Earnings Call Transcript
DARLING INGREDIENTS INC. (DAR)
Earnings Call Transcript - DAR Q3 2021
Operator, Operator
Good morning and welcome to the Darling Ingredients Inc. conference call to discuss the Company's Third Quarter 2021 results. After the speakers' prepared remarks, there will be a Q&A period and instructions to ask a question will be given at that time. Today's call is being recorded. I would now like to turn the conference over to Mr. Jim Stark. Please go ahead.
Jim Stark, VP of Investor Relations
Thanks, Brad. Welcome to Darling Ingredients third quarter earnings call this morning. Participants on the call are Mr. Randall Stuewe, Chairman and Chief Executive Officer, Mr. Brad Phillips, Chief Financial Officer, Mr. John Bullock, Chief Strategy Officer, and Ms. Sandra Dudley, Executive Vice President of Renewables in U.S. Specialty Operations. There's a slide presentation available, and you can find that presentation on the investor page under the Events and Presentations link on our corporate website. During this call, we will be making forward-looking statements, which are predictions, projections, and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in yesterday's press release and the comments made during this conference call, and in the risk factors section of our Form 10-K, 10Q, and other reported filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now, I'd like to hand the call over to Randy.
Randall Stuewe, CEO
Hey, thanks, Jim. Good morning, everybody and thanks for joining us this morning. Our core business continues to perform very well. For the third quarter, we reported combined adjusted EBITDA of approximately $290 million of which $230 million was directly from our Global Ingredients business. Like many companies around the world, we continue to face challenges related to labor, transportation, and higher costs of operations. Our team continues to execute our business strategy and operate our facilities with great efficiency while improving our gross margin year-over-year and sequentially from the second quarter of this year. I want to thank all of our employees who continue to dedicate their efforts to navigate the challenges we face in our daily responsibilities. As it has been well stated, Hurricane Ida took a significant toll on DGD's performance in Q3. For the first time in over eight years of operation, DGD was shut down to protect the employees and the assets of the facility from this significant storm. The great news is there was little damage to the facility which took a direct hit from Ida. With the days of shutdown and the restart process, we lost approximately 17 days of renewable diesel production. Additionally, on the positive front, the DGD Norco expansion is running well and is nearing its production capacity, putting DGD on track to sell 365 million gallons or more in 2021. We believe DGD could sell over 700 million gallons of renewable diesel in 2022, as the engineering team continues to fine-tune the performance of this expansion. The achievements at Diamond Green Diesel are only possible because of the hardworking employees, contractors, and service providers at the facility. While many of these dedicated individuals suffered damage to their personal property and disruption to their daily lives from the hurricane, their resilience to return to work and get the plant back into operation and finish the construction of DGD2 was incredibly important and exceptional. We truly appreciate their tenacity for getting the job done. Also, during the quarter, Darling repurchased approximately $22 million of common stock. For year-to-date, we have purchased approximately $98 million worth of stock. As of now, our Global Ingredients business has earned approximately $628 million of EBITDA, putting us at an annualized run rate of approximately $850 million for 2021. With that, I would like to hand it over to Brad to take us through the financials and then I'll come back and discuss our outlook and how we intend to finish up for 2021. Brad?
