Good morning. Thank you for joining us at the 2026 Darling Ingredients Investor Day. I'm Suann Guthrie. I'm the Senior Vice President, Investor Relations and Global Affairs. During this Investor Day, we will be making forward-looking statements, which are predictions, projections, or statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results can materially differ because of the factors and cautionary statements discussed in this Investor Day, and in the accompanying slide presentation, and in the Risk Factors section of our Form 10-K, 10-Q and other reported filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. For historical non-GAAP financial measures referenced during this Investor Day, reconciliations to the most directly comparable GAAP financial measures are available on the slide presentation, which can be found on our website.
Reconciliations and forward-looking non-GAAP measures are not provided for the reasons stated in the slide presentation. Again, thank you for joining us here at the New York Stock Exchange, and thank you for all of those who are on the webcast. We have a great couple of hours here planned for you guys. Very excited to be here. Let me just give you an overview of what we're doing today. I'll give you a quick overview on Darling Ingredients, who we are, what we do, for those of you who don't know us. I'm gonna turn over the floor to Randy. Randy's our Chairman and Chief Executive Officer. He's gonna talk to you about the foundation we've built over the last couple of decades, and how that foundation has built the strength for our business, and what that does to unlock our future.
Randy's gonna turn over the floor to Carlos Paz. Carlos is our Executive Vice President, Renewables, North American Specialties and Global Risk Management. Carlos is gonna spend some time talking to you about Diamond Green Diesel, how that is a proven model, and it's a resilient model, no matter the commodity markets or public policy. He's then gonna turn the floor over to David Van Doorslaer. David is our Executive Vice President in Sales and Marketing for Rousselot. That's our collagen and gelatin business. He's gonna talk to you about the next era of collagen, what does that market look like, and the growth we see there. Finally, we're gonna wrap it up with Bob. He's gonna talk to you about how we're gonna put our strength and scale to work, and a little bit about our capital allocation plans.
At the end, we'll leave some time for Q&A for those of you in the room with us today, and then we'll go from there. With that, I'm gonna turn the floor over-- Oh, no, I'm not. I'm gonna talk about Darling first. Sorry. Again, Darling Ingredients, who we are, what we do. For those of you who don't know what rendering is, about 50% of the animal that is eaten is not consumed. It goes to waste. What rendering does is it takes about 99% of that animal and upcycles that into something else. That reduces greenhouse gas emissions by about 90% compared to composting. Our process is quite simple. We collect, we have one of the biggest trucking fleets in the U.S., and we collect that raw material from abattoirs and slaughterhouses.
That goes to one of our 260 factories across the world, and we process that into fats and proteins. Proteins primarily go back into animal feed and pet food. Fats go into primarily now renewable diesel and sustainable aviation fuel. Of course, we're creating value from all of those products that we have. Now, I'm gonna turn over the floor to Randy.
Thanks, Suann. Good morning, everybody, thank you for taking time out of your day to come spend it with myself and my team. Today, I really am excited to showcase my team that, and kind of what we're looking at for Darling. As I walked in this morning, no different than you, my head snapped when I saw they had a picture of me on the leaderboard. I didn't know, but I do know for at least about another 2 hours, I'm bigger than Buffett. I always have to start by telling people my 1 interaction with Warren Buffett in my life. Yes, I've been three tables over and tried to eavesdrop on a conversation.
Jamie Dimon invited me to an event he had at their old building, and Warren was there, and he said, "Randy, come on up and meet Warren." Warren took me off to the corner, and I said, "Warren, I'm Randy Stuewe. I run Darling Ingredients." He goes, "Oh, I know all about Darling," and blah, blah. We went on for no more than probably two or three minutes. He goes, "I'm very proud of what you've built." I said, "Well, does it fit in the Berkshire platform anywhere?" His answer to me at that time was, "It's a really interesting business," but he says, "It takes too much capital." I thought that stayed with me. That's probably 10 years ago.
For me, it was a fascinating moment of it's a, it's a capital-intensive business. You know, as I can always end all conversations to get the last laugh, I said, "Well, don't you own a railroad?" That's my opening line of, you know, you'll learn a lot today about how capital's deployed, how capital's used, and ultimately how we're going forward with it. I think you're gonna come away today with Carlos and Bob, and especially Bob at the end, we're trying to bridge where we are to where we think we can be. I'll talk to you a little bit about the foundation built, and then I'm gonna talk to you about what we've unlocked for the future.
You're gonna get a real deep look today at the collagen business and where that fits in our portfolio. I think ultimately we've got our marketing and sales team here. You know, take some products home. You know, it's a long trajectory to make critical scale in that business around the world. We're the biggest, and we've got the most unique product portfolio of anybody out there in the collagen space. In today's world of trying to find health and wellness, we have a solution that I think is really world-class. As we go forward, I always like to tell people real quick what built the business. For many of you that know the company, you can say blah, blah. For this team, I'm still transitioning my learnings along the way.
We operate under three primary principles: entrepreneurship. We're decentralized. There's 260 P&Ls out there. The authority relies on that manager at that location. You know, we provide capital planning, and legal, and treasury, but decisions are made at the lowest level to execute on the business plan. Transparency. We don't go to the balance sheet to make numbers. I've been in a company that's done that. I don't like it, and there's no surprises. We call it transparency. We call it no surprises. We share the good with the bad, and ultimately, we try to be accountable in a disciplined execution way. Integrity. You know, it's not the most glamorous business in the world.
You know, maybe it gets a little bit of narrative of green and climate change and all of that, at the end of the day, we're an essential service that processes some stuff that doesn't really smell very good. It's hard to be a good citizen all the time. Ultimately, the integrity piece for us is being part of a community, doing the right thing. Social media has made it so difficult to not be on the defense. You're always being attacked constantly for something, whether it's an employee, whether it's an environmental, or it's just an upset condition, integrity is key. You know, I'm proud of the history of this team and of our company, especially from an accounting perspective of not joining the wall of shame, of significant deficiencies and material weaknesses out there.
That's a very bold statement to say, and for me, because of the number of acquisitions that we've done, and we'll talk about that. Today, I get to talk to you about we built a global foundation. You guys have ridden through the ups and downs of this business. It had some headwinds, policy, it had headwinds of global ingredient overproduction. We've spent the last couple of years transforming the business, fixing some assets that needed fixed, disposing of some assets that needed to be let go, and we've invested to strengthen additional capabilities. What Bob's gonna talk to you about is we are fundamentally poised for accelerated returns. We're gonna show you how we think about that, how we calculate it. How do you communicate it, teach it, and get and own the outcome, if you will, at the lowest level?
Remember, 260 facilities and a decision-maker down in Brazil, in China, in Australia. How do they think of the business and make the right capital allocation, capital investment decisions? I think really this is kind of a history lesson real quick for those that haven't seen it. We started in 2003, took over the company with 600 employees, about 20 locations. We had a grand total EBITDA at that time of about $24 million. We had a CapEx budget of $24 million. We were using duct tape and baling wire to hold the company together. You know, as we went forward, we found someone else kind of in the same shape called National By-Products.
National By-Products was part of Holly Farms, which Tyson acquired. Then Tyson decided to spin off National By-Products or Holly Farms did in order to get the Tyson deal done. We basically doubled our scale of plants. We took $2 25 million EBITDA numbers and synergistically, through rerouting, turned it to $100 million. That kind of became the foundation as we started. We then held off another 5 years, acquired the Griffin business. Ultimately, entered the species-specific or chicken poultry processing business and doubled our scale. Ultimately, that started to transform the company. Now, we both had beef, we had chicken, but we were still a North American processor. As we went forward, we were brought the Rothsay. That was part of the Maple Leaf Foods.
Maple Leaf had an activist in there that wanted to break up the company and spin Rothsay off, focus on consumer products. We were lucky enough to win that auction and picked up the number one position in Canada. At the same time, we were making that initial investment of $423 million into Diamond Green Diesel on a technology never proven, never done, a career bet for us. Ultimately, we all know the history there as we go forward. We got Diamond Green Diesel under construction. We just bought Rothsay, here comes the only international rendering platform in the world called Vion.
Lot of history, lot of noise underneath that one, it gave us a position in Europe, gave us the number one position there, gave us a position in China, gave us a small position in Brazil. Ultimately, that's the last time, if you will, or the first time that we put a massive amount of debt on the balance sheet. We also did a follow-on offering to finance and take out some of the risk. The foundation build goes forward, as we look here, we like Diamond Green Diesel. For those that don't know, we invested in Diamond Green Diesel not to be in the energy business. We don't know anything about energy. We built it as a transformation unit for waste fats and oils.
Not to put an age on me today, but when I entered this business, waste fats and oils had a trading range of $0.08- $0.15 a pound. The April P&L shows that they're trading somewhere between $0.68 and $0.77 FOB our plants now. We have transformed this business because we created a machine that can value add this equivalent with the other big food oils and fuel oils in the world. 2022, we came out of it. One more time, the balance sheet looked good. You know, my job has always been not only to be the steward of capital, but to also help a chance to create relationships. You know, it's the funnest part of my job is building these relationships. You don't know when the founder is gonna decide to transition, and they're all under different circumstances.
Here came the number one chicken renderer, poultry renderer in North America, Valley Proteins, 18 plants. Been close to the family and we created a deal to do that. Oh, by the way, here came 16 plants in Brazil at the same time. Much smaller, but still, we fundamentally, and I'll show you why we have invested in Brazil. We like green energy, and green energy is not only renewable diesel. Green energy is, in the Benelux countries, we're the largest green energy provider from biomethane, and that's food waste recycling. If you see a picture out there, that's Oot de Bek in Kallo, Belgium. 2022 goes by, and then 2023, we're bringing on Diamond Green Diesel 3. I originally said we weren't in the energy business. When we built Diamond Green Diesel 3, we entered the energy business.
