All right. Over the last decade, Darling has transitioned from a U.S.-based rendering company to a global leader in rendering renewable diesel and food ingredients. Through acquisitions and capacity additions, expansion into sustainable aviation fuel, and mix improvements, Darling continues to enhance its position in the global push toward sustainability and enhance its earnings potential. CEO Randy Stuewe has been the architect of Darling's transformation, and we are very appreciative, Randy, that you're here with us today. Thanks for joining us.
Thanks.
You know, I guess where I would start is that the business has been navigating a transition that you have talked about a bunch, from a very favorable supply, demand, and pricing environment to one that's now has a lot more abundant kind of global supply. So where are we in that transition now? If you could kind of frame that and what the implications have been for or are for the earnings trajectory for the business from here.
Yeah, and you know, as I look back, and I'm trying to find the right words here, is, you know, as Andrew said, 22 years. You know, this, we started as a small regional, 21 plants, 600 employees, operating in 42 states here in the U.S., and now it's 270 factories in 23 countries. And the underpinning there is one of, you know, Darling is a growth vehicle that is geared at, you know, converting, you know, animal byproducts into their highest and best use, and ultimately creating value in that supply chain to lower the price of consumer products in the world.
And so, you know, I—it, that all sounds really cool and things, but what's it—we're still in a commodity world, and we make products that compete with other things. And so, you know, as I look back at our growth, you know, it's always a matter of timing. In 2005, we doubled the size of the company. In 2010, we doubled the size of the company. If you look back in the commodity cycle, you would look and say we hit it perfectly. In 2014, we doubled the size of the company, and we hit a deflationary cycle. And so for about four years, we fought that. We held earnings as we grew around the world, and then in 2000...
Late 2019, we started to shift out of that cycle, and we had these incredible tailwinds. I always, I always remind our team, we look smarter than we are when there's tailwinds. So now we've entered a marketplace that now has adequate global supply of grains, oilseeds, and so ultimately, you have to then adjust your business model again. There's only so much you can do, and I always try to remind people of that. I mean, if you think of our business, you know, there's many of our suppliers and customers in the room here, and ultimately, we have to take care of them every day. We have to cover our costs, but we also have to remind ourselves there's the alternative of going to the landfill if they have to. So there's not unlimited economics in this business.
The way the business is structured globally is we try to earn a fair return for our shareholders to attract capital, and I think we do that. And then if the markets cooperate around the world, meaning higher prices for grains, oilseeds, fuels, then we share, and that's the way the model's worked. We think we're... You know, I always hate being the guy that's gonna call a bottom here, so I'm not calling a bottom, but I said we're in the bottom of the trough right now, and we're seeing it turn around the world. You know, the poultry side is resilient here in the U.S. right now. The beef side's tailing back a little bit, tailing off. The porcine or pork side's pretty darn strong. Europe, everybody had doom and gloom. It's holding in there.
But the animal numbers are shifting. They're shifting up to Poland, they're shifting down to Spain, and the animal numbers in South America are just... we're out of capacity again. And so you just see this global shift that's happening, and then we throw China in the mix, and China's far more robust than the media makes you believe right now, and we've had another solid 3-4 years. So, you know, ultimately, I guess, you know, trying to answer a short way to a long question is we're seeing this thing cycle back up. You know, we completed 6 record years in a row last year.
I'm not taking off a seventh record year yet, but I wanted to kind of just kind of temper everybody's expectation at this time until we see how the world kind of shakes out here.
As you watch that play out, you are taking some internal actions that you talked about to support the margin structure. Can you talk about some of the things that you've been doing, how far along in that process you are, or maybe how much is left to realize on a go-forward basis?
Yeah, and I mean, we look at it, really, out of the 16 million tons that we process, 11 or 12 are really in the animal feed area, and ultimately, that's the area that has the most commodity exposure. You know, clearly, as I was reminding a colleague, you know, every time an Amazon warehouse popped up around one of our factories, we lost our first shift over the last five years. And trying to you know, kind of regain and retrain labor at a fair value has been the biggest challenge. So, you know, trying to explain to our suppliers and our customers the costs that we've had to incur. And I give another example.