Brad Phillips, CFO
Okay. Thanks, Randy. Net Income for the Third Quarter of 2021 totaled $146.8 million or $0.88 per diluted share compared to net income of $101.1 million or $0.61 per diluted share for the Third Quarter of 2020. Net sales increased 39.4% to $1.2 billion for the third quarter of 2021 as compared to $850.6 million for the third quarter of 2020. Operating income increased 61.4% to $205.7 million for the third quarter of 2021, compared to $127.5 million for the same quarter of 2020. The increase in operating income was primarily due to the $114.1 million increase in gross margin, which was a 53.8% increase in gross margin over the same quarter in 2020. Our operating income improvement was affected by the lower contribution of our 50% share of Diamond Green Diesel's net income, which was $54 million in the third quarter of 2021 as compared to $91.1 million for the same quarter of 2020. As Randy mentioned earlier, Hurricane Ida impacted gallons sold in Q3, resulting in lower earnings for DGD during the quarter. Our gross margin percentage continues to improve year-over-year and sequentially. Q3 2021 gross margin was 27.5%, which is the best result we have had in the last ten years. For the first nine months of this year, our gross margin percentage was 26.8% compared to 24.9% for the same period a year ago, reflecting a 7.6% improvement year-over-year. Gross margins have continued on a positive trend for the last four years as our management team across the business has worked to increase profitability. Depreciation and amortization declined by $7.9 million in the Third Quarter of 2021 when compared to the Third Quarter of 2020. SG&A increased by $7.3 million in the quarter as compared to the prior year, and declined by $1.9 million from the previous quarter. The higher costs in the quarter compared to a year ago were primarily related to labor, travel, and other expenses. Interest expense declined by $3.4 million for the Third Quarter of 2021 as compared to the 2020 Third Quarter. The Company recorded an income tax expense of $42.6 million for the three months ended October 2, 2021. Our effective tax rate is 22.3%, which differs from the federal statutory rate of 21% primarily due to biofuel tax incentives and the relative mix of earnings among jurisdictions with different tax rates. For the nine months ended October 2, 2021, the Company recorded an income tax expense of $126.3 million and an effective tax rate of 20.2%. The Company has paid $36.9 million in total income taxes year-to-date as of the end of the third quarter. For 2021, we are projecting an effective tax rate of 22% and cash taxes of approximately $10 million for the remainder of the year. Our balance sheet remains strong with total debt outstanding as of October 2nd at $1.38 billion, and the bank covenant leverage ratio ended the Third Quarter at 1.6 times. Capital expenditures were $65.6 million for Q3 2021 and totaled $191.7 million for the first nine months of 2021. This capex spend does not include our share of the capital spend at Diamond Green Diesel, which continues to be substantially funded by internal resources at DGD. Now, I will turn the call back over to you, Randy.
Randall Stuewe, CEO
Hey, thanks, Brad. As our Global Ingredients business and Diamond Green Diesel continue to perform well, we are maintaining our guidance for 2021 of combined adjusted EBITDA of $1.275 billion as indicated in our press release yesterday. There is strong momentum for our global platform, and we look to finish our best year in history and build on that energy going into 2022. I want to spend a few minutes on capital allocation. Over the last couple of years, we have outlined our best use of cash at Darling through five key points, and those have not changed. These key points are investing in DGD, growing our core business, reaching an investment-grade debt rating, meaningful share repurchases, and potentially starting a dividend policy for our shareholders. We believe that our future cash generation will be large enough to fulfill all of these points in our capital allocation plan, and we continue to execute this plan as our free cash flow generation continues to grow. I want to note that we made the decision earlier to accelerate the construction of DGD Port Arthur, Texas, which will increase capital spending on DGD in 2022. That does push out the potential size of distributions from the venture in 2022, but increases the potential for 2023. Furthermore, our M&A funnel of opportunities to grow our low CI feedstock footprint globally and increase our green bioenergy production capabilities is rising. This may adjust priorities in our capital allocation plan but will not limit our ability to execute on all points mentioned earlier. With that, Grant, let’s open it up to Q&A.
Operator, Operator
We will now start the question-and-answer session. We ask that you limit yourself to two questions while in the question queue. At this time, we will pause briefly to gather our roster. Our first question today comes from Adam Samuelson with Goldman Sachs. Please go ahead.
Adam Samuelson, Analyst
Yes. Thank you. Good morning.
Brad Phillips, CFO
Good morning.
Randall Stuewe, CEO
Morning.
