the quarter.
Diamond Green Diesel, the company's joint venture with Valero Energy Corp., had its first full quarter of operations and posted solid results. Although still in startup mode, Diamond Green Diesel was able to reach name plate capacity for part of the quarter prior to finding some excessive metallurgical wear in its main heat exchanger in August, 2013. Production remained at a reduced rate during the quarter, with a shutdown commenced today to replace multiple heat exchangers. It is anticipated that name plate capacity of 9,300 barrels per day or above will resume by mid-November. The pre-treatment facility continues to exceed expectations and has proven capable of processing animal fats and vegetable oils."
Darling International recycles beef, poultry and pork by-product streams into useable ingredients such as tallow, feed-grade fats, meat and bone meal, poultry meal and hides. The company also recovers and converts used cooking oil and commercial bakery residuals into valuable feed and fuel ingredients. These products are primarily sold to agricultural, pet food, leather, oleo-chemical and biodiesel manufacturers around the world.
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