You know, about five years ago, we built, six years ago, a new, the first new rendering plant in the U.S. in Grapeland, Texas, and spent about $45 million on that unit. That plant today is being rebuilt in North Carolina at $100 million. And so the costs are way up. Not only people, but, you know, tip up a concrete building's now $600 a sq ft. And oh, by the way, there's a lot of young people in this room, they that have never known what inflation was, and they thought an interest rate to buy a house should have been 2% or 3%. And I wish your bankers would know that's a better number than they're loaning me right now, but.
Very fair. So, bottom of the trough, you've talked about kind of a gradual improvement from there.
Mm-hmm.
Can you talk about the drivers of that, and maybe within that, the dynamics between international and domestic prices, the arb there? Obviously, a lot of news flow the last couple of days about what the government may or may not do over time with imports from China. So, is there a more bullish opportunity or set of circumstances that could play out? Or I guess, how do you think about the different options?
Yeah, and there, there's probably, you know, a half dozen subjects buried in that question.
Sure.
We're long term, and long term is back half of the year, bullish, and driven by continued decarbonization in the world. And you know, you think we're on the back end of, whether you call it a recession or not, but some global contraction. And ultimately, you know, we, as I always tell people, you know, we do a couple things: we make protein, and we make fat. And the fats we make in the world predominantly have one use, and that is back into some type of hydrocarbon business. And in a classic sense, we own the lowest carbon intensity oil field in the world today, with about 15%-16% of the world in our control. And so we believe our business model is built around this continued expansion of low-carbon fuels, and I...
We're entering 2.0 now, which is the SAF world. With you know and for those that have followed, we have the first SAF plant under construction in Port Arthur, Texas. It's pretty darn close to being done here. We're on shutdown or turnaround right now for tie-ins, and hopefully here later this summer, we'll be ready to start the early commissioning. And you know, ultimately, for those that have followed the Darling business model from 2014 to 2018, the earnings were about $400 million-$450 million EBITDA a year. And then they went to, I think, $540, then $841, then $1.2, then $1.541, then $1.611.
I'm still trying to join the $2 billion dollar club, is the goal here, and that's gonna be driven off of the world of SAF. What we're seeing in the SAF world that will drive this for us is we are seeing robust demand. You know, I'm not allowed to say who the customers are, but you would know them by every name, and you're probably flying home on them. Ultimately, the margins are coming back in to where we thought they would, and then ultimately, we're oversubscribed. We're gonna have to build a second plant. I mean, that demand's real, and we're excited about it. We'll hold on that decision probably till the first of next year, but we're getting the engineering done.
But at the end of the day, what I'm seeing around the world is we've made the adjustments on the, if you will, the procurement side. You know, made the cost adjustments. You know, ultimately, we have scaled back our spending on CapEx at this time. You know, I'm trying to watch the world and figure it out, but we see the fat prices improving in the world. Your comment about Chinese UCO, we've remained somewhat silent on it, and by a decision, we're the largest importer of it. You know, it. It's- I get to wear two hats.
As the largest UCO collector in North America and the largest UCO importer in North America, and this, the selfish hat over here says, "Get that stuff out of here." The reality is, with my partner at Valero, it is all legitimate, ISCC-certified, that we're processing, and it needs to be converted. It is the lowest carbon intensity feedstock in the world to go back for CORSIA-certified SAF. And the SAF, because of Port Arthur's location, a lot of it's gonna end up back in Europe. Now, here's your statistics. This is kind of your fun facts for today. There are 2.5 million QSRs in China. There are 200,000 in the U.S. There's 12.6 million restaurants in China. There are 700,000 in the U.S. It is a legitimate source of used cooking oil.