Adam Samuelson, Analyst
I guess my first question is around policy. Just thinking about some of the new incentives that are making their way through Congress in the Build Back Better Act. Specifically, the sustainable aviation fuel tax credit and then that clean fuel production credit post-2026 and beyond. Randy, I'd be interested to hear how you see the opportunities for DGD around both of those and what the longer-term potential contribution of those would be to DGD.
Randall Stuewe, CEO
Okay, Adam, I'll let Sandy take a shot at this for us.
Sandra Dudley, Executive VP of Renewables
Hey, good morning, Adam. First of all, I think these new incentives are very supportive of the biofuels industry. It's a long-term commitment that demonstrates that biofuels are an important way to reduce emissions, which we have known for a long time but often do not receive recognition for. In terms of the BTC expansion, there are two things that are positive for Darling. First, there's the BTC extension, which is a four-year extension at a dollar per gallon. It is treated in the same manner as it is today, which is very positive. After that, you have the clean fuel production credit, which goes from 2027 to 2031, and possibly to 2034, as interpreted. This becomes a production credit with a base of a dollar per gallon adjusted annually for inflation and subject to a CI adjuster before there's a step-down in credit value. That step-down is based on whether certain emissions reductions have taken place or by the year 2031. This all represents enormous support for what we've been doing today and what we expect to do going forward. In terms of SAF, there is also a credit for four years. What we're reading is it would be $1.25 per gallon up to an additional $0.50 per gallon depending on the CI. You'll have to demonstrate a life cycle reduction of at least 50% as determined by an approved methodology. After 2026, the clean fuel production credit kicks in for 2027 to 2031, potentially lasting till 2034, providing a production credit that would rise from $1.25 to $1.75, adjusted yearly for inflation and subject to a CI adjuster as well. All of this is supportive of reducing emissions and aligns with the direction that Darling and DGD are headed.
Randall Stuewe, CEO
Adam, I think Sandy did a detailed job explaining. Overall, the legislation in the Build Back Better Act has a high probability of moving forward and is probably the most bullish thing we’ve seen in years, providing certainty of our participation in the climate change discussion. I want to ensure you picked up on the emphasis Sandy placed on 'production credit.' It significantly favors U.S. assets.
Adam Samuelson, Analyst
That's really helpful color, Sandy and Randy. As you look at DGD, with the Norco expansion nearing completion and Port Arthur coming online in approximately 18 months, how are you thinking about opportunities to reduce CI scores of your own production and what it would take to start making SAF?
Sandra Dudley, Executive VP of Renewables
Yes. We are constantly striving to reduce our CI scores. There are several ways we are doing that, starting with our feedstock. We are exploring ways to enhance our feedstocks to help reduce CI scores. Internally, we continuously assess and adjust our processes to facilitate this. So, it's an ongoing focus for us. Regarding SAF, we are excited about the potential but need the right economics. We have reviewed the necessary capital, studied yield profiles, engaged with the logical markets, conducted preliminary engineering, and assessed the economics. The Build Back Better Bill seems committed to supporting the SAF industry, which is encouraging. However, we need to see the finalized legislation before making decisions. Assuming favorable economics, we look forward to expanding our role in low-carbon solutions. Our past actions have shown that when we announce something, it’s well-considered and serious, rather than just a press release or an ESG story.
Adam Samuelson, Analyst
I appreciate all that color. I'll pass it on. Thank you.
Operator, Operator
Our next question comes from Prashant Rao with Citigroup. Please go ahead.
Prashant Rao, Analyst
Hi. Good morning. Thanks for taking the question.
Randall Stuewe, CEO
Morning.
Prashant Rao, Analyst
I wanted to pick up on something you mentioned, Sandy, about the ESG narrative, along with the legislative environment broadly from this administration. Darling has a compelling ESG and sustainability story. Randy, you pointed out that 2022 might be the year to clarify messaging and set market expectations. Can you help us think about how you're addressing not only carbon reduction but also land use, water use, and other ESG factors, and how you might leverage that?