What I mean by that is, we now consume more fat than the Darling global system produced. That was quite a learning curve for us as we went there. Now, we had the biggest quarter in the history of the business in 2023. We felt pretty smart. Here comes Gelnex, succession plan. Patriarch, 84-year-old father of the founder, you know, developed dementia, and the children didn't want anything to do with the business. Number one producer of bovine grass-fed collagen in the world out of Brazil. Great position, great factories, really built in the last 10 years. So we looked at each other and we said, "Boy, you know, we still got quite a bit of debt out of there from Valley and FASA.
You think we can do it?" We said, "Yeah, we think we can do it. We'll do it with all debt." Ultimately, we did. That put us in a pretty tough position because what happened? Not only did we buy that, we bought a small plant, a couple plants in Miropasz. We'd invested $500 million in the SAF production. The story there was we decided not to use any equity at the time because we had the confidence in the business and the strength of the balance sheet and the ability to risk manage through these scenarios in a deflationary time.
What we didn't envision at the time was having a policy environment where, as you'll hear, the Renewable Fuel Standard or Renewable Volume Obligation just kind of vaporized for a year, and we went to overproduction in the green energy business, and that put us in a pretty challenged position. Today, as we move forward, you're gonna learn about those headwinds are gone. They're blowing pretty strong from the south right now, feeling pretty good. Carlos will teach you how long that'll last and what we see in the future going there. Then, you know, I'm gonna try to teach you, with the help of Bob, about what we're looking at for the future.
As Suann already covered this, you know, basically one out of every six, seven animals in the world goes through one of our factories after the meat goes to the consumer. The gelatin collagen market, we won't spend a lot of time talking about our joint venture with Tessenderlo. It's still an antitrust review. We're making lots of progress there. We're confident it's gonna close. We're hoping to close it here yet this summer. It allows us to grow our position significantly in areas where raw material is available and we're not. We're at capacity today in our rendering business globally. We're at capacity today in our collagen business globally. We see the collagen business growing rapidly in the over the next five to 10 years. David's gonna help you understand why.
I'm always going to remind you that remember, in the collagen business, 80% of that process is animal feed and animal fat. Not only in these tailwind markets now of the deflation or of the commodity markets, the Rousselot business is getting a nice uplift from that. The fuel business, Carlos, as I said, will try to take you through. We're going to try to show you the S&D. We're going to use the Bloomberg RIN S&D. We've got our own version of it, but we'll talk to you about what we think that can be. I mean, everybody wants me to forward guide that business. Very difficult to forward guide, but it is, it's doing quite well. We'll talk more about that, especially during Q&A. You've seen that. We don't need to talk about that again.
I wanna talk to you about why. Global scale, where it matters, this is, I think, one of the more powerful maps that we can put out there in the world. You know, more facilities than ADM. You know, you start to think about it. Maybe we're not handling grain and crushing millions of tons of soybeans and this, ultimately, we're where the animals are. The U.S., as we look forward here, continues to grow. Poultry is growing very rapidly. Chain speeds are going up. Demand for the other white meat, chicken, is really doing well. Beef is in a down cycle. We've never seen a down cycle like this in beef for 75 years. Herd replacement, probably still a couple years out, that's okay.
You know, at the end of the day, it gives us a little time to get ready for that, and we'll talk a little more about that. This is why we went to Brazil. The numbers are unbelievable down there. The amount of, you know, as I always say, land, water, and people, they have it all there. They can continue to produce beef, but they're moving rapidly into poultry and also pork. Europe, this is the impact of climate change. This is green initiatives. I mean, this is, you know, somebody went over with a aerial map and, you know, measured nitrogen levels from 20 years ago and said, you know, "They've got too much manure." Well, what happens? Well, it doesn't mean they're not gonna eat. It means that Poland, it means Spain they're producing more animals.
It means it's now moving east. We're moving east. You know, we've got joint ventures already in the Czech Republic and other areas in the east. The numbers will move east there. China came back sharply after ASF. It's still growing. Huge importer of soybeans. Huge importer of meat. Brazil beef to there. We don't see that slowing down. What we do see slowing down, ultimately we'll talk about with China, is their production. They're out of land. They're out of water. They can't buy more proteins and other thing. It's really end of the day, the U.S., Brazil production system is what we're building. Today, before I turn it over to Carlos here, we're gonna talk to you about a roadmap. We'll look at it at a 3 to 5-year roadmap.
Yes, there can be lots of different things that happen in that 3-year window. You've got an RVO for the next 2 years. It's very solid. What happens after that, hard to say, but it's hard to believe that we'll go backwards from where we are. You're gonna see that the roadmap that Bob lays out, that's already out in that presentation, took Q1 of 2026 and then kind of multiplied times four. That doesn't mean that's what we believe. That just means that's the point in time we chose. What we're seeing when we did our earnings call a week or so ago was, this is the first time that we'd done an earnings call before we'd seen the first period of the next quarter.
The first, the April, as we call it, or period four now, is starting to come in. It's materially stronger than what we told you. I think that that'll be the one headline on Bloomberg. Sabrina, there it is, materially stronger. That's driven by higher prices, strong volumes, fuel demand, fuel margins. You know, it's really hitting on all cylinders. We're going to get to show you some scenarios in the balance sheet. I haven't forgot that I was probably giving this presentation 3 or 4 years ago when, you know, I thought I'd be debt-free by about right now. I thought I'd be paying Jeff Gates a dividend. He'll never forgive me for that one.
I get one more shot at it, and I think you'll get to see how we're thinking about it and ultimately the flexibility as I refer to it there. From an M&A front, we're not done growing, but we're not M&A focused. We own the big items that are out there, and we have built the foundation. Over the next 3 to 5 years, there's no less than probably 20, maybe up to 30 new factories that are gonna have to be built around the world to meet the growing demand of meat. We'll show you all of that, and then we'll let David kind of woo you with the collagen product line, and you kind of start to ask a lot of questions about that, what it can be.
We've always said, if we're half as successful in our Nextida wellness program over the next five, seven years, we'll double the earnings in the Food Ingredients segment. Half as successful as our prior collagen, which most would know at the time was Vital Proteins underneath this company. You know, we're excited about these products. He'll tell you what's in the pipeline. Not only do we have a strong balance sheet to give us financial flexibility, we've got new plants and products and new opportunities around the world. With that, Carlos, I will turn it over to you.
Thank you very much, Randy. Good morning, everyone, and thank you for being here. Really appreciate you coming and listening to us. My name is Carlos Paz, and I will be talking about our Diamond Green Diesel business. First of all, I want to talk to you about what a great story Darling is, and as Randy alluded to it, but I think to me the brilliance of Darling and Diamond Green Diesel as an early adopter was our ability transforming waste fats into a global opportunity. Okay. The waste fat markets were driven by feed dynamics in the past. Margins were constrained, and the business was very cyclical. As, as Randy alluded to, in those times, early 2000s, we have a chart here over the last 25 years of the value of fats and corn.
In the early 2000s, the value of fat was somewhere between $0.07 and $0.10. Look what has transpired since. The value of fats in 2022 got all the way to above $0.80 a pound. That is a transformational game that Darling has brought to the market. As the largest waste animal producer in the world, and as the largest used cooking oil collector in North America, Darling captures this massive upside in the market. Now I'm gonna talk about our used cooking oil collection business. This is a great map that shows our facilities in the U.S., our rendering facilities, and our used cooking oil facilities in the U.S. and Canada. We run a very much an integrated business.
We leverage our rendering facilities to maximize the value of our used cooking oil processing and collection facilities. We leverage this by creating synergies between the two businesses. How do we create the synergies? We maximize economies of scale, and we take full advantage of the logistical advantages that provides by running these businesses as an integrated business rather than a separate business. A used cooking oil business is a fantastic business. We own over 90 facilities in the continental U.S. and Canada. We serve the population centers of 90% in the U.S. and Canada. Something that I'm very proud of, we collect from over 160,000 restaurants in this geography. How do we do that? By using over 2,100 fleet units to be able to accomplish this job. We serve over eight industries in this space, between restaurants, groceries, et cetera.
Where does all this global fat and the used cooking oil business that we aggregate around the world and North America goes? The great majority goes to our Diamond Green Diesel business. We are truly a global industry leader in this space. We're a profitable entity. As Randy showed, we started in July of 2013, and we've had positive cash flow since year one. We've invested over $6 billion in this entity, and what is impressive, that it's have been self-funded, and Bob will expand on that. It's a strategically position where we have world-leading size, scale, and location. It's one of the largest renewable fuel producers in the world. We produce roughly 1.2 billion gallons of renewable diesel. Including in that is 235 million gallons of sustainable aviation fuel or SAF.
We're very proud that we're very nimble, and we have an agile supply chain. What does that mean? We have extremely versatile inbound and outbound logistics. We can buy feedstocks from anywhere in the world. We can buy it by water, either by vessel or barges, we can buy it by pipe, we can buy it by rail, we can buy it with truck. In the same token, we can execute our sales in the same modes of transportation to make sure we're maximizing the margins of the entity. We have massive pretreatment unit, and this allows us to handle all types of feedstocks, from virgin vegetables to the more complex fats that we can buy around the world. This paints a pretty good picture how well-positioned is Diamond Green Diesel in the world, in the international markets of supply and demand.