Doesn't mean there's not some bad actors out there, but at the end of the day, it's legitimate supply out there. And ultimately, leading to the discussion here, Andrew, is, you know, I want to say it was 2012, or no, 2014, we employed LMC out of the U.K., ourselves and Valero, to make sure that there was adequate waste fat to do what we thought our dream was. Neste was out there. We're out there, and let's just make sure we're just not gonna create a margin crunch off of fighting for feedstock. And LMC brought this, like, 100-page report, and really, the thesis of it was, says: "If you get the price of waste fat to a reasonable level, it will incent collection and aggregation." I didn't believe it. I was wrong.
I talked to, you know, our... we have a giant presence in China today, and essentially, they changed the rules over there. Chinese UKO used to be referred to as gutter oil. And so after a restaurant was done cooking it, at a QSR predominantly, they'd leave it out back, there's a collector, and then they would resell it to the street food stands. The government has clamped down on that for food safety and disease purposes, so it needed to find another way to market, and that, that's what's going on here, so.
That makes sense. Before we move over to DGD, we get the question a lot about the ability to grow the feed business, kind of price agnostic-
Mm-hmm
... I guess I would say. You made the acquisition of Miropasz. You have- you had made some announcements around a offtake agreement, I believe, with one, one of the beef plants that was supposed to come online with, with Butterball as well. I guess more generally, how do you think about the growth of that business over time, your desire to continue to grow your own supply there, and those opportunities?
Yeah, I think, you know, we look at the world as having really incredible growth opportunity, and that- that's the U.S., that's Canada. You know, clearly Polish poultry economics are very, very good right now. South American economics, you know, are. You know, we've put, I don't know, $2.5 billion in Brazil here in the last two years, and ultimately, the view there is that Brazil will become the commissary for China. And between the land, water, grains, I mean, it. You know, you look at the beef production business in South America today, and the average weight of the Zebu cow coming in, or steer coming into slaughters, you know, 400 kilos or whatever, 800 and whatever, 80 pounds, versus a 1,200-pound animal.
They can up their production 50% if they learn to get the genetics right, a little more animal feed, or get more grain fed into their different breeds. But you know, you've got a complicated supply chain of currency conversion for the grain farmer to the livestock producer, so it just takes time. But you know, ultimately, we see incredible opportunity still around the world. We've just commissioned two more plants in South America, two more that are under construction. You mentioned the Butterball. That's partnering with a, you know, a large supplier to reduce freight, and I mean, you can't ever forget... People say, "What business are you in?" We're in the we're in the transportation of water, evaporation of water business to a degree.
That year, you know, I always call it our Trivial Pursuit bar question, you know, "What's the number one product Darling makes?" "Water." And, you know, as I always say, it's the dumbest thing because we, we collect it, we transport it, we evaporate it, we pump it, we treat it, and then we pay somebody to take it. What a great business model.
Okay. So with that, we're going to shift to DGD, and we know the margins have gotten better.
Mm-hmm.
You've been vocal about that. Where, where are margins today? And I guess kind of at a broader level, you put up a first quarter, and that gave an outlook for the rest of the year, that didn't suggest really that much change over the balance of the year. So how are you kind of thinking about the puts and takes for DGD margins over the rest of the year relative to where they've been?
Yeah. When, you know, trying to guide on that is somewhat difficult, but, you know, we look at the... And I always remind people, in 2013, in July, when we started the plant up, the, after 2 years of construction, that the 10-year look-back margin was $0.79 a gallon. That was the investment thesis on $3.23 a gallon construction cost, and that's where we're at today. We're at or near that. We thought the market would eventually go there.
You'll hear me communicate, they say, "Well, what, what's the competitive advantage of the DGD system?" And I say, "It's $1 a gallon." You say, "Well, how do you get that?" I would just tell you, you know, pull up Holly Frontier, pull up Montana Renewables, or whatever they go by, pull up PBF, and they're losing money, and we're at $0.70-something. So that's, you know, it's really... Ultimately, we knew this business would commoditize. We knew we had a first-mover advantage. Our cost structure is way different than everybody. Our assets are paid for. And now we're moving to 2.0 in the SAF business, which once again, will have a first-mover advantage. There's not enough in the world. And so DGD margins are gonna be volatile.