John Bullock, Chief Strategy Officer
Yes, this is John. It's an interesting point. We have long viewed ourselves as an ESG company because almost everything that Darling does is a carbon capture story, which is positive given the global need to reduce carbon emissions. What's exciting is not just that we happen to be in the right position at the right time, but the fact that we are actively helping the world reduce carbon emissions with initiatives like Diamond Green Diesel and our internal efforts to lower water usage. We can recapture a significant amount of water from our rendering operations, contributing to our broader ESG narrative. Our ESG story has been evolving, and we are working diligently to clarify our messaging around it because, ultimately, no other company has moved as proactively to support carbon emission reductions as Darling has.
Randall Stuewe, CEO
Absolutely, John. Prashant, as we noted during your conference, in 2022, we will spend more time discussing our global initiatives around water usage reductions, exploring new technologies in our gelatin business, which is a significant water consumer, and strategies for improving energy efficiency. Economic factors have made this more urgent as energy costs have increased dramatically in the past year, drawing more attention to these issues. Additionally, we need to be smarter about labor as the market becomes more competitive. We appreciate you highlighting this and look forward to sharing more in 2022.
John Bullock, Chief Strategy Officer
Thanks, John and Randy. Just a quick follow-up regarding capital allocation for the coming year. Randy, it’s great to hear the reconfirmation of your strategy. In light of the acceleration of Port Arthur and potential distribution delays until we see DGD3 operational, what is your appetite for inorganic growth in 2022, and what flexibility do you have on the balance sheet if needed for potential acquisitions?
Randall Stuewe, CEO
That’s a great question. I'm facing a lot of inquiries about this. We are clearly seeing an increase in M&A opportunities worldwide compared to the last three to four years. While I can’t disclose specifics yet, we are committed to building a moat around our machine, which is fundamentally our significant ESG story. We aim to enhance our low-carbon feedstock footprint globally. The acceleration of DGD3 is a blessing and a challenge, as it pushes our cash-generation capacity back to early '23. In the meantime, we have ample room within our credit agreement to pursue our objectives in 2022, and potentially some modifications to it if required, as Brad indicated with our leverage ratio being a manageable 1.6 times.
Prashant Rao, Analyst
Great. Thanks, Randy. I appreciate your time. I'll turn it over.
Operator, Operator
Our next question comes from Tom Palmer with J.P. Morgan. Please go ahead.
Tom Palmer, Analyst
Good morning, and thanks for the question.
Randall Stuewe, CEO
Good morning.
Tom Palmer, Analyst
We've seen animal fat prices increase, while used cooking oil and corn oil haven't followed suit. What is your view on this dynamic? Do you expect the price gap for UCO and corn oil to converge with tallow or are there constraints to consider affecting other feedstock pricing?
John Bullock, Chief Strategy Officer
Yes, this is John. Generally, we are seeing that waste fats are increasingly valued as we seek to reduce carbon emissions in our fuel supply. However, I wouldn't react too significantly to short-term fluctuations in the relative pricing of UCO, corn oil, and animal fats — they each carry unique carbon intensity scores. Yet, they provide a much better value compared to vegetable oils in the low-carbon intensity fuel cycle. This market is substantial and continually evolving. Short-term variations between fat prices should not overly concern us. The essential idea is that waste fats hold higher value in low-carbon fuel markets, which is a fundamental truth now and for the foreseeable future.
Randall Stuewe, CEO
Tom, I agree with John’s points. As Sandy mentioned, SAF will provide preferential treatment to low-carbon feedstocks. We are trading well above the caloric value of corn, which has always set the benchmark for pricing. DGD2 purchases 40% of North America's feedstock today. Prices are firm, and we are confident there's enough feedstock available to support our goals for both DGD2 and DGD3.
Tom Palmer, Analyst
Thanks for that. Last quarter, you provided an EBITDA outlook for 2022 between $1.6 and $1.7 billion—$850 million from the ingredients business and $800 million from DGD. Is this outlook still accurate, or has the increased production affected your projections?
