“The greenest company on Earth” – Darling Ingredients | Summer Series

Bryce: [00:00:22] Welcome to the Equity Mates Summer Series, proudly supported by Sharesies. Over 12 episodes where deep diving into some of the most exciting, interesting and well known companies from around Australia and the US. Each episode we're also joined by an expert to help us unpack the key metrics, the bookcase and the bear case for each company. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How you going? 

Alec: [00:00:43] Oh, I'm very good, Bryce. Good to be here for a company that I don't expect a lot of people are familiar with, but one that we've heard of a few times this year. 

Bryce: [00:00:53] Yes, we have had it a couple of times. And that is darling ingredients. And our expert is Anthony Doyle from FireTrailInvestments. One of Anthony's colleagues actually pitched darling ingredients at the Southern Hearts and Minds Conference late last year. The Equity Mates summer series is proudly supported by Sharesies and a couple of reasons that we love Sharesies Firstly, they were awarded a 2022 Canstar Innovation Excellence Award with the judges saying the platform is quite unique with a significant wow factor as it reduces barriers to entry for new investors. We love when markets are accessible and the second reason is the platform is easy to use, especially with their auto invest feature where you can now truly execute dollar cost averaging across Australia, US and New Zealand markets. Promo Code Grow when you sign up to the Sharesies platform for $10 in your account ready to invest. That is publicly available. We do not get any commission on that promoted and says apply. Download the Sharesies app or visit sharesies.com.au To learn more so I thank you to Sharesies. Now we are licenced, but any information on this show is for education and entertainment purposes only, and any advice is general advice only. But with that said, rent darling ingredients quote Anthony Doyle in this episode a very, very simple business. So in a sentence, what have we got. 

Alec: [00:02:10] In a sentence? They recycle animal products. 

Bryce: [00:02:15] They recycle animal products. And it's very much simpler than what they say they do on their website where they try and bring in all this emotive language. But that is what they do, in essence, and they have a big role to play in the decarbonisation of this planet. But let's have a look at their history. They were founded in 1882 by Ira Darling in Chicago as a solution to beef stockyards growth. Today, they are the world's largest processor of slaughtered animal by-products, where they transform them into value added ingredients and solutions to feed and fuel the world. [00:02:52][37.9]

Alec: [00:02:53] And so when we think about Darling as a business, think about it in the middle of this unglamorous supply chain, that is hugely important because, as you said, slaughtered animal by-products not exactly the most glamorous industry, but a massive industry. And so what they do is that they collect slaughtered animal by-products from livestock suppliers, from meat processors and abattoirs, but they also then collect, you know, food waste from food production facilities and the food service industry. They'll pump grease traps if you've got like chicken ovens, like a Coles or a Woollies or that chicken fat can be collected and collected from a company like Darling, you know, their equivalents in Australia that I worked with when I was at Coles. You want to you want to do as much as possible to keep this animal waste from going to landfill or being wasted. And so there are speciality companies that will collect this stuff. And Darling is, I guess, the £800 gorilla globally in this space. So they'll collect all this meat offcuts and animal by-products. And then there are three divisions where this food really goes. So does biofuels and green energies. And that's the one that FireTrail. And Anthony is probably most excited about this feed. And so that'll go to like pet food, aquaculture and stuff like that. And then there's food and that will go to, you know, pharma they say health markets. 

Bryce: [00:04:21] Yeah, probably the fats in maybe. 

Alec: [00:04:23] Yeah, they talk actually in one of their preserves. They talk about the expansion of the collagen and peptide product line. So that's probably where Essendon got all this from. 

Bryce: [00:04:35] Yeah, it's been an interesting story, but where as you said, the Fonterra guys get excited is in the fuel component and in 2013 they partnered with Valero Energy Corp to create Diamond Green Diesel. Now why this is significant is because they now annually repurpose approximately 15% of America's recycled animal fats, cooking oils, etc., and turn it into low carbon, clean burning, renewable diesel, which is if you think about decarbonisation of the planet and the amount of large scale transportation systems, i.e. aeroplanes that use diesel, renewable diesel. This is exciting. 