We're never gonna tell you they're not, but as you said, as we looked and built guidance, I mean, you had to normalize for the inventory adjustment out of Brazil that we had. But, you know, that- it's really when you say, "What's the base business gonna do for this year?" It did $1.1 billion last year. Right now, fat prices are down $0.25 a pound from a year ago, and we say each penny's worth about $0.12 a pound, so you kind of... You're missing $300 million. We think fat prices will improve the back half of the year because of some RD capacity coming online, some people getting some pre-treatment units, figuring out how to run them, and so that's where we got the base business at about $900 million.
And then we see DGD with no SAF earnings predicted in 2024 yet, being conservative, and that's where you take $0.75 × 1.33 billion gallons. Pretty simple. It's always easy, as I remind people, it's easy to call this business when you're in a flat or a carrying charge market. When you're in an inverse, you look stupid-
Mm
... and it just, it's just really, really hard to call a bottom.
You talked about the cost advantages that you guys have.
Mm.
We've seen some of the other players in the space report some not so pretty numbers. There were reports of one of the plants that's gonna shift back away from RD. I guess, where do you think we are in this cycle? How do you think this plays out from an industry perspective overall? Because I, you know, there's part of me that sees those losses and some of those announcements, but also recognizes you've got, you know, this SAF opportunity and some of these other things that are exciting, and I don't know how kind of the pushes and the pulls play out over time. So I guess, what's your expectation in terms of the capacity, and how some of these players react to where we are?
You know, I think you have to kinda bifurcate the freestanding guy and the brownfield conversion-
Mm-hmm
- guy out there. You know, clearly, Marathon is there. Clearly, Phillips 66 is telling people they're there, although I haven't seen the gallons, I've seen the feedstock purchases, and the feedstock purchases would suggest a significantly red margin at what they're paying for it. But then the question that you have to ask yourself, are they running for compliance, or are they running for profit? Their crack spreads are so pretty darn good right now that I... And they're not gonna report it in a segment, so I don't know that we'll ever know.
Right.
The freestanders, you're talking about Vertex, HollyFrontier. I mean, when you got a goal of being at 75% capacity, you know. It's a far more difficult business than people understand. I mean, we're so blessed with our partnership with Valero because not only do we have access to, you know, great people, great engineering, great technology, but great marketing with Valero Marketing Services Corporation. So, you know, the vertical here gives us the ability, and then the, you know, as I said, the. When we looked at this thing, and, and, you know, I'm a 40-year commodity guy, you know, commodities come down to one thing: location. You know, who owns what real estate? And if you had to say, where's the best place to build a renewable diesel plant? The Gulf Coast.
Not Artesia, New Mexico, not Montana, not Dickinson, North Dakota. Probably not San Francisco, but, but good luck.
Yeah. That makes sense. Before we go over to the SAF side, I wanted to ask about LCFS and RINs. LCFS values having not reacted yet to some of the policy proposals. And does that surprise you, and what do you think it takes? And maybe you tie that into or layer in how you're thinking about RINs from here, given, you know, expectations around the production ramps and maybe on the biodiesel side. How do you think those two things play out maybe through the balance of the year into 2025?
Yeah, and, you know, you buried about nine things in there this time. But-
I just thought you... wind you up and let you go.
You know, so you know, clearly markets anticipate, and, you know, clearly RD capacity is growing. It's replacing Gen 1 biodiesel capacity. That's creating a lot of angst in the farm community right now. And when you, you know, you can dive in, and we'll talk a little bit about RINs, LCFS, but it comes down to one thing: Can we get the momentum in D.C. under whichever administration is gonna be there to increase the RVO here at the end of next year? Once they do that, this thing fixes itself. And the question for me, I fundamentally believe they'll do the right thing. You know, and so that's driver number one. If you say, "What's driving LCFS? What's driving RINs?" It's just not enough demand.