Randall Stuewe, CEO
We are still on track. There have been fluctuations in margins due to disruptions from Hurricane Ida and increases in hindrances throughout logistics. However, we believe we will perform as stated. The base business for this year should finish up around $850 million, with expectations of $700 million from DGD next year, set at roughly $2 a gallon at 700 million gallons.
Tom Palmer, Analyst
Great. Thank you.
Operator, Operator
Our next question comes from Manav Gupta with Credit Suisse. Please go ahead.
Manav Gupta, Analyst
Hey guys. I'm going to ask a policy-based question. You engage with CARB regularly and have discussions with their high-level officials. There are some estimates suggesting an influx of projects coming online, and some suggest that LCFS prices could dip to $80, which would not be positive for the LCFS program. In your opinion, given your discussions with CARB, do you believe they will support a reasonable carbon price that secures returns for investors in these low-carbon projects?
Randall Stuewe, CEO
Sandy.
Sandra Dudley, Executive VP of Renewables
Manav, this is Sandy. I realize everyone is focused on LCFS credit prices these days and the shifts they have taken. In Q2, we saw LCFS exceed deficit, but recently, there has been a general decline. We've noted decreased gasoline and diesel demand in California compared to historical levels, alongside similar trends in Europe. These factors contributed to an increase in renewable diesel volumes shifted towards California, leading to increased imports and pressure on the market. We have seen a rise in credit generation across various categories. It's also important to note that some projects have faced delays or cancellations. We've recently learned that Governor Newsom has called for carbon neutrality by 2035, a significant target requiring substantial carbon reductions. CARB is reportedly considering ramping up its carbon reduction targets. Therefore, while there are temporary trends in the LCFS, I don't believe we are witnessing a significant inflection. There are several positive developments that should support credit prices in the future; however, we will continue to monitor the situation.
John Bullock, Chief Strategy Officer
To add, we are excited to see that the LCFS credit market has not faced maximum ceiling pricing challenges. This development will aid long-term low-carbon fuel programs in other jurisdictions and encourage California to increase its mandates. The new low-carbon alternatives entering the market create positive momentum. As more government entities adopt low carbon fuel standards whereby California leads the way, it positively impacts our position with Diamond Green Diesel and Darling as a supplier of low-carbon feedstocks.
Manav Gupta, Analyst
Thanks for taking my questions. It’s impressive how you've maintained your annual guidance despite setbacks from Ida.
Operator, Operator
Our next question comes from Ben Bienvenue with Stephens. Please go ahead.
Ben Bienvenue, Analyst
Hey, thanks. Good morning, everybody.
Randall Stuewe, CEO
Good morning.
Ben Bienvenue, Analyst
I wanted to follow up on Adam's questions around SAF. I know we're still ramping DGD2 and have DGD3 ahead. Sandy, you mentioned needing clarity around policy to support the production economics of SAF. Additionally, John, you mentioned having adequate feedstock availability to support the ramp-up of DGD2 and DGD3. Given production economics are key, how does feedstock availability factor into your decisions regarding possible SAF involvement?
Randall Stuewe, CEO
Go ahead, John.
John Bullock, Chief Strategy Officer
Are you asking whether there will be enough feedstock to manage both renewable diesel and SAF production? We essentially have two paths. One option is to repurpose some of our current or expanding renewable diesel capacity for SAF production when desired. Meanwhile, we could also choose to develop DGD Port with some of its product output focused on SAF as well. Both routes remain open to us in the future. However, our inclination is that if we want to move quickly into the SAF space, we would likely begin by diverting some of our existing renewable diesel capacity. We are prepared and have conducted our homework. Once we finalize policies, we will convene with our partners to discuss our course of action. The most rapid transition would probably involve repurposing some renewable diesel production towards SAF if we choose to act swiftly.