We are located in the Gulf of Mexico or Gulf of America, whichever you prefer. We buy feedstocks from the centers of production. As Randy alluded, our rendering plants are where animals are, and DGD buys its feedstocks where those get produced. Mainly from the United States and Canada, South America, we are from Brazil, Argentina, Uruguay, even Colombia. We buy from all over Europe. We also originate from Southeast Asia. Everything goes to our two facilities, one in Norco, Louisiana, and the other one in Port Arthur, Texas, and it gives us efficient access to the demand centers. This year, especially in the U.S., mainly the West Coast, Canada, and obviously, when the market determines it so, we go to Europe as well.
Talking about demand, it's something that has been in everyone's mind, is the RVO, the Renewable Volume Obligation, which became essentially law in April 1, 2026. The much-anticipated RVO did not disappoint. It was quite robust. The 2026 and 2027 annual demand is 5.4 billion gallons compared to the 3.35 billion gallons of a year ago. The delta is over 2 billion gallons of increased demand. It favors definitely domestic feedstocks, which is extremely supportive to Darling's core business. The global demand right now for renewable is solid. As you've seen, Indonesia, Brazil, and Europe are increasing the potential demand for renewables. In crude oil tightness, because of what's going on in Iran today, is making renewables very attractive, very economic.
When we're paying $6.50 for a gallon of gas in Chicago or $12 in Europe, renewables become a very economic and attractive option. I can tell you today, DGD is operating at a high-capacity utilization because the margin after the RVO is a very attractive environment. As Randy alluded to, how do we view this picture of the current RVO? I think how to view, especially with my trading background, the easiest way to do it is to put in a supply and demand. I want to thank Sabrina and the Bloomberg team for providing this to us. I think obviously in the top, you all probably have seen this, but the top side of the table essentially looks at the demand side of the equation.
The middle part looks at the supply side of the equation, how are we gonna be able to meet that demand? The most important part is the lower line, which shows the balances. As Randy mentioned, the RVO from last year wasn't a robust one, so what it implies, that we have a oversupply of RINs in 2025, and the balance is almost 2.8 billion RINs, which obviously are gonna be used and consumed in 2026 given the increased demand that we have from the current RVO. We agree with the scenario that Bloomberg paints here, which essentially balances the S&D in 2026. There's an increased supply, the margins are there, we're gonna meet the higher demand, and we're gonna more than likely balance the S&D. RIN value should continue to support margins, as they are the great equalizer.
Bloomberg shows some potential deficits, as the demand increase in 2027. We believe those deficits can be addressed mainly by higher production. Engineers and plants, when there's sustained higher margins, good returns, find ways to produce more internally. This tend to happens in every industry. That's the beauty of capitalism. With this increased demand, imports of biofuels to the U.S. should increase.
The U.S. should become the high price islands for renewables in the world, which means imports needs to come to the U.S., the best margins in the world should happen to the U.S., and what gets exported out of the U.S. should be very small. This is how we believe there's the potential to balance the deficit that is brewing in 2027. When you put all of this together, it's extremely supportive for DGD margins. With that, I will pass it on to David, who's gonna talk about our great collagen business.
All right. Thank you, Carlos. I appreciate it. Good morning. My name is David Van Doorslaer. I lead sales and marketing for Rousselot, and I'm honored to be here today and represent our global Rousselot team and share a little bit about how we are going to help our customers lead in the next era of wellness through collagen. For the next few minutes, I'm going to cover three things. I'm going to talk about the current trends that are happening in the collagen space, how Rousselot is poised to be able to help support and lead over the next few years, several years as we go forward and capture those trends, and then we've got something special with Nextida as a platform. I'm excited to share that with you as we go throughout the presentation here. Let's jump into it.
If we had had this conversation 10 years ago, we would be talking about collagen as a niche-type product, right? The hair, skin, and nails. You can see back in 2016, there's about 600 products around the world that had some collagen in the functional food and beverages and supplements that were brought to market. Today, we're at over 1,800 products globally around the world that have collagen in them, and that is a 50% increase in just the last 3 years. As I walk a little bit more into the trends coming up, I'll walk through what's happening there, what started to happen in 2022 and into 2023.
Some of you may have already seen what's happening 'cause we've got some good samples in the back with John and Louise in the back, and I see some of you have already got your collagen drinks in different applications. You can see that the application trends are also changing, right? From the powder to mixed ingredients with hydration, with electrolytes and collagen, as well as sports nutrition and overall wellness. Let's jump into it and keep moving. Let's take a step back just for a second and talk about what collagen is. Collagen is the most abundant protein in human. Thinks of it as the glue for our body and our skin and our joints and our structure, and as we get older, we lose just a little bit every year.
That is where the ability to have supplements like collagen that are bioactive, bioavailable, allow us to be able to consume those supplements and support reinvigorating the collagen in our system. There are 28 types of collagen that are in the that are developed. There are three that are the most common. That's type one, type two, and type three collagen. Collagen has been used for ages, right? Collagen has been around for several hundred years. If you think about our other businesses that we have, we have a gelatin business, and the collagen business is how we go to market in Rousselot. The gelatin manufacturing process, you can create gelatin or you can create collagen by adding hydrolysis and spray drying, and that's how we create collagen in our manufacturing facilities. Jump in and start moving into the trends.
Consumer trends, they're all in on wellness, and that is driving the collagen boom. There are three things that we see, and you can see that with the variety of the applications that we have on the screen. There is an aging population that wants preventative health and nutrition. There is the rise of food as medicine, so we want to consume more natural ingredients, right, to be able to help us in our overall health journey. There's an increased demand in protein. That's where you start to see in that 2022, 2023 timeframe, the protein craze and the GLP-1 drugs that are out there. People need the protein to be able to support their diet, and collagen is an opportunity there. This is one ingredient that is positioned for growth across multiple industries.
I'll talk a bit about applications. I think this is an area where Rousselot can really help and stand out in the market. You can see a wide range of applications here, from cookies to beauty products, coffees, traditional powders and gummies that are out there for our consumers. Our application labs that we have, that is pretty unique. We have three global application labs around the world. This is where customers can bring their applications to us, their ideas, and we partner with them to help solve some of the complexities that come up as you introduce new applications in the market. That gives us that deep partnership and long history that we have with our customers to be able to support them as they bring new ideas to market. Yes, we work with large global multinational companies.
We also work with innovative startups and founder-led companies that have an idea that they wanna bring to market, and that's where Rousselot can help our customers. We have several examples here on this slide and also in the back. If you haven't had time to try some of the collagen samples that we have, please feel free just after the session. As I start to move from the second point around collagen and how Rousselot can help and start to transition into our Nextida platform, there's a few things I'd like to highlight here. You need the expertise of collagen, the history that we have. We have the scientific expertise with our science and innovation team that can help lay the foundation for us to build Nextida. We've got the process control.
I'll talk a little bit more about why that matters in a second. We have the global scale that we need. Collagen is a trend that is happening around the world. I was just in Spain last week, talking with our European customers. This is a global initiative right now with collagen that is growing around the world, and we bring that deep industry knowledge. I was gonna talk a little bit about something, Randy, you talked about entrepreneurship and our team. We have something really special at Rousselot, and it's our people, and they're the people that are working on Nextida because they want to help people live better. Nextida is a platform. It is not a product.
This team and this company is really passionate about that, and we're provided with the resources we need to be able to develop these entrepreneurial ideas like Nextida. We're really excited about what Nextida can bring in the market. We start with the industry knowledge, right? The history that we have with collagen. Collagen is a long-chain protein. It's got a broad peptide mix. We take that collagen, and we unlock the code, unlock the code of collagen with Nextida. That's where we control the process. We can define the outcomes, and that gives us the targeted functionality that we need and that our customers are looking for to differentiate in products in the market. Nextida GC is just the first product under the Nextida platform.
This one is focused on glucose control, so it reduces your post-meal blood sugar spike. It also naturally increases the body GLP-1, and it leads us to feeling fuller longer. This is just the first example that we brought to market. We're very proud of Nextida GC, and this is just the beginning. With Nextida, it brings us the opportunity to have accelerated revenue growth with margin expansion potential. There's higher pricing power when you have products like Nextida GC that give differentiated experiences and outcomes in the market. That gives us improved margins and premium segment expansion. I would also say when customers are formulating with us in the application labs, and they're introducing Nextida into their products, it really creates a stickiness with that customer for a long time.
You mirror that with our co-branding from a marketing standpoint, where we work with customers. We actually are co-branded with them with the Nextida platform on the products that they bring to market. It really helps us to accelerate the brand recognition around the world. Invest in the collagen transformation with us. These are clinically validated products that we're bringing to market with Nextida GC. As I mentioned, this is just the first one. Our next focus will be in the cognitive space, we are well-positioned to be able to excel in this new era. Again, this is a platform. We have a long library of peptide chains that we're studying around the world that we believe that will keep us quite busy for years to come.
Before I wrap up here, I would like to just add one of the things that we need to help us accelerate that growth and to make sure that we can compete long-term in the broader health and wellness sector is the announcement that we made with the joint venture opportunity between Darling Ingredients and Tessenderlo Group. This is where Darling is contributing Rousselot to a new joint venture company, and Tessenderlo will bring in PB Leiner.
As Randy mentioned, you know, we entered into a definitive agreement in December, and that's going through the process. We're excited about what this opportunity can bring for us. I think for me, the diversified global portfolio and attractive regions will help us, as well as the gelatin solutions that are really important for the pharmaceutical industry. Thank you very much for the opportunity to be here. I'll now turn it over to Bob, who'll give you an update on the financials.
Thank you, David. Good morning, everyone, thank you for the opportunity today. I speak to a lot of you frequently, but I'm excited about the opportunity today to talk about the business from a slightly different perspective. I'm gonna really summarize our value proposition. I'll talk a little bit about our balance sheet, our debt position, the cash picture, how we see the outlook of the business from a number of different perspectives. As Randy said, talk a little bit about how we see the future and what those plans are. Before I do that, though, I wanna just come back to talking about Darling and explaining Darling.
