Darling Ingredients (DAR) Piper Sandler 25th Annual Energy Conference summary

Market overview and industry dynamics

• Renewable diesel market is experiencing oversupply and industry rationalization, with margins dropping and less efficient producers running at a loss.

• Transition from blender's tax credit to producer's tax credit and slow LCFS rulemaking are key factors impacting the market.

• Imports no longer qualify for the producer's tax credit, leading to a shift back to domestic feedstocks and a reduction in imported biofuels.

• Regulatory changes and increased RVO targets are expected to drive both supply reduction and demand growth in the coming year.

• Industry is positioned to favor the most efficient, vertically integrated producers with flexible feedstock capabilities.

Regulatory and policy environment

• EPA is expected to announce the 2026 RVO by April or May, with industry advocating for a 2 billion gallon increase.

• Producer's tax credit is secure by law, with clear financial impact and direct cash flow benefits for qualifying producers.

• LCFS amendment changes are expected to be implemented between October 1 at the latest or retroactively to January 1, pending final approval.

• Regulatory uncertainty remains, but the outlook is positive for biofuels and renewables due to strong political and agricultural support.

• PTC extension is likely but may follow budget reconciliation, with full market clarity expected in the second half of the year.

Feedstock and supply chain trends

• Shift from imported to domestic fats is underway, with higher fat prices benefiting the feed segment and overall business.

• Imported animal fats from Europe and Brazil remain viable, while Chinese UCO is now prohibited.

• Supply chain is being reworked to optimize sourcing and logistics in response to new regulations and market conditions.

• Arbitrage opportunities between Europe, South America, and North America are supporting global system efficiency.

• No significant risk is seen in feedstock sourcing, only timing and logistical adjustments.