Ben Bienvenue, Analyst
Thanks, John, and I understand. Shifting gears a bit, I wanted to discuss the food ingredients business, which has steadily expanded margins. This segment seems underrepresented relative to DGD enthusiasm. Where do we stand on potentially continuing to grow margins in this area?
Randall Stuewe, CEO
Yes, Ben, this is Randy. We have indeed been parallelly focusing on transforming the Russillo business, transitioning from a gelatin supplier to a collagen company. This involves a multi-faceted approach, particularly with collagen peptides now available on shelves globally, with notable growth potential evident in North America and Europe. We have devoted substantial efforts towards innovation regarding collagen peptides over nearly nine years, and now we are implementing our plans to expand in our current operations while contemplating new facilities. This initiative will unfold over the next three to five years, during which we expect strong margin expansion and growth. The collagen peptide market faced some headwinds due to COVID as supply chains were disrupted. Presently, we are experiencing some challenges in South America, where certain raw materials have surged in price by up to 300% due to declining cattle processing capacity amidst labor shortages compounded by COVID impacts. Nevertheless, we forecast great potential for growth in the coming years, positioning us for earnings growth as we expand our offerings.
Ben Bienvenue, Analyst
Thank you. Best of luck with the rest of the year.
Jim Stark, VP of Investor Relations
Thank you.
Operator, Operator
Our next question comes from Sam Margolin with Wolfe Research. Please go ahead.
Sam Margolin, Analyst
Good morning.
Randall Stuewe, CEO
Morning.
Sam Margolin, Analyst
I wanted to follow up on the Ingredients M&A situation. In prior discussions, you mentioned how private industry valuations were prohibitively high relative to Darling's valuation, creating a waiting pattern until valuations align. Are you observing any shifts indicating that private acquisition targets’ valuations are coming down? Alternatively, are there synergies and value creation plans that Darling has been actualizing to unlock future value?
John Bullock, Chief Strategy Officer
Yes, this is John. I don’t believe there’s a significant change yet. We’ve noted that when valuations are inflated, we still have the option to build, as we've done extensively with Diamond and our core operations. Over the last four to five years, we've had a continuous stream of four to six facilities undergoing major expansions or new builds, and we are not finished yet with Diamond Green Diesel ventures. I anticipate us being proactive participants in potential acquisitions as opportunities arise. However, we will maintain our price discipline. Should valuations remain exorbitant, we will hold back. Nonetheless, I expect us to engage actively in this upcoming opportunity round.
Randall Stuewe, CEO
Correct, John. As we explore various businesses globally, please remember that aside from the period since last December, there have been notable difficulties for businesses globally, but this year has improved significantly. Family decisions on business sales can be influenced by market conditions, and we're beginning to see that shift in the market. Plus, we have the capability to make the most out of by-products from the slaughter industry and add new product streams, providing us a unique opportunity to integrate these companies to enhance their value.
Sam Margolin, Analyst
Thank you for that perspective. Lastly, could you elaborate on the ingredients margins? As rendered fats experience price increases, do you think your suppliers will take a portion of that margin, limiting your margin expansion?
Randall Stuewe, CEO
As we’ve mentioned for about 18 years, a significant portion of our raw material procurement is on a shared commodity basis, so our suppliers are already benefiting from the higher CI and corresponding values. Our margin expansion originates mainly from specialty products and capabilities we’ve implemented. Margin pressure can arise from energy prices, labor costs, and so on, but most of our sales prices are unaffected by prevailing inflationary trends. The primary challenges to margin growth relate to our ability to recover operating costs through operational adjustments.
Sam Margolin, Analyst
Got it. Thank you so much. Have a great day.
Operator, Operator
Our next question comes from Craig Irwin with Roth Capital Partners. Please go ahead.