You know, we hear consistently that Darling is a complicated company, and for some people it's hard to understand. We, you know, we're gonna try to demystify that as we go forward. From our perspective, it's really quite simple. Our raw materials that make up 98% of Darling's adjusted EBITDA come from animal byproducts and used cooking oil. There are over 100 million metric tons of supply of these products. 90% of it is animal byproducts. That's a lot of supply in the world, and animal production continues to increase. I think when a lot of people think about Darling, they kinda think, "Well, how long is it gonna last?
What's your supply picture? We're in a very stable position as it relates to supply. When it comes to the processes that we have to run our business, there are two primary processes. We have collagen extraction that we're extracting from animal skins and bones, and then we have animal and rendering and used cooking oil processing. As Carlos pointed out, we do those things as an integrated business. Pretty straightforward what we're doing. We're taking animal byproducts, used cooking oil, we are processing those things, and we're adding value to those products. That's where it gets complex. I think, you know, well, it's complex in the right way from our perspective.
The reason why that is attractive to us and to the market is because we're doing things as a P&L center that other companies are doing as a cost center. Which means that these are businesses that are core to us. We're reinvesting in these. We're investing in innovation. We're investing in efficient operations. We can be a leader in the industry at creating all kinds of value-added products from these core processes. As we, as Carlos explained and Randy explained, the Fuel Segment is essentially an extension of the Feed Segment.
It makes sense for us to be invested in that segment because at the end of the day, we can be in that space, and we can compete in that space, and we can control the outcome better if we are in that space. That's just another way to look at Darling and hopefully simplify that picture a little bit. The value proposition. Randy said this when he started. We are an essential service. We're an essential service for two reasons. 100 million metric tons of product, that's a lot of biomethane emissions that the world would experience if we didn't do something with it. It's essential that we do, and that's the role that we play. We also have a really important role in the broader meat and food industry.
The value of what we do gets passed back to the producers of human meat production. That ultimately leads to a decrease in the cost of meat for people around the world. What we do is essential. That's an important part. We've got a scaled global footprint. We talked about it. I'll talk a little bit about kinda the history over the last several years and how we've been able to complete that global footprint. That global footprint gives us certain advantages and stability that we didn't have before.
We consistently generate cash, that's a result of making good acquisitions, being in the right place, running a good business, but also because of the competitive dynamics in our industry that we believe are more attractive than what you might see in some other commodity-based businesses. Operational best practices and product innovation. This is who we are, and this is what we do. We'll talk about all those things. I'm gonna fast-forward to this one first, and we'll come back to the others. A short history. Randy gave you the long history, but just kind of an update on the short history. The acquisitions of 2022 and 2023 were really important acquisitions for us. We bought Valley Proteins, we bought FASA in Brazil, and we bought Gelnex in Brazil.
We also, you know, bought Op de Beeck and Miropasz, there's been some others. Those three were really critical at rounding out our global Feed Ingredients segment and our global Food Ingredients segment, which essentially is our global rendering business and our global collagen business. Those acquisitions put us in the right places for the right reasons, and we'll talk a little bit more about that. We funded those acquisitions with cash flow and debt. The expectation was that, you know, we would pay that debt down relatively quickly. As Randy talked about, we experienced somewhat of a down cycle in our markets at a time when we were integrating businesses, and integrating businesses and companies is hard, and it takes a little while. We went through that process.
Despite that, in 2024 and 2025, despite being in a down cycle, we generated positive cash. If you look at the run rate from the first quarter of 2026, and you extrapolate that out through the year, we are poised to generate over $800 million in cash in 2026. As Randy started with, really our environment is looking better than what we saw in the first quarter. Let me come back to our debt and our leverage ratio. Co-consistent with the picture that you saw in the last graph, as we took on debt to make these acquisitions, our leverage ratio increased. Our debt was high, relatively high.
If we look at the first quarter, and extrapolating that out for the year, the bar chart assumes a $700 million of debt paid down. We get our debt down pretty close to $3 billion by the end of the year, and our leverage ratio is below two. We're feeling pretty good about where we are today as far as this goes. As, as I said, you know, it might have taken a little bit longer than expected, but I think now it's accelerating at a rate that may end up surpassing expectations. When we look at our overall debt and our, our obligations there and where we sit, we're really comfortable with that picture.
If we do get our debt paid down to near $3 billion by the end of the year, that implies that almost all or all of the $2 billion term A revolver line that we have would be paid down. When we get to April of 2027, that's the expiration of a $500 million bond. I think we've been really clear on calls and one-on-one discussions that our plan A is to pay that bond down, and we can either do it with cash on the balance sheet or taking money from the revolver to pay that down.
We've got quite a lot of flexibility as to how we handle that, and that is what we think would make sense to do at that point in time. In addition, once that's done, we've got quite a lot of flexibility and time. We don't have anything that comes due until 2030. We'd have a lot of flexibility and headroom with the $2 billion line that we've got. We really like our position once we get to that point where we've got our debt paid down to around $3 billion.
I wanna shift a little bit to giving some insights on some of the operating metrics that we use to run our business and really emphasize the focus that we have on performance of the 260+ assets around the world and the priority in our company to generate cash, positive cash in all those locations. We talk a lot about adjusted EBITDA. Adjusted EBITDA is an easy number to understand. It's an easy number to use to compare different companies. At the end of the day, what really matters to us is, are we generating cash? Are we generating cash in all these different locations that we can use to reinvest in the business?
That is, we use a very simple metric to come up with what we define as implied net cash. Every whether it's an asset or whether it's a business, we can use it for different purposes. We start with the adjusted EBITDA. We deduct a cost of debt that's a combination of a term debt allocation based on the book value of the asset in question and total term debt that we have. There's a maintenance cap or a working capital debt charge based on actual use of working capital. We also deduct maintenance capital. The Warren Buffett story that Randy told and the significant amount of capital that's required to run this company, it's true.
I think we've forecasted that we'll spend around $400 million in maintenance capital this year. That's cash that we don't have access to at the end of the day. We wanna see what our assets and business performances look like after paying for that maintenance capital. I will say later, I'll talk a little bit how about how that high cost of investment is actually an advantage for us and not a disadvantage. I wish Warren was here. We take that implied net cash number. It's a great number for us to use to have our PNL managers focused on. We also then will divide that by different things so that we can compare that performance on a relative basis.
We do look at invested capital, as a way to do that, but what I really wanted to emphasize today was how we use that number, as it relates to replacement value of our assets. This is especially important for the rendering and used cooking oil business. The calculation is also very simple. We take that implied net cash, we divide it by the replacement value of the assets or the business that we're talking about, and that gives us an implied return on replacement value. Why is that important? First, let me just point out 95% of adjusted EBITDA in the Feed segment is rendering and used cooking oil. When we talk about feed, we're essentially talking about that.
One of the reasons why implied return on replacement value is so important for that business is because of the inflation period that we went through over the COVID era. The cost of industrial construction from 2019 to 2026, it increased 65%-70%. We've got a lot of fixed assets. We put a lot of money into our fixed assets, and therefore, we need to increase the fees that we charge for the use of those fixed assets to keep up with what replacement cost is. That ensures good discipline. If we're able to do this, the reason why this is important as well is because of the competitive dynamics in our industry.
We have the luxury of having a lot of moisture in the raw materials that we source. What that means is, if we're bringing in product from someone, and we are a certain distance away, and if our supplier wants to go somewhere else, that added water in the freight is gonna cost money. What it does is it prevents some of the irrational behavior from competitors that you see in other industries. The example I go back to is, I lived in China for a while, and I worked in the oilseed crush industry, and this is back in 2010, 2011, when state-owned companies in China were coming into the industry and building out capacity, and everyone was competing for market share.
We were generating a negative $40 a metric ton loss before variable costs. That was completely irrational behavior. We don't see that in our business because again, if someone wants to try to do that, they're gonna have to decrease the fees they charge or even pay someone to take the product just to try to get market share that probably isn't sustainable on a long-term basis because they're not close enough to where they are. This is a reality of our business. It provides stability in terms of the margins that we earn and the cash we can generate. It's really important then with the inflationary period that we went through, that our teams are disciplined about the way we're pricing our contracts. We're getting paid a fair value.
This methodology of implied return on replacement value, it ensures discipline on one hand, but on the other hand, it also ensures fairness for the supplier. If you're generating a return on replacement value that's too high, well, then you're just incentivizing a competitor to come in and compete with you. What we really use this for is to help our teams really focus on the market, what's the right thing to do. One of the things we're really excited about is, you know, with the acquisitions that we've made with Valley Proteins and FASA, we have made changes to our contracts. We have made improvements in the operations. We have increased the implied return on replacement value in those businesses.
We still see opportunities for improvement, and we believe that over the next 2-3 years, we can increase the implied return on replacement value by 2%-3%, and that implies an additional $150 million to $300 million of EBITDA from the Feed segment. We're very excited about that. The way we do that is operational efficiency. One of the things that Carlos and his team is focused on is now that with this Valley Proteins acquisition, we have entered the poultry rendering industry, you know, on a large scale. We are working with those proteins that we make and identifying the best destination markets for that product, and we're getting more from it. That's an example of that. The commercial optimization, price risk management is another one.
I think, you know, with our global footprint that we now have, we've got a line of sight into what's happening with world oils and fats that other companies don't see. That helps us understand and determine when a supply and demand analysis is loose or tight, and how we should manage our commercial plans as a result of that and be much more strategic and precise about how we do that. The contract management, that happens over time. In some regions of the world, contracts are renewed once every three to five years. In some regions of the world, they're renewed every three months.
