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Text: Now, I would like to hand the call over to Randy.
It's great to have everybody here.
Over the trailing 12 months, Darling's Ingredients business has generated in excess of $4 billion in sales and now more than $1 billion of combined adjusted EBITDA.
To us, this is a significant breakthrough for all of our stakeholders and puts us on an accelerated path to continued growth across all of our business segments in the coming months and years.
Darling opportunistically repurchased approximately $76 million of common stock during the second quarter because we believe that our Diverse Green Global business will continue to appreciate in value in the near future.
We saw many records in Q2 in all segments and including our joint venture Diamond Green Diesel.
In total, our Global Ingredients business generated approximately $222 million of EBITDA and DGD produced $132 million, which is our half, making our combined adjusted EBITDA just shy of $354 million for the second quarter.
We are very excited about the anticipated start-up of the new 400 million gallon renewable diesel expansion in Norco.
We are approximately 60 days from the largest project of its kind to begin producing, one of the greenest hydrocarbons on the planet.
Also, we are pleased that the start-up of the 470 million gallon renewable diesel plant located in Port Arthur, Texas has now moved through the first half of 2023 for start-up.
Once Port Arthur is online, the DGD platform will have 1.2 billion gallons of renewable diesel production capacity and 50 million gallons of Green gasoline capability.
With that, now I'd like to hand it over to Brad to take us through the financials, then I'll come back and discuss our outlook and why we're raising our guidance for the balance of 2021.
We'll take a look at the income statement first, briefly.
Net income for the second quarter of 2021 total a $196.6 million or $1.17 per diluted share compared to net income of $65.4 million or $0.39 per diluted share for the 2020 second quarter.
Net sales increased 41.2% to $1.2 billion for the second quarter of 2021 as compared to $848.7 million for the second quarter of 2020.
Operating income increased 152.4% to $268.3 million for the second quarter of 2021 compared to $106.3 million for the second quarter of 2020.
The increase in operating income was primarily due to the $104.3 million increase in gross margin, which was a 48.2% increase in gross margin over the same quarter in 2020.
Adding to our operating income improvement was our 50% share of Diamond Green Diesel's net income, which was $125.8 million as compared to $63.5 million for the second quarter of 2020.
A quick comment on gross margin percentage as it continues to improve year-over-year and sequentially.
For the first six months of this year, our gross margin percentage was 26.5% compared to 24.8% for the same period a year ago, which comes out to a 6.8% improvement year-over-year.
We continued to experience higher protein and fats prices in the second quarter compared to the same period a year ago, while at the same time maintaining historically high volumes.
This better pricing environment and strong volumes are driving the improved results for the first half of 2021 and that trend, we believe, will continue for the balance of this year.
Depreciation and amortization declined $4.1 million in the second quarter of 2021 compared to the second quarter of 2020.
This decline is primarily in our Food segment where certain assets became fully depreciated and/or amortized by the end of 2020.
SG&A increased $8.9 million in the quarter as compared to the prior year.
The main drivers for the higher cost in the quarter were related to FX, travel and insurance increases.
Interest expense declined $2.7 million for the second quarter 2021 as compared to the 2020 second quarter.
Now turning to income taxes, the Company recorded income tax expense of $55 million for the three months ended July 3, 2021.
The effective tax rate is 21.7% which differs from the federal statutory rate of 21% due primarily to biofuel tax incentives, the relative mix of earnings among jurisdictions with different tax rates, and certain taxable income inclusion items in the U.S. base on foreign tax -- foreign earnings.
For the six months ended July 3 2021, the Company recorded income tax expense of $83.7 million and an effective tax rate of 19.2%.
The Company has also paid $25.3 million of income taxes as of the end of the second quarter.
For 2021, we are projecting an effective tax rate of 22% and cash taxes of approximately $20 million for the remainder of this year.
Our balance sheet remains strong with our total debt outstanding as of July 3 at approximately $1.44 billion and the bank covenant leverage ratio ended the second quarter at 1.71 times.
Capital expenditures were $65.3 million for Q2 2021 and totaled $126.1 million for the first six months of 2021, which is in line with our planned spend of approximately $312 million on capital expenditures for fiscal 2021.
As a reminder this capex spend does not include our share of the capital spend at Diamond Green Diesel, which continues to be funded by internal resources at DGD.
As our Global Ingredients business and Diamond Green Diesel continues to perform well, we are, once again, updating our combined adjusted EBITDA guidance for 2021.
Through the first half of 2021, we have produced $638.5 million of combined adjusted EBITDA and we believe based on what we see in our markets at the present time, the second half performance of 2021 will be as strong as the first.
DGD has sold 162 million gallons of renewable diesel in the first half of 2021 and with DGD II starting up in Q4, we should see over 200 million gallons sold in the back half of 2021.
I do want to point out that we would expect the EBITDA margin per gallon for DGD to normalize back into the original guidance range that we gave you of $2.25 to $2.40 per gallon over the next six months.
And, I would also add, that's not a bad thing.
Earning $2.97 EBITDA per gallon in the first half was well above our expectations.
And with margins normalizing in the second half, DGD can still put up EBITDA per gallon north of $2.50 per gallon during all of 2021.
Remember that our focus at DGD is to improve our efficiencies, lower our carbon index scores and innovate production of renewable diesel and other renewable products that we can make like renewable naphtha, and soon, sustainable aviation fuel.
With the largest platform in North America, DGD will continue to take full advantage of its first-mover position for a long time to come.
Now that we are less than five months away from 2022, we think it might be time to frame up our expectations for the next calendar year.
With our current Global Ingredients business approaching $800 million of EBITDA for 2021, we believe that our base business could grow in the range of 5% to 10% for 2022.
Our assumption for this growth is continued higher demand for animal proteins and fats and continued growth of Peptan product sales around the globe.
We anticipate that DGD will earn $2.25 per gallon in 2022 and at a 700 million gallon sold rate that puts Darling's half of DGD EBITDA at approximately $800 million.
Our DGD outlook for 2022 is based on DGD's ideal location, our incredibly flexible logistical platform, our processing capabilities, and the fact that we have by far the most experienced and capable team of people, which makes DGD the lowest cost producer of renewable diesel in the world.
Adding it all up, Darling Ingredients combined adjusted EBITDA for 2022 should be in the range of approximately $1.6 billion to $1.7 billion.
For a quick comparison, last year we reported $841.5 million of combined adjusted EBITDA.
Where we stand today, the 2022 estimate is double what we earned in 2020.
Yes, our team needs to execute to deliver this performance next year.
And I am very confident that they will, because for the last half-year and -- year-and-a-half, our 10,000 employees have delivered stellar results in what has been one of the most challenging environments a business or a community or our people and people around the world have ever faced with the ongoing pandemic.
With that, let's go ahead and open it up to Q&A, Andrea.

user
compname posts q2 earnings per share of $1.17.
q2 sales $1.2 billion versus refinitiv ibes estimate of $1.11 billion.
q2 earnings per share $1.17.

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