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Management attributes the significant Q2 outperformance to a rally in finished product markets, specifically fat and protein prices, alongside favorable trade-related developments.

The Feed Ingredients segment benefited from robust biofuel demand and tightening global fish meal supplies, which strengthened protein values and supported improved gross margins.

Operational excellence programs, including contract management and price risk optimization, are delivering on the Investor Day promise to generate $150 million to $300 million in additional EBITDA over three years.

The Food segment is undergoing a structural shift from gelatin to higher-margin collagen, with collagen currently generating 2.5x to 3x the margin of traditional gelatin products.

Diamond Green Diesel (DGD) maintained its global leadership position, leveraging a sophisticated supply chain to capture $2.23 EBITDA per gallon despite market volatility.

Strategic portfolio optimization continued with the acquisition of Potenze rendering assets in Brazil and the divestiture of non-core trap and casing businesses to simplify the global model.

Management projects Q3 Core Ingredients EBITDA between $325 million and $340 million, implying underlying performance consistent with Q2 when excluding one-time tariff recoveries.

The company expects to reach a net debt level below $3 billion by year-end 2026, resulting in a leverage ratio well below 2.0x.

DGD production for Q3 is targeted at approximately 335 million gallons, with management expressing confidence in the stability of the RVO and RIN market tightness.

Future capital allocation will shift toward evaluating shareholder value initiatives, including potential dividends and continued share repurchases, once debt targets are achieved.

Growth strategy for the next three to five years will focus on organic expansions and de-bottlenecking existing facilities rather than large-scale M&A.

Q2 results included a $51 million favorable IEEPA tariff recovery at the DGD entity level and $18 million for the Rousselot business.

A strategic build of feedstock inventories at DGD increased working capital requirements in Q1/Q2, which management expects to reverse and flow through as cash in the second half of 2026.

The company successfully closed the sale of its trap business for $90 million and signed an agreement to exit the European casings business by year-end.

Management noted that while the 'M&A holiday' is nearing an end, the focus remains on disciplined, accretive additions that optimize the existing global rendering and collagen network.

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Management confirmed that global protein markets remain very strong due to tightness in fish meal supplies caused by environmental factors.

Strong demand is being seen across all continents, particularly in aquaculture and poultry sectors, with no expected interruptions through the balance of the year.

Management does not expect meaningful changes in SRE volumes that would disrupt the current RIN supply and demand balance.

They believe the administration will avoid actions that negatively impact supply, as current policies are successfully achieving higher farm-gate prices.

The primary goal remains reducing total debt below $3 billion to ensure a comfortable leverage position even in mid-cycle environments.

Once debt targets are met, the board will evaluate a transformed capital strategy that could include consistent dividends and share repurchases.

Darling is transitioning extraction capacity to hydrolyzed collagen to capture 2.5x to 3x higher margins than commoditized gelatin.

The new Nextida glucose control product is seeing repeat sales in Asia, and a new 'Brain' health product is slated for launch following clinical trials.