The second thing that's out there is that there's too many imports. That's gonna end. When I say imports, imports of biodiesel right now. Why? Because this is the last year of the Blenders Tax Credit, so they're bringing 900 million gallons in. So let's do that times 7.5 or 8 pounds a gallon, whatever, that's 6.5, 7 billion pounds of fat. Why are we bullish the back half of the year? Because that's gonna have to convert. RINs, they seem to be finding a bottom right now. We're below the marginal cost to produce. Remember that one of the other theses we had, or hypothesis in a sense, was that the RIN became. In business school, everybody'd say, you know, the marginal cost to produce, and you need it.
So the RIN was the marginal profitability required to take a feedstock that's above diesel fuel price plus production cost to make it profitable. And while that seems to be true, in most cases what we're seeing out here right now is that there's just an oversupply of RINs because of the RVO. You're seeing it idle. You've seen Chevron idle a couple of old Reggie biodiesel plants. You've seen Vertex reconvert back the other way. I doubt you'll see anything else built. All the S&Ds on the R- the RINs are, you know, that the sell side were doing, with the exception of you, was having everybody run full on day one and push the button. That's not happening. That will fix itself. LCFS, you know, there's nothing different than what's been promised out there.
Is there clearly an ambition, an aspiration, to accelerate the decarbonization. The numbers are out there. It's gonna happen. It was always supposed to be January 1, 2025, and it looks like sometime in July we'll get it all through the rulemaking public comment period. You know, you've got a governor out there that I know, that he, he's inserted himself in the process. I'm not sure I can put a finger on why, other than it's important to him, but I also think that, you know, it's not gonna make the price of fuel go down in California, and he wants to be close to that in case Pennsylvania Avenue calls him here. So I think there might be an underlying delay there that's part of the driver.
But we'll see. I mean, you know, the LCFS piece is very bullish into 2025, and the acceleration that it needs. And then I think the other piece that everybody has to start to get their mind around, and it's very complicated, and I know people hate complicated regulatory environments. But the 45Z, the producer's tax credit, if you're not running waste oils, and you're not making renewable diesel, you're not gonna make any money in the business, so that will have a chilling effect on the industry here. So. And what I mean by that is, if you're making RD out of soybean oil with a producer's tax credit, you're not gonna make any money.
With respect to LCFS policy, is there a better outcome or a more preferred outcome within the range of options, or we're all kind of headed in the right direction?
Yeah, it's in, it's in the right direction. You know, bigger is better.
Right.
You know? Yeah.
Okay, so that makes sense. On SAF, how do you think about the long-term opportunity? We are close to the first one. You've started to talk about SAF 2. You know, how do you think about the evolution maybe of the DGD portfolio over time, balancing between RD and SAF?
You know, so we have, you know, paralleled the engineering on St. Charles or New Orleans, you'd know it as. That's DGD 1 and 2. That's a site that has roughly 800 million pounds of capacity. It sits next to the largest hydrogen plant in the country. It's got great inbound economics, but it was not laid out with the dream in 2010. We didn't know what SAF was at that time. So it's got a lot more infrastructure corrections that are gonna have to... improvements that are gonna have to happen in order to put the SAF plant there. That engineering should be complete later this summer. We'll take a look at it. I'm hoping by then everything is inked on all of our SAF agreements. What we're looking for is multi-year offtake agreements.
The SAF agreements that we have meet that right now, three-year deals, at prices that are materially what we've represented to people, in the over RD as the base feedstock. It has an exceptional payback, and so if you look at the business model as we go forward, you're gonna convert St. Charles to the second SAF plant. That will be because as Europe's ramp up happens, you know, I think probably out of our 17,000 barrels a day that we'll run in at Port Arthur, I suspect half will stay domestic, half will stay export, and then you'll see the ramp up export-wise as we go forward. And then St.
Charles, you know, if we got 1.3 billion gallons or 1.4 billion, for easy math, you'll have 700 million gallons of SAF within, you know, three years here, and 700 million gallons of, you know, of RD. And then what makes DGD even more competitive is it can swing about probably 275, 250 of that into what I call Arctic Grade, so we can ship Canada year-round, the product. So there'll be a mix of Arctic Grade, SAF, a little bit of commodity, and then that's the mix.