Craig Irwin, Analyst
Good morning, and thanks for taking my questions. Randy, $95 million higher feed segment margins are a wonderful indicator. Approximately two-thirds of this uplift was derived from fats and used cooking oil purchases. Can you discuss the primary drivers of this margin expansion and whether DGD2's commissioning has fully impacted market conditions for fats and oils? I'm aware that biodiesel producers grew from the supply chain disruption caused by Ida. How do you see this dynamic playing out for operations in Q4?
Randall Stuewe, CEO
Randy here, I'll team up with John on this. In broad strokes, both North America and internationally, fat prices are robust, reflecting strong demand for low CI feedstocks. The intricacies of the market were illuminated by Hurricane Ida, showcasing the fragility of this sector. DGD's 17-day shutdown meant not just idling production but halted logistics because electricity loss stalls unloading railcars. Consequently, we postponed shipments, contributing to market volatility. Nevertheless, the fat prices have rebounded as the supply chain stabilizes. On the protein side, specialty proteins perform strongly due to robust pet food demand despite logistical challenges affecting the transition from primary markets to end consumers. Our outlook for 2022 indicates steady fat prices and possibly improved protein margins based on the global crop yield outlook.
Craig Irwin, Analyst
Thank you for that explanation. I have a follow-up regarding the renewable diesel plants slated to come online. If we estimate that only half of these will be functional, several companies are courting feedstock suppliers, targeting long-term agreements to mitigate CapEx sunk costs necessary for processing at their facilities. Are you engaged in dialogue with any of these speculative plants, or could there be a possibility for long-term take-or-pay deals with third parties?
Randall Stuewe, CEO
John, do you want to take that?
John Bullock, Chief Strategy Officer
Are you suggesting that Darling might enter into contracts with new entrants in the renewable diesel sector? Let me clearly say that we will not do that. We will not ally with companies that would compete against Diamond Green Diesel. There’s much conversation about how to replicate what we’ve established at Diamond Green Diesel. But our plant’s strategic position with superior operational capabilities and logistics makes it the best destination for fats in North America. Discussions about alternate deals are popular, but solid economics prevail. Importantly, our fat suppliers will gain competitive margins from renewable diesel success, reaffirming their commitment. But I will not guarantee that I will invest capital and forfeit margin to others who did not incur costs. Their paths and economics do not correlate with ours.
Randall Stuewe, CEO
Exactly, John. It's a real estate-centric model: location, location, location. Diamond Green Diesel stands out as it has the capacity to readily import fats globally onto our property. Many competing projects are partnering with soybean aggregators who have historical pricing norms which may pin them down to localized limitations. We don't fear that; our feedstock acquisition position has a distinct advantage.
Craig Irwin, Analyst
A compelling perspective. I appreciate it. Thank you.
Operator, Operator
Our next question comes from Matthew Blair with Tudor, Pickering, Holt. Please go ahead.
Matthew Blair, Analyst
Good morning. Congrats on the strong results. Randy, you had comments regarding capital expenditures for 2022. I’m hoping to clarify the expected spend at DGD next year. Initially, we anticipated about $350 million, but you’ve suggested it may be more. Also, can you address estimates for Darling's standalone capex in 2022?
Sandra Dudley, Executive VP of Renewables
I believe that one’s for me.
Randall Stuewe, CEO
Let’s stick with you on capital spend for DGD for 2022.
Sandra Dudley, Executive VP of Renewables
The capital spend for DGD for 2022 should be around $800 million.
Matthew Blair, Analyst
Around $800 million?
Sandra Dudley, Executive VP of Renewables
Yes, that's what I meant.
Randall Stuewe, CEO
And for our base business, we expect spend to range from $275 to $300 million.
Matthew Blair, Analyst
So, approximately $100 million for DGD and $275 to $300 million for Darling standalone? Sounds good. Also, Randy, you reiterated the overall EBITDA guidance for 2021. Do you have updates regarding segment levels? If we understand the past numbers, does it imply a decline in feed, while food should improve, is that accuracy?