In the cases where there's a long timeline for the contracts, it's tough to adjust the prices all at one time, but over time, we're able to get that fair value and ultimately generate what we consider to be a modest return on the replacement value of assets. Market conditions is the one thing there that's outside of our control, and certainly, when we're in an environment like we are today, those are tailwinds at our back. I think the message here is that there's a lot that we can control that is outside of any influence from the market. Because we're an essential business, because of the competitive dynamics, you know, we see much more consistency in financial results and cash as we go forward.
Shifting to the Food Ingredients segment, which again, the over 80% of the EBITDA, adjusted EBITDA in the Food Ingredients segment is collagen and the collagen business. We have a similar opportunity in terms of getting more value out of our existing footprint and infrastructure for very different reasons. I mean, David really highlighted these things and we're very excited about it. The track record here is that over the last 5 years, we've increased the mix of collagen gelatin from 20/80 to 30/70. If you look at the on the left, bottom left part of the screen, if gelatin margins are a factor of 1, hydrolyzed collagen margins are 2.5-3 times that, the targeted ingredients or the active peptide collagen is 7-11 times that.
Randy made the comment that if our Nextida business or our target ingredients business could sell half as much volume as our normal hydrolyzed collagen business, we would double the EBITDA in the entire collagen business, gelatin included. That's the opportunity. What we're focused on is developing the Nextida portfolio of products. If they can represent 3% of our volume, that would represent 15% of our EBITDA. The beauty of this is we can make those products through our existing infrastructure. The only difference is we use different enzymes to cut the amino acids and create peptide profiles that have those targeted health benefits. That's really the only difference. And that's, again, one of the reasons why we're so excited about the potential opportunity with forming a joint venture with Tessenderlo.
That's because this is technology that we have that no one else has. We innovate in collagen more than anyone else does in the world. If we can bring that innovation to their asset footprint, then we believe we can get significantly more value from that footprint than what they're getting today. There's some underutilized capacity there that will allow us to continue to grow. As Randy said earlier, we are at capacity today in our collagen business. When we kinda look at, you know, try to imagine a post-2026 picture, and we're sort of thinking about, well, what would You know, what do we consider to be down cycle, mid cycle, up cycle? This isn't worst case, best case. I wanna be clear about that.
It does sort of paint a picture around how we see ranges and I wanna give a little context to this. First of all, you know, the down cycle. What would cause a down cycle? You know, right here it says DGD $0.33 a gallon, average margins. We certainly don't expect that through 2027. We have an RVO in place that's very robust, as Carlos showed. We just don't see that. Beyond that, I mean, who knows? I would say we think it's unlikely that it looks like this, but we wanna be respectful of what's possible.
You know, when we always do that when we think about our balance sheet, we think about what, you know, what opportunities we have and what commitments we wanna make in terms of capital investment. We have to go through that process and look at what a down cycle looks like. I will say that, you know, we went through a down cycle in 2024 and the beginning of 2025. Despite making the acquisitions that we did in 2022 and 2023, our balance sheet withstood that just fine. That down cycle analysis was done then. We continue to do that today. This is what it looks like for us. At $0.33 a gallon would imply a pretty disappointing RVO, 2028 and beyond. We're not really expecting that.
One reason why is because, hey, the policy has worked. This policy was announced on April 1st. One of the real intentions of that was to improve soybean prices at the farm. Soybean futures are above $12 a bushel and climbing. I think, you know, this policy has achieved and is achieving the objectives of this administration. We don't expect in 2028 an RVO to be completely disappointing, but if it was, this is what that picture looks like. Global oil seed crops, veg oil protein, I mean, let's just say less than $0.50 a pound for fat and lower protein prices would mean that there's a problem with demand in the world and an abundance of supply. Then the tariff environment.
The tariff environment has not been particularly negative to Darling, but there's a lot of different forms that that can take, and if it were somewhat negative, then that's kinda what describes the downside scenario. The nice thing about that is if we assume, you know, again, $3 billion in debt, and that's sorta what's assumed in the debt cost number here, reasonable CapEx, you know, reasonable taxes, we would still be generating $400 million in cash even in a down cycle as we go forward. That's, you know, in part because of this global infrastructure that we have and the reliability of that infrastructure. When we look at a mid cycle or an up cycle, I mean, we can go through all these different versions. We could come up with 10 different versions.
The bottom line is, you know, the external environment is going to shape what some of these things look like. You know, we've given some examples. I mean, in the mid cycle, that really that would suggest that our first quarter run rate is kind of a mid-cycle type of an environment. That's an $875 million of potential cash generation. Still very healthy in a mid-cycle environment. In an up cycle environment, it starts to get pretty exciting. Position for significant cash generation as we go forward. I do want to make a distinction here. You know, Carlos shared some information about Diamond Green Diesel, this is where things are a little bit different for us than they have been in the past.
Diamond Green Diesel officially founded 2013. Obviously, the idea started a bit before that. $423 million invested by Valero and Darling together. In total, there has been about $6.5 billion of cash either invested in the business or provided to the business for working capital. Over the history of the Diamond Green Diesel business, there's been almost as much money taken out as dividends as there has been contributed. When investments have been required, you know, each parent company contributes capital. When they generate surplus cash, they get dividends back. Roughly, $1.3 billion have been put in, taken out, the rest has been self-funded. If you look back at the history of this investment, it's really been an incredible story.
$400 million invested up front. Six and a half billion dollars have been invested in total. Outside of the initial $200 million investment from each company, it hasn't cost either company anything to do that. You know, a startup that really has generated cash. Now what's different is. As Diamond Green Diesel generates cash, we're not really planning to put the cash back into Diamond Green Diesel. You know, we've got the footprint that we want. We may someday add more sustainable aviation fuel capacity to make some more of the renewable diesel capacity agile and flexible so it can switch between the two. We need some market commitments to do that.
Now, as we joke a little bit, this is like being able to go to the Pink Pony Club. I mean, we are free and clear. We can take this money and we can use it to reinvest in any way that we see fit for what's in the best interest of Darling and Darling shareholders. This outlook shows what that picture looks like given those three different cycles. The down cycle, we're assuming doesn't exist in 2027 just because of the RVO that's in place and what we're seeing right now. If it happens 2028 and beyond, then, you know, we're still generating over $2 billion in cash over, you know, over the next 5 years.
In the mid cycle and the up cycle starts to generate a pretty exciting amount of cash, $4 billion-$6 billion. What would we do with that? You know, Randy talked about the organic growth that needs to happen in the company. You know, we've built these and bought and put together this global footprint, so we now have the luxury of not having to say yes to something new that's on the market that's for sale. You know, we are in all the places that we wanna be. Sure, we'd like to maybe have it look a little bit differently here and there. When we think about what our opportunities are, there's opportunities to organically invest, and I'll talk about that more in just a second. Certainly additional debt paydown is possible.
Share buybacks, dividends, is a possibility. I think, you know, what this demonstrates is that those are all things that now we can consider that we really just, you know, we considered a little bit in the past, you know, when you thought about strategically what was the right thing to do long term for Darling shareholders, it made sense to add pieces that we didn't have. Because we've got these things in place now, we can consider some things that quite frankly, we just really weren't in a position to do in the past. Those are things that we just wanted to give insight around.
We're gonna be looking at that as we get this balance sheet to where our debt is down to $3 billion or below, and then we'll see what the outlook is for cash at that time and decide what to do. Growth, this is just again, some of the things, sometimes Suann and I will be talking to some of you all and others, and people will say, "Well, gosh, you know, you guys, are there any other big things out there? Are you gonna be done growing? Like, what's, you know, what more is there to do?" There's still a lot more to do.
You know, when you think about the different segments and what we have and some of the things that we have going on, I mean, I won't read this list, but the bottom line is there's still plenty of runway for Darling. We are ahead of the pack when it comes to our industries, whether it's rendering used cooking oil or collagen, and there are things that we can do to continue to stay out in front, and we intend to do that. You know, in summary, if I could leave you with this from a financial perspective, you know, we are committed to solidifying our position financially. That means reducing our debt down to below $3 billion, below a 2.5 times leverage ratio, even in a down cycle type of an environment.
We are committed to optimizing this portfolio, and we are positioned to generate $4 billion-$6 billion in cash over the next five years, and we're gonna do everything we can to make that happen. Delivering long-term shareholder value. This balance sheet is in a really solid place. We're excited about what it's gonna look like when we get to the end of this year, and what that may allow us to do in terms of funding shareholder value initiatives and continuing to methodically grow to maintain the strategic advantage we have. With that, I don't know, Randy, if you have any last words or we open it up to questions.
Let's go ahead and open it up to questions, and then I'll have some closing statements when we're done. So.
All right.
Ooh.
Some questions up here already.
Okay. Tom, we'll get you a mic here in just a second here.
Yep. Either one.
Yep.
Hey, Tom Palmer, JPMorgan. Thanks for the presentation. Very, very efficient too. Wanted to maybe follow up on a comment you made, Randy, about April coming in stronger than you'd expected. Maybe just an update on what areas of the business kinda drove that upside versus when we were speaking a couple weeks ago, what you thought it might look like. I guess any additional commentary you might wanna provide on kinda how you see the rest of the year evolving at this point. Thanks.
Yeah. Like I said, traditionally, historically, you know, we've always kind of seen period one of the next quarter. Given that we wanted to mirror Valero in their announcement on the 29th or 30th, we, you know, we did not have those numbers ready to go. The good news of having 260 facilities, you have 260. The bad news is consolidating that is a task. I said, you obviously want to stay off the wall of shame. The team to get there, I just got to give them time. I can't push them, in the sense I want to make sure the numbers we turn out are real. All we did was basically, divide March by 5 and took it times 13.