I just wanted to confirm what you were saying on the offtake agreements. Are those... Those are still being negotiated? I know you said three years seems like the term that you're discussing. Are those completed, or where are you in the process? What's the timing of that?
There is a substantial portion of the capacity that has been completed.
Got it.
You know, it's like I said, it's with everybody that you guys would know if I gave off the names. You know, we indicated margin structures out there, and it's at the high end of that.
On the whole—like, in aggregate?
In aggregate.
Got it. Okay, okay.
It's a great business.
That's great to hear. In terms of... You answered a lot of my questions in there, so you pulled out the rug there, unwinding it.
What do you got left?
Yeah, no, I've got plenty.
Yeah.
I wanted to move over to the food side.
Okay
... of the business. You've made a lot of progress valuing up the, the, that business at and at much higher margin structure. So where is that mix today versus where you want it to be longer term, and how do you think about the pace of continuing to move that mix to the higher value side?
Yeah, it's always, always interesting. You know, when we do investor meetings, you know, 98% of it's DGD, and, you know, then we finally get to, "Oh, we're almost a $2 billion food company, too." And unfortunately, it gets, you know, the... We're trying to create a strategy to unlock value there, and I think you'll follow that eventually over time as we get there. You know, our food business is really dominated by our collagen company, our global collagen company, which is, I think, 16 or 17 plants in the world now. Collagen is a building block of life, and it really is-...
You know, you say, "Why are we in it?" Well, because within the bone or the skin of animals is collagen, and you've got a choice. You can grind it up back into animal feed, or you can extract it and put it into a higher and better use. And it's an old business. I mean, it's 100 and something years old. You know, and you say, "Well, what was the original use of collagen?" Well, it was a film coating for Kodak. Then it became the encapsulation for medicine. And then here, about 10 years ago, we created, you know, hydrolyzed collagen peptides, and what's that mean? Well, if you think of gelatin, it all starts as collagen.
If it is hydrolyzed and then essentially dried, you have gelatin, which is a thickening agent, an emulsifier, a binder. But if you kind of flip the molecule over enzymatically, you make it water-soluble, and so that's what hydrolyzed collagen peptides are. Peptides have been shown to have incredible health benefits, and, I mean, it's clinical proof. I mean, I'm sure I suspect if I asked to raise the hands, which I won't, there's many that take, you know, Vital Proteins or some type of collagen peptide in here. That was phase two. We transitioned a business that was making about 100,000 tons, and when I bought it in 2014, was making $90 million, and it made $308 million last year, and that's the transition to hydrolyzed collagen peptides and the product mix shift.
So now, phase three of this for us is, and I think we're launching next week in Geneva, is where we've learned to concentrate the peptide. And, you know, I'm not allowed to pre-front run the branding of it yet today, but the first product that will be rolled out is a glucose control peptide. Clinically proven, doesn't have to go to FDA approval, it's patented, and it will compete with many of the drugs out there as a natural supplement for glucose moderation and control.
My dream of that business is to build it to a 10,000-ton business over the next two to three years, with three or four more peptides that are in there, and that will turn it into somewhere between $250 million-$400 million new revenue growth business. We have something no one else has, and we know that's in the isolation of the peptides out here, and it's a technology we've created and own, and we're excited about it. So you say, "What's that mean?" We think that the food segment ultimately over the next five years could grow to be nearly as big, if not, as the feed segment.
And that in itself, you know, creates a challenge, but at the end of the day, people say, "Okay..." When that bone or skin comes in, 80% of it's animal feed, 17%-20% of it's collagen, and so the business is very robust. It's growing nicely. We bought an absolute gem of a business in Brazil and Paraguay last year, and we're excited about it.
Will you need more capacity in that business to achieve your kind of growth aspirations over time? And can you maybe help us think about the ramp of that business over the next several years? I know it's... You're cautioning us kind of smaller to start, but how do we think about the ramp of that business over time?