Jim Stark, VP of Investor Relations
Matthew, this is Jim. The upside remains in the Feed segment, while Food packages will likely align with earlier forecasts of around $200 million for the year, maintaining performance in the Fuel segment.
Matthew Blair, Analyst
Thank you.
Operator, Operator
Our next question comes from Ken Zaslow with Bank of Montreal. Please go ahead.
Ken Zaslow, Analyst
Good morning, guys.
Randall Stuewe, CEO
Morning.
Ken Zaslow, Analyst
A couple of follow-ups: what led to decisions around share repurchases, and where do you stand on this in the future? Particularly since your stock has faced some pressure.
Randall Stuewe, CEO
The board authorized a $200 million share repurchase program, and we've utilized $98 million to date. We intend to maintain our opportunistic purchasing strategy as we deem fit and expect to continue this behavior moving forward. While we have many great shareholders, some have low average positions, which has recently put pressure on the stock. The outlook remains positive, though sizable block trades can cause instability amid active trading.
Ken Zaslow, Analyst
Got it, thank you. One final question on the pricing dynamics. Are you fully capturing the rise in prices, or is there room for refinement? Is it just a margin shift based on expanded product offerings?
Jim Stark, VP of Investor Relations
Are we still in the process of adjusting fees and services?
Randall Stuewe, CEO
We're on track and continue to renegotiate contracts. We're capturing margins, and there's ongoing work to expand margins beyond simply shared contributions with large slaughterhouses. This effort has spanned a two to three-year process focusing on enhancing margins from our services, but the key challenge remains in tackling rising labor and energy costs.
Ken Zaslow, Analyst
Appreciate the explanations, thank you.
Operator, Operator
Our last question will come from Ben Kallo with Robert W. Baird. Please go ahead.
Ben Kallo, Analyst
Hey, everyone. Good morning. Randy, I appreciate your guidance for future outlooks. My first query pertains to carbon intensity. How does this impact pricing and costs? Could you elaborate on that? Also, regarding South America, we often hear concerns about feedstock availability—how do you plan to maintain your competitive lead there? Finally, you've frequently been active in acquiring family-owned businesses; how's that aspect evolving?
Randall Stuewe, CEO
Sandy, would you care to address the carbon intensity point?
Sandra Dudley, Executive VP of Renewables
Regarding CI, in general, lower CI feedstocks typically price higher. Lower CI feedstocks also enable greater margins, which has been the trend we are observing. While there might be a higher cost upfront, they yield superior returns.
Ben Kallo, Analyst
In essence, if I understand correctly, you'd need two gallons from vegetable sources to equal one from reclaimed sources, correct?
John Bullock, Chief Strategy Officer
To clarify, when buying renewable fuels, a gallon from waste fats commands a higher premium than a gallon from vegetable oils due to reduced carbon intensity, thereby resulting in elevated margins for Darling.
Randall Stuewe, CEO
Correct; that's essentially a gallon of compliance.
John Bullock, Chief Strategy Officer
Indeed.
Ben Kallo, Analyst
Thank you. Moving on to feedstock acquisition, how are you faring there? Given your solid advancements in this area, what are the next steps?
Randall Stuewe, CEO
We are aggressively pursuing this opportunity, as the complexities of the market reveal themselves. The capability to scale extraction will enhance our competitive edge over time, as we source feedstock globally. Multiple opportunities are appearing in Europe, Asia, and South America due to evolving regulations. In addition, we have refined our acquisition strategy to focus on identifying strong family-run businesses that align with Darling's values and management approaches.
Ben Kallo, Analyst
Sounds good. Appreciate your insight.
Sandra Dudley, Executive VP of Renewables
Thank you.
Operator, Operator
Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Mr. Randall Stuewe for any closing remarks.
Randall Stuewe, CEO
Thanks, Grant. I appreciate everyone’s participation today. I hope you all continue to stay safe and enjoy a wonderful holiday season. There are details concerning upcoming events available in the IR deck, and we look forward to speaking with you again soon.
Operator, Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.