TOP CONTRIBUTORS

James Hamm

DAR AT A GLANCE

P/E ► 22.4 AVG EV/EBITDA ► 9.26 AVG ROA ► 7.1% AVG ROE ► 10.1% AVG Debt to Equity ► 0.588 LOW Current Ratio ► 2.19 AVG Interest Coverage Ratio ► 16.3 AVG

 

 

 

 

 

 

Darling International Inc. (AMEX:DAR) is the largest rendering business in the United States. It provides recycling and rendering services in which animal and food waste products are turned into useful commercial goods such as tallow, meat and bone meal, and yellow grease (cooking grease). Initially based out of Texas, Darling International now has 44 facilities and over 1,200 employees, controlling a near monopoly share of the rendering business in some parts of the country.

Business Segments

Products

• Protein Meal
  • Bone Meal:
  • Meat Meal:
• Tallow:
• Yellow Grease:

Customers

• Food Industry
• Agriculture:
• Manufacturing:

Industry Metrics

Performance Metrics

Trends and Forces

• End Product Demand:Because tallow and yellow grease are good substitutes for the vegetable oil feedstock used in biodiesel production, and the price of these oils has nearly doubled over the past 18 months, the biofuel boom is responsible for increased prices in renderers' end products and profits have increased greatly. As long as biodiesel subsidies remain in place and demand for biodiesel remains high, this trend is likely to continue. Hence the biofuel boom will lead to increased prices in soap, paint, and other oil dependent products.
• Mad Cow Disease:Bovine spongiform encephalopathy (BSE), commonly known as mad cow disease, is a major concern for the rendering business and Darling International in particular. About 1% of cattle and 2% of poultry die before they are slaughtered, opening a large market for the processing of their bodies. The whole animal is processed and included in the processed meal, which is used as feed. If the animal has BSE it is a risk to include it in feedstock. Regulations resulting from a mad cow incident or scare would reduce attainable revenues for the rendering industry.

Competition

Darling International faced bankruptcy at one point and a group of 6 banks acquired a 3/4 equity position in the company in exchange for a $163m line of credit. After the second largest renderer in the nation decided to quit the rendering business amidst the threat of BSE, Darling acquired them and now runs a near monopoly on the rendering business in the US. In New Jersey, for example, anti-trust laws prevent Darling from buying any of the few remaining New Jersey renderers.

References