Yeah, the answer is capacity, yes. I need more capacity in China, and I know that makes a few of you cringe in here, but we're very successful in China, have been for almost 30 years now. We're the largest collagen manufacturer in China today, and we're out of capacity. The Chinese population loves to take a pill, and I don't know how else to say it, and so they're... It's a very business that we're gonna have to add capacity there. The rest in whether it's Europe, or South America or the US, it's really kind of repositioning the product mix. You know, we've so there's not a lot of capital investment to achieve our peptide dream or vision here.
The ramp would be, you know, if I'd say it, you know, we were 325, 335, Brad, last year, if I remember. Yeah. You know, to take it to 400, to 500 over the next three years is really, I think, very, very achievable. The question's gonna be is we're working with the CPG companies. It ranges from supplements to, you know, bottled drinks to nutrition bars. You know, where are they going to focus their effort? I mean, we're not going to market with it, they are, and how much... You know, what's their accelerator and how quickly can they really get it there will determine how quickly we get there. But, you know, I, I'm highly confident in what I'm seeing right now with where they're going.
Give you a little, you know. So, you know, it'll be a GC product, glucose control. We're in final stages of a dementia product, women's health, hair, skin, nails. There's probably five in the portfolio that'll be rolled over the next two or three years. It, I always tell people, "It's a little bit out of my fairway," and so I. But it, you know, we know how to make it, and we wanna be the ingredient supplier, and, you know, stay tuned.
Can you talk about... I mean, obviously, the story has been margining out that business. This is, I would assume, an even more attractive margin than, than even kind of where you've been from a value-add perspective. Can you frame that at all?
I don't know yet.
Okay.
You know, I set a number in the boardroom last Monday, and we have a director that came out of the CPG area, and she said, "You're 50% too low.
Huh!
I don't know. It's, it just depends on what products it goes in. I mean, if this drug... I can't call it a drug. If this product, ingredient, supplement is competing against Ozempic, you tell me where we can price it. You know, it's a lot.
We only have a couple more minutes, so I want to talk about the balance sheet, capital allocation. You know, the anticipated kind of deleverage and the confidence in achieving those targets, how much does that depend on the distributions from DGD in the back part of the year? I guess I would start with that question.
Yeah, and clearly, that's the business model that was put out there. You know, is that DGD would provide the deleveraging to get us down to below 3.0 by the end of the year. With what you see right now, it looks pretty challenging to get there, without some help from fat prices, on the back half of the year. But I have to remind you that DG... If we were the consolidating partner of the joint venture, which we're not, and that's another 10-minute discussion that dates back, you know, 13, 14 years ago, because what do you do with 54 employees on a site? We just said, "Well, leave them on Valero's payroll," and therefore, they became the consolidating partner. It was just that simple.
Now we look at it and say, you know, there, there's a whole lot more employees, but we're not the consolidator. If we were the consolidator, then leverage ratio would be way into investment grade because we would recognize the EBITDA today. So, dividends are expected to... I, Brad and I aren't gonna rule out a dividend in second quarter yet, and they're gonna accelerate in third and fourth. Remember that we have been reinvesting every dime back into finishing out the SAF plant, which should finish up here. You know, we might do a little bit of utility work on SAF 2 in 2024, but any major spending would be way off in 2025, and the leverage models that we run out there have us below 2 in 2025. So it's building.
I know, I know, I feel, and many of you think I'm a broken record on this, but we didn't, we didn't see fat prices cycling like they did here. And that's really the main driver.
So then when you think about getting below your leverage targets and then having some flexibility on the capital allocation side, you've talked about dividends for a while, share repurchase, M&A, you're on a pause. I don't know if that becomes more interesting at some point. Can you just kind of weigh the opportunities as far as you see it?
Yeah, you know, and I, I, I'm gonna rattle off three goals in my final, you know, couple of years in my career here is that I want $2 billion of EBITDA, a $100 stock, and a dividend underneath Darling. I... And I know Brad and I are making eye contact. That's our goal, and that's where, that's where we're going. You know, a dividend isn't an admission that we don't have something else to grow with. It's an admission that we're generating a lot of cash.
I think that's a perfect way to end it. We're right on time anyway, so,
He's the best.
Thank you very much for being here.
All right.
We really appreciate it.