I looked at Bob and said, "Let's add a little bit." Let me talk about what a little bit means. We've seen commodity cycles in the past that have caused fat prices to move up, typically driven either by a hemispheric drought or policy change in the moment. We've never seen fat prices move up like they've moved. To be honest, we're still not sure how those are flowing through. How does that translate back to the raw material contracts, the timing? You know, our entire portfolio in North America is headed to Diamond Green Diesel. That wasn't the way a year or two ago because of all the imports. There's a lot of moving parts there, but it's flowing through. We started to see it. That's true of the we'll call it the Feed Ingredients segment.
The collagen or Food Ingredients segment, you know, we've got some major customers there that are started to, you know that Jan, Feb in the consumer products markets have always been, you know, let's pull inventories down from last year or let's The orders started to come in. Q1 was a little stronger than we'd anticipated for the collagen business, but the orders are coming in strong. We saw them in April here, and they're even stronger in May. Confidence level picks up. Diamond Green Diesel, I know everybody wants guidance there. You know, you're not gonna like the number I'm gonna give you, $1 to $2 a gallon. We're running strong there. Carlos said we're running very, very strong right now. Feedstock prices are moving up rapidly.
RINs are doing a lot of the work. I mean, clearly the run rate in Bob's, you know, upcycle there is probably much closer to where we're at at this point in time. Q2 looks, you know, absolutely fabulous as I look going forward. Q3, summertime rendering, a little bit of downturn there as always. Right now the prices, if you look at what DGD's bids are out there, they're in the mid-80s delivered. Take $0.05 off to go FOB North America. We've never seen this before. Ultimately, as we're originating cooking oil, as we've got price sharing contracts, as we've got all this stuff going on, how it flows through, what I think I would be Bob can echo on this.
I think I'm pretty sure April's really darn good, even though it's not final. I'm gonna tell you May's gonna be better, it should probably level off after that unless we go higher. Margins at Diamond Green are, you know, as we expected, really as, if just think about it, the RVO didn't kick in until April 1. You know, end of the day, it's the environment is way different than what we saw, you know, two weeks ago.
Thank you.
Good morning, guys. Certainly thanks for your time with this presentation. Very informative. Maybe just speaking to slide 55, and the reason I wanted to start there was it sounds like there's a lot of opportunity to really make that business more efficient, the feed business more efficient. Just could you speak to where you are in terms of operational efficiency gains? Like, what's the kind of P10 to P90 type spreads that you're seeing across the operations today? Just on the commercial optimization side, maybe just speak to where you are in that process as well.
Yeah, I can start and Carlos feel free to jump in. You know, I think I said in the presentation, with the Valley acquisition, we jumped really heavy into the poultry rendering business. Darling has always known poultry rendering, but I would say not to the degree and scale that we do now. The implication there is, there's a lot of different types of raw materials that we can take from a supplier. Ultimately the proteins that we make, the qualities are different. They're different by plant. It's just due to the nature of that raw material, the supply that's coming in.
Our understanding today of what that quality is, our operational uptime, our ability to mix and blend if it may make sense, is something that we're doing much better today with that and we see opportunities to continue to improve and get more value from as we go forward. I think that's one of the areas. By being able to do those things, we're able to reach certain export destination markets that pay, you know, significant premiums for certain qualities of proteins and also some high value pet markets in the United States that we just weren't able to hit when we first made the acquisition. That's an example. Another one is with contract management. I talked about that.
You know, when you're talking to a supplier and, you know, you wanna increase the processing fee by 75% versus the last contract that was negotiated five years ago, that's a tough discussion. They're not always prepared for that. We can't always get all of that just out of, in order to preserve and manage the relationship with the supplier. I think as time goes on and we continue to renegotiate contracts on the basis of replacement value of assets and getting what we consider to be a fair return on that basis, there's still some opportunity there. The, you know, outside the U.S., you know, with FASA as an example, that's a very different set of dynamics.
In Randy's slide, he showed the growth rate of animal production in Brazil. Keeping up with that growth is critical in order to maintaining good quality of our products and our processes. You know, we've learned some things in the two years that we've owned that business that I think going forward is gonna allow us to extract a higher average margin from it. Those are some examples. I hope that answers your question.
Yeah, I think Derrick, and then I'll have Carlos. I mean, some of the, you know, if we look back, I take the ownership on the outcome of purchasing the Valley assets. We have them fixed now, and I do declare victory. We're in that optimization phase of, as Bob was alluding to, if you're processing two-day-old poultry, you're making byproduct of meal. If you can get it through your plant the same day, you're making chicken meal. Very different market condition profiles. It has nothing to do with commodity swings, ups and downs. It's just which market are you serving.
The Trump tariffs were a punch in the nose because one day China's open, one day China's closed, one day Vietnam's open, closed. You know, we've got all the plants now re-permitted, if you will, to ship into China. Those numbers alone, just off the Eastern Shore plants, is $100 million. That's the differential in making good product and being able to export it or making lower grade product and having to consume it domestically. What else you want to add, Carlos?
I would say, you know, when you integrate companies, you've seen the growth that we experience. You integrate it physically, but you got to integrate commercially. I think that's a big part of my job. You know, how do we run these businesses like global product lines? Not like isolated business. We want to leverage the bigger Darling to make sure we're executing to the right markets around the globe. We're shipping the right qualities. We're originating the right qualities. There's a lot of margin to have in the qualities that you produce and how aligned we are as a global business. That's a key part of what I do around managing risk. It's not just buying low, selling high, but how do we maximize margins with our global product line that we have?
That's really speaking to the earlier comments of entrepreneurship in a number of facilities. Getting 260 facility managers to agree on what's best for Mother Darling or the mothership is a challenge. Carlos is pulling that together. You know, examples of Bob talked of Brazil for you here. You know, that we're capacity down there. That doesn't mean they stop killing animals. It's coming at you. We're having to run Saturday. You're making lower grade quality fat because of the aging raw material, here comes a Trump tariff. Once again, the first slide Carlos showed you is if you have to go back to animal feed, it's worth so much less than biofuel. That feed-fuel arbitrage and trying to pull it together as a team is really what Carlos is doing around the world for us. Yeah. Where do you want to go?
Hi, Matthew Blair from TPH. Thanks for the detailed presentation. I have a few questions on the Nextida product line. First, I think you mentioned that clinical trials are now complete. Could you talk about the next steps here? What does the timing on new products look like, and how many partners are you working with? Second, for future Nextida products, I think you said they would go into the cognitive space. Maybe you could talk a little bit about the opportunities there. Finally, I'm not sure what slide it is, but there is a slide that shows 15% of EBITDA in 2030 coming from targeted ingredients. Is that in the Nextida line or is that something else?
You wanna take that one first? Yeah, I mean, I can answer your last question first. That is the implication. When we talk about target ingredients, we are talking specifically about the Nextida portfolio of products. Again, you know, if the gelatin margin is a factor of 1, the margin with those products is 7-11 times. If we can get 3% of our volume from those, then it extrapolates out to 15% of EBITDA. Yeah.
For Nextida GC, we have completed an additional clinical study on that. That is something that we are taking to our customers today. We're sharing that with them, that information. It has validated the first study. You know, if you talked about the things that I mentioned in my presentation around the post-meal blood sugar spikes, the increase in the GLP-1, and then making you feel fuller for longer, that work has been done. Now we're sharing that with our customers and we plan to have a new Nextida, I would say every 18 to 24 months is the current roadmap, and the cognitive space is the next Nextida.
Talk a little bit about the trajectory, I mean, of initial customers of Nextida GC repeat orders and what the pipeline looks like. Maybe not quantity or whatever.
Sure. Yeah. I think one of the key KPIs that I'm looking at for the success of our sales business in this space is the number of repeat orders that we're getting. The goal is we try to get this out into the customers and get as many seeds planted as we can, right? To have them launch products under the Nextida platform. We look to see where those reorders are coming, which means those SKUs are starting to be sold in the market, and we're starting to see that take place now this year. That's really been positive for us that the success of GC, the glucose control product, is picking up. Now I think that's just about us continuing to find those new customers.
You know, oftentimes they're not the same customers that we've always been working with. I mentioned earlier that we work with a lot of entrepreneurs, a lot of startups that are starting with us, and that's where our application labs come into play and help them solve those problems.
Hey, guys. Yeah, thanks. This is Dushyant Ailani from Jefferies. Just going back to that slide 45. I know that you guys have talked about the different levers in terms of contract management, price risk management. Could you maybe talk a little bit about what the timeline is to get to start realizing that $150 million to $300 million? When can you start seeing that?
Slide 55, I think.
Oh, 55. Sorry.
Yeah.
You know, we've been on that timeline. I think if you were, and you know, again, if we were to go through a down cycle environment like we talked about, we think our results would be better than what they looked like the last time we went through that type of an environment. We're on that trajectory today. I think, you know, to get this additional $150 million to $300 million of EBITDA, assuming all other things equal in terms of market environment, you know, we think over the next two to three years that that's achievable.
It's $1 million a plant. You know, when you put it into scale, you know, it's very achievable. Go ahead.
Yeah, thanks. Jason Gabelman from TD Cowen. It looks like a lot of your growth is focused on margin expansion. You know, obviously you have this slide in the collagen and targeted ingredients opportunity as well, but you also talk about the volume growth you're seeing in Brazil and East Asia as well. How much do you think about upside from additional capacity expansions or other volume opportunities? Where does that factor into the plan? Maybe kinda tied to that, you know, you went through some of the large acquisitions you've made in the past. Once again, you're seeing a lot of volume growth in some of your core markets. Are there large packages out there still of things you would like to own, as you look into the future and the balance sheet, kind of improves over the next couple years? Thanks.