Alec: [00:05:20] Now, the perhaps the most exciting thing about renewable diesel is that it's a drop in fuel. You don't need to change engines. It's it has the same chemical properties as petrol, diesel, and it can be used, you know, in existing vehicles, planes that use diesel today. 

Bryce: [00:05:41] Yeah. Which is a huge benefit. 

Alec: [00:05:44] Yes. Yeah. 

Bryce: [00:05:45] Especially for aeroplanes that can't go electric because batteries are too heavy. Physically, literally can't do it. Yeah. Yeah, yeah. So this is the only one of the only options. 

Alec: [00:05:55] Yeah. There's one other part of the business that I pulled out that I thought was quite interesting. And it's just really because I've had experience with in Australia, different companies in Australia. Yeah. In 2020 they acquired a company called Enviro Fly It. Now they create, quote, nutritional high protein ingredients for pets, poultry, fish and exotics from black soldier fly larva. And so I went to one of these facilities in when I was in Melbourne and it's essentially they take food waste, they feed it to flies, the flies produce heaps, more flies and then those flies like when the larvae get killed and turned into animal feed. Wow. And they were trying to do it for chickens, I think. And the soldier fly larva is more nutritious than the existing animal feed, I think also for fish they were trialling it for. And so like the value proposition is for a company with food waste, they don't send it to landfill. This is a cheaper alternative, cheaper disposal option. And then for animal growers, this food is more nutritious than existing food. So you get healthier animals at the other end. Wow. Now, unfortunately, the company that I saw I don't think went anywhere because I think they found they got caught up in something else that he did previously, came back to bite him. But yeah, this is something that is like there are similar companies to this in Australia trying to do something similar. Yeah. Wow. Yeah. 

Bryce: [00:07:37] So one of the biggest strengths of Darling and Anthony unpacks this in a bit more detail. But it is the, I guess this scale. They have 270 facilities, refining facilities across five continents, 170 in North America, 18 in South America, 50 in Europe, 13 in Asia and one in Australia. Good to say. And they're repurposing approximately 15% of the world's meat industry waste streams into, you know, what, the fuel what do you call it, fuel feedstocks, food stocks, whatever it was, fuel units that go into if it go into the. 

Alec: [00:08:15] Fuel, I think the feedstock. Feedstock, that's it. 

Bryce: [00:08:18] Yes. So really their competitive advantage here is their scale and the amount of the world's sort of by-products that they are. 

Alec: [00:08:26] Yeah. Before we get to the financials, if we think about where this company is going, well, they just want to be the leader in this space and be correlated to the growth in the amount of protein consumption in the world. Because despite a growing percentage of people becoming vegan or vegetarian, despite make free Mondays, the world is eating more and more meat every year. And especially in developing countries where there's emerging middle classes, meat consumption is rising very quickly. The US Department of Agriculture track the world's rising meat appetite and they look at globally how much meat is eaten each year. I don't think fish. I think they just look at beef, pork and chicken. But those three combined in 2020, 272 million metric tonnes, that was up 5 million metric tonnes from the year before, which was up 5 million metric tonnes from the year before that. If we go back to the year 2190 million metric tonnes by the year 2010, 200 and just shy of 240 million metric tonnes, the year 2020, 272 million metric tonnes like. 

Bryce: [00:09:40] That is unbelievable. I know I'm literally going left or right. 

Alec: [00:09:42] And I'm just explaining a chart, but yeah, it's like a slow, steady grind upwards and all darling want to do is see that trend increase and they want to take more and more of the animal by-product and then their job. And I guess how they separate themselves is by finding value added use cases for more and more of this animal. By-Product. 

Bryce: [00:10:05] That is, that chart is crazy.

Alec: [00:10:07] Like yeah, you very rarely see a chart that consistently go bottom left to top right. 

Bryce: [00:10:12] It's also like how on earth, if that continues like this, going to get a crisis point. They would have. 

Alec: [00:10:19] To. Well, yeah, that's why companies like Beyond may exist. Yeah, that's why. That's why there's all this failed. Well, didn't fail. Failing got overvalued. Well, yeah. That's why companies that's why, like researchers are trying to do lab grown may. 

Bryce: [00:10:33] Yeah show us the world's rising appetite for that. 

Alec: [00:10:38] Lab grown people will like lab grown European it would blow up a company like Darling because then there'd be no animal by product. 

Bryce: [00:10:45] Yeah, it'll take ages, but that is fascinating. 

Alec: [00:10:48] We didn't ask Anthony about it. 

Bryce: [00:10:51] Where that comes into play. Yeah, yeah. Maybe it's just so far down the track that it's not even a consideration. 

Alec: [00:10:56] I think it's also like the world's meat consumption isn't going to zero. Yeah, like even if beyond may, plant based meat and lab grown mate take a fraction of. 

Bryce: [00:11:06] 3% or something. 

Alec: [00:11:07] Yeah, yeah. It's like, come on, guys.

Bryce: [00:11:09] Yeah, well. 

Alec: [00:11:10] I'm glad we didn't ask because he would have looked at us and said, Dumb question. 

Bryce: [00:11:15] All right, let's have a look at the financials market cap of 10 billion. It is pretty flat this year, down 1%. So you'd say it outperformed S&P. It was up 280% in the past five years. Revenue of 4.7 billion revenue five years ago was 3.4, so up 38% over the past five years. Okay, but it is up 31% between 2021 and 2022 align so basically flat for the four years and then a big inflexion point in the last year, profit of 650,000,102 million five years ago, so up 537%. But again, 2021 profit of 297 million, so up 119% in the last year. So pretty solid numbers starting to come out of it in the last 12 months. No wonder it has been pitched by the FireTrail guys and it is part of their portfolio now.

Alec: [00:12:13] I think the last year has been a bit of an outlier year because the tallow price, which is like animal fat price, is correlated to the oil price. And so as oil spiked, you can say their revenue had a massive inflexion point, up 31% up, but their profit was up 120%. So the profit more than doubled in the last year. Don't extrapolate that trend because the oil price has come back down. The teller price is still high. But the idea that like 2021, 2022, it was a great year. 

Bryce: [00:12:48] Great year for fat prices. 

Alec: [00:12:49] Yeah, yeah, yeah. So that's an important input because you know, they might be paying more to their suppliers, the abattoirs and stuff that they're buying these animal by-products off. But the price that they would get for their value added products was so much higher and their margin increased because the commodity price was going up. As the commodity price compresses, you know, they'll be paying less to the abattoirs, they'll be getting less from the value added products, but you would expect a bit of margin compression as well. So that's just a watch out. About last year was an epic year, but don't just extrapolate it forward without doing the work and thinking about what a normal, a normalised price for tallow is. 

Bryce: [00:13:32] So Darling Ingredients is listed on the New York Stock Exchange. The ticker is d i r. You can access the US stock market plus the Australian and New Zealand markets on the Sharesies platform with no investment minimum. This is not product advice. Make sure you do your own research. We are now going to take a very quick break. And on the other side, we're bringing in Anthony Doyle from FireTrail Investments to get his thoughts on darling ingredients, key metrics, bull case, bear case and where it's going to be in ten years time. So we'll pick it up straight after this break. 

Bryce: [00:14:08] So we're joined by returning fan favourite Anthony Doyle, who's head of investment strategy at FireTrail Investments. Anthony, welcome. 

Anthony: [00:14:16] Thanks, Bryce Thanks for having me back. 

Bryce: [00:14:17] No worries. Always good to have you in the studio. 

Alec: [00:14:20] So, Anthony, before the break, we spoke about darling ingredients as the company. What it does a little bit about its history. But now we want to turn to Darling as an investment. And we want to start with how you analyse a company like this. How do you approach it? What metrics matter? And are there any that don't really matter for a company like this