No, it's a good question. I told, you know, Bob, I said, "You know, I'm gonna have a group of people out here that might know that every time I get a little extra cash in the cookie jar, I go buy something." I don't know the world pretty well out there. We know the world pretty well. What we've identified as a management team, a global management team, is, you know, 25 to 30 really targeted, specific, you know, opportunities to grow. You know, it's pretty simple on the Nextida product line to see that. It's pretty simple to see the Tessenderlo growth, what that'll help with and give us a platform there. I just approved expansion in Paraguay. I've approved an expansion into Wenzhou, China.
That's in David's business, and that's cause we're outta capacity. We're seeing the same thing in Brazil. There's no less than a 0.5 dozen plants in the U.S. right now that have to expand over the next 3-5 years. Why do we say 3-5? Why not tomorrow? Permitting's 1 year, construction's about 1.5 years, and then 0.5 years of commissioning. That's what we're looking at. We're also limited in resources, and what I mean by that, there isn't anybody out here that does this. When I say this is construction. We build our own equipment, we choose our sites. Permitting for wastewater and air is just it's a process. Ultimately, we've got some onesie-twosies, we call them tuck-in acquisitions out there.
We've still got some aging families that are facing the same environmental hurdles we do, that they've gotta decide, you know, whether they wanna stay in or not. I think that's true in the USA, that's true in North America, it's true in Eastern Europe. I didn't think I'd be talking about moving east into Europe, but we are. South America, there's one or two tuck-ins that could be bought that have, you know, two or three plants, but there's no 18 or 20 plant systems left out there. I don't see any. The SAF decision, it's engineered for out there if that market continues to grow. We'll see.
The portfolio's there, but I just wanna articulate to what Bob and we've got the team focused over the last couple years, disciplined capital allocation. Fancy word for saying spending money where we needed to spend money. We know very much from history that if we don't reinvest, you have real problems in this business. That happened in a couple places. We leave those decisions down there. I can't tell you if you need to replace an air condenser in Bastrop, Texas, or if the wastewater is at limits. Those are things that we kinda work through when they happen. We're playing a little defense there, we'll clean that up. Ultimately, we know what it takes to maintain the business.
You know, the flexibility is do we peel a little bit of that off and keep reinvesting? We have to for our customers today. I mean, we woke up here a month or two ago, something that we've known for years, but the chain speed of the chicken plant. That's how quick the birds hung and it goes by to be de-boned, if you will, or cut up. You know, they just gave us another 25%, 30% speed. They didn't give us any more rendering capacity. That doesn't happen tomorrow. You gotta build a feed mill, you gotta build the hatchery, then you gotta have the labor and all of that in place. That's what we're talking about.
Bob, you wanna clean up my mess that I just started?
That's pretty good. I mean, you know, maybe, Suann, if you go to, I think it's slide 50, maybe eight or so. It just kinda highlights some of these. The one right before that. Yeah. Some of the growth opportunities. You know, and like Randy said earlier, we are focused on organic growth. We've got, you know, massive growth in the poultry sector in the United States. We're gonna need more capacity. The cheapest way to add per metric ton of vintage capacity is to expand a plant when you've got wastewater treatment capacity available. Beyond that, we may have to build a plant.
Greenfielding a few things here and there is probably in order. Similarly in Brazil, you know, we may need to greenfield or consolidate. You know, we've got with the FASA acquisition, not all rendering plants in that acquisition were made equal. The bigger ones are more efficient, we have an opportunity to increase scale and consolidate. You know, collagen is a similar story. I think that's really the focus, the tuck-in acquisitions.
We are in a very different world than we were at the start of this year. Your partner is actually making high cetane diesel and sending it all across to Europe to make most profits. What I'm trying to get to is that, is there an inherent demand pull on renewable diesel in the U.S. market to offset the amount of ultra-low sulfur diesel we are exporting? Globally, 6 million barrels of refining capacity is offline, so you're not even making that much ultra-low sulfur diesel out there. Can U.S. actually fulfill some of its transportation needs by making more renewable diesel just because there's not much ultra-low sulfur diesel out there spare? Thank you.
I can start. Look, you know, I'm glad you brought that up, Manav. I mean, the value proposition for renewable diesel and quite frankly, ethanol as well, has never been stronger, I don't think, than what we're experiencing today. Imagine a world where we took out 6% of the diesel supply in the U.S. and 10.5% of the gas supply. Prices would be a lot higher than where they are today. Ultimately then, cost of production and competitiveness and all that, it matters a lot less when you really understand what the impact of the lack of that supply would have.
You know, specifically, I wanna talk just a little bit about the conflict and what that's done for the business, because I think a lot of people jump to the conclusion that, oh, the margins are great because oil prices are so high, and if that changed, it wouldn't be that great. We always expected the margins that we're seeing today, that we would see those margins because of the Renewable Volume Obligation that we got. What we didn't necessarily expect is that it would happen so quickly.
You know, we expected it would happen when there's ultimately compliance dates that require, you know, the buying of RINs so that we have convergence between actual demand and supply. What this conflict has done is it's somewhat bridged that gap, and it's gotten us there, and it's sort of highlighted the value proposition of those fuels. You know, I think the answer to your question is yes, we can do a lot for this economy and fill in a lot of gaps, and we're seeing that all around the world. Carlos, I don't know if you have-
I think you covered very well, and is what I tried to allude. Right now, renewables are very attractive, not only in the U.S. and the rest of the world because of what's going on. They're an attractive option of inclusion.
I mean, that's a I think Carlos set it up there, and maybe it wouldn't, you know. Renewable diesel made at Diamond Green Diesel today is cheaper than fossil diesel in Denmark and the continent. I mean, who would've thought that? That's what that's doing is dislocating capacity, keeping it home versus here, and trying to pull from here now, so. Okay. Ben?
Hey. Thank you, guys. Just maybe adding on to Manav's question. How has the response been just on the supply side to the RVO? Is everything running full out now, and just how does that impact the next, you know, short term, I guess, until more capacity comes back online? Thank you.
I would say it's been gradual, but, as Bob alluded to, we expected kind of a gradual increase in margins. What's going on in the Middle East and Iran has accelerated that. I think obviously there's some biodiesel plants that were not operating. Eventually our margins stay up here, they're gonna have to come online. There's too much incentive to be idle. That's why we say by 2027, there's probably more capacity that does come online. The plants that are operating will probably operate as much as they can for as long as they can. As people get used to running plants, they get better as well. Those marginal increases, when you aggregate everything, creates higher supply.
I don't think, Ben, I don't think it's gonna restart investment in the Houston Ship Channel and the $9 billion of plants that were planned down there. you know, clearly the Neste plant coming on in Rotterdam is 2027 sometime. you know, Shell's trying to sell their Rotterdam whatever's there, and BP abandoned, you know, RD business.
Good morning. Jeff Gates from Gates Capital Management. We appreciate your commitment to finally de-leverage the company in an upcycle, and I think the market appreciates that as well. I'm wondering on the operational side, are there businesses that you might consider exiting that aren't integrated that would reduce the commodity volatility in the next down cycle?
You want me to take that?
Yeah.
Yeah, I mean, look, it's not by accident that we focused today's presentation very much on rendering used cooking oil and collagen. I think, you know, Darling has been a very successful company. Certainly the investment in Diamond Green Diesel, like I talked about, has generated a lot of cash. It's given a lot of opportunities and options. There was some experimentation kinda getting into ancillary businesses and doing some things, what we look back and see is that when we stick to our core, we're really successful. We've got some other businesses that have been successful, but maybe they aren't as strategic. You know, in our last 10-K, we made it clear that we've got some assets that are held for sale. In the Q that went out last
Friday
Friday.
Friday.
We announced that we sold the majority of our trap business for $90 million. That's a good example of a business that, you know, we were good at and generated some decent EBITDA, but quite frankly, that becomes a financial transaction if it makes sense relative to expected returns. We've got some more of those kinds of opportunities that we think could generate some cash. It's, you know, when you look at the expected cash generation for the next five years, it's not necessarily extremely material. It's nice, but it's more the focus and the lack of distraction. I think that, you know, we've got a couple more of those types of things.
Hi, Andrew Strelzik from BMO. just wanted to clarify again on the operational improvements in the feed business that you articulated. Is that embedded in those assumptions, or does it change kind of the fat prices that you would need to get there? My other question is just on the priority uses of cash. I guess where does M&A actually kinda like stack up? I know you said you'll evaluate that as you get there, but you'll have a lot of cash. It was listed first. Is it the number one priority? I guess, how do you kind of tick off the cash use priorities?
First question first. Those assumptions are not really built into the mid-cycle. You know, that was more of a bit of an as is take where we are today, pay down debt to $3 billion, what does it look like, kind of a mid-cycle. If we get, you know, continued improvement from the Feed Ingredients segment, then that should change the outlook of that. As far as cash priorities, again, I think, what we wanna be really clear about is that we wanna get our debt down to $3 billion or below, and that has been our focus. You know, Randy's referred to it as an M&A holiday. You can see it with the, you know, the history of where we've, you know, managed our capital.
Once we get to that point, you know, it's gonna depend upon the outlook. I would say this, though. We, you know, we wanna continue to maintain a strong balance sheet with a great leverage ratio. That's always important in a business that is subject to commodity market forces. That's critical. Second, you know, we recognize that our peers, you know, are doing things with related to shareholder value initiatives that, you know, now, you know, where we are as a company, we need to consider. We're gonna evaluate that, and that's a priority to take a serious look at that. That's a discussion with our board, and we'll evaluate that.
I think the next priority, it's really on some of these organic investments that we have. You know, in order for 1 plus 1 to equal 3, it's really to round out this infrastructure that we've built and make it more and more efficient. We can either do that by, you know, investing in innage capacity per metric ton at a lower cost because we're expanding something or, you know, there's just a lower cost way to do it with the existing infrastructure, or there are commercial synergies because of the location that we have, the contracts we already have in place, the commercial destinations we can serve. We wanna really take advantage of the low-hanging fruit that's been created by, you know, buying and building out the global network that we have.
Yeah, Andrew, you know, Bob says it so eloquently and, you know, the reality is we are the buyer of last resorts of in the M&A world. You know, we started the presentation with the foundation is built value to be unlocked, clearly organic investment now as we optimize our global footprint is a far better return. The challenge with it is it you gotta go, you gotta start now, it's gotta be continuous because, you know, the capacity gets added, not rendering or Rousselot capacity. Capacity in the meat production business just doesn't ever stop right now. Yeah.
Hi, Everybody. Conor Fitzpatrick from Bank of America. One of the most defined uses of cash that you outlined is the transition from gelatin to collagen within the Food Ingredients business. To help demonstrate that, could you give us an idea of per ton or per facility CapEx and research and development intensity for that growth and expansion?
You wanna take that, Bob?
Okay. Per ton, it's probably lower than you might expect. You know, look, I will say this, that, you know, we continually ask ourselves if there's an opportunity to invest more capital to accelerate the rate of development of these products and the innovation of these products. The cost per metric ton annually that we put back to the business is, I mean, I don't wanna be one digit off, so I'm just gonna run the math quickly. It's roughly $100 a ton.
Hi. Thank you, guys, for doing this. Alexa Petrick, Goldman Sachs. I wanted to follow up on the market scenarios that you outlined, maybe a two-parter there. Can you talk a little bit about some of the macro assumptions that are running into your adjusted EBITDA per gallon? Also notably, as we think about the capital spend in each of those scenarios, it right now looks pretty constant, but can you talk about how you would think of adjusting that in those different environments?
That's a fair question. I think, you know, certainly in an upcycle type of environment, we might be a little more aggressive about CapEx. I think what we wanted to show with this slide is what's that maintenance CapEx obligation that we feel in order to keep our assets running in top shape? What is it that we need to do? Honestly, when it comes to this kind of CapEx, maintenance CapEx, you know, we're committed to keeping our assets at a Darling level condition irrespective of the cycle that we're in. There isn't a lot of fluctuation there.
I would say maybe there's more investment in some newer innovation things or some, you know, we might try some things, more, you know, additional things that we may not do in a environment where we're trying to be lean, but there isn't a big difference as far as that goes. As far as the Diamond Green Diesel environment that kinda gets us to a $0.92 versus $1.50, you know, at the end of the day, it's very hard to predict. I mean, I can't sit here today and tell you where our margin's going in the renewable diesel industry in the next year and a half, even though we've got an RVO that's clear.
Because there's just so many uncertainties still around what's the industry's ability to make product, and how much are they gonna make, and what are imports gonna be like, and what are other markets outside the U.S. gonna be? There's a lot of questions there. This just assumes a reasonable RVO with reasonable production obligations in the U.S. from both the renewable diesel sector and the biodiesel sector. Our understanding of where Diamond Green Diesel's margins are when a reasonable amount of biodiesel production needs to exist in the U.S., and we kinda back into this sort of a scenario.
Yeah, I think it's another little macro point that's out there. I think the world learned here in the last 30 days in the Iranian conflict how fragile the S&P still is in global fossil. You know, while the narrative on climate change and green may have moderated, I think it was a little bit of a wake-up call here that where green fuels need to play a role in the portfolio going forward. That was reassuring to me because the longer you listen to our president, the more you thought all these programs were gonna be dead, even though we knew that the RVO is farm policy.
You know, the 28 cycle is the one, if you think, of what could happen in the EPA right now, where's Lee Zeldin gonna be? Is he taking Bondi's job? His two lieutenants that did the program are going back to the private sector. Now we start over then with legacy staff. I don't think they ever go. They've proven they never go backwards to the, to what they've done for the farmer here. Clearly, you know, the whole world woke up when you realize you're not exporting soybeans to China.
It looks pretty solid, but once again, as just to Bob's comment on the down cycle, I mean, as we talked in the boardroom, and, you know, we could roll the movie back 3 years and, you know, show you charts that said, you know, Darling stock was never going below 60 again, and Diamond Green Diesel would never have margins below, you know, $0.80 a gallon. Boy, were we wrong. You know, at the end of the day, we hit a couple cycles there. The down cycle here is actually what the business ran pretty much last year.
That was with no RVO out there, and that was with some plant problems around the world that have all been fixed. That's why we You know, Bob said it's not worst case. It isn't, but it feels pretty solid, and then we should get uplift from there with the new products and then clearly an improved biofuel environment globally.
Hi, Pooran Sharma from Stephens. It sounds like you qualitatively took up your guidance on the business. April sounds really good. Does that mean we've started to see imports roll in now, or do we need some more margin to see that?
You guys wanna take that?
You're talking about renewable fuels?
Renewable fuels.
Yeah.
Sorry.
You wanna talk about that? I'm, yeah, I'm happy to jump in.
I mean, feedstocks imports for sure are coming in, and to an extent, renewable fuels should come in. You know, it's a margin environment that will drive that. Obviously, the data that we have today is as of March, right? It was right when the RVO was getting implemented, so the actual import data is not out there. Imports, especially for feedstocks are taking place.
Yeah, I would just say, I think if you take a look at Sabrina and the Bloomberg team's numbers on imports for the S&P, we need to accelerate that relative to where we are today. It would suggest either margins need to get better here for that to happen, or they need to get worse somewhere else where that product is otherwise going. We do think there's continued uplift opportunity there.
Oh, up here, Jillian.
Okay.
Hi, Jackson Coulis at Citadel. Thank you very much for putting this event together. If we can go back for the fifth time to slide 57 where you show the different scenarios. This shows even in a down cycle, you're generating very healthy cash flow. Something that you've demonstrated over the last two years. We appreciate and understand the commitment to deleveraging before considering your alternative uses of cash.
Once we're through that, what would prevent you from initiating a dividend or resuming larger share repurchases? This math would say, even in very difficult industry conditions, you can afford to pay $1- $2 a share dividend. My second question: On the $150 million to $300 million of upside in feed earnings as you reprice your contracts over time, should investors think about that as a one-time reset, or should longer term investors think about this as a business that can compound earnings over time as you offset inflation? Thank you.
I'll take the first part of that, Bob, and then I'll give you the second part of that.
Thank you.
It comes down to one word, Jackson, confidence. Our ability as a management team to stand in front of our board and have the same discussion we're having with you today, and to get them comfortable. I'm telling you from my standpoint, the meeting just wrapped up last week, the confidence level is much greater. You know, it was kind of, I think the verbiage was, "We're from Missouri, show me." So it gives us a whole different narrative. You know, what we wanted to show you was that's possible now, exactly what you said and articulated. You know, Bob's now I'm a less than $3 billion guy, and there's nothing magical about that.
you know, and you look at the mid-cycle and upcycle this year, you're gonna, you're gonna blow past that, is kind of what's underneath it. It gives the board the chance. we kind of wait, weigh the, you know, what do we have in the pipeline? Do we have to invest, you know, three new plants? Can we do it all? I think the answer is the flexibility to do it all is way different than it's been in the past.
Can we go back to the return on replacement value slide? Appreciate the question, Jackson. I think there's some of this that's sort of a one-time improvement. I mean, that's certainly when it comes to the operational efficiency, the commercial optimization. As we sort of figure out what the best destination markets are for our products, and we're hitting all those, and we're mixing and blending and optimizing and all that, I mean, you get to a point when you've maximized what you can do, and that's sort of what that $150 million-$300 million speaks to.
You know, you bring up a point that I didn't emphasize probably enough and that is even more important, and that is because of the competitive dynamics that I explained earlier, you know, talking about the high moisture in raw materials and comparing it to oilseed crush in China in 2011 to 2012, this business essentially if it's run well and we're disciplined about the way we operate it acts as an inflation hedge against the cost of construction. The nice thing about that, and the maybe the power of that doesn't jump out on the slide because we don't have actual numbers on there, but as EBITDA increases, dollar for dollar cash increases. That's exciting. That means the numerator in the calculation on, you know, returns is increasing.
When we compare that on an invested capital basis against book value of assets, the denominator is decreasing. While we wanna get to an appropriate return on replacement value and stay there, and stay there even as we live through you know, more and more inflation in the future, the implication there is that on assets that we've acquired in the past, we are gonna be significantly accelerating return on invested capital. That's, that doesn't come out in this slide, but you gave me an opportunity to say that, so I appreciate it. I don't think that a lot of agriculture-based, commodity-based businesses are able to say that about their business.
Yeah.
Any other questions? Okay.
I guess I'll close it up and, you know, As we started the foundation built, the future's unlocked, I showed you the three values, core values. There were two that I left off, and I'll leave you with a smile here. It's called family and fun. Bob and I are both honored to have our children in the back of the room today. Bob was also given a challenge today by his daughter that if he could sneak in a line, I would pay him $100. I believe you heard something about the Pink Pony Club. That was a bet. The values carry forward, and there's nothing more honoring than to have you guys and our children in the audience today. Thank you for your trust and support in Darling Ingredients.
Thanks.
Thank you.
For those of you here with us in New York, we do have lunch available for you. Feel free to grab some and come back in here. Great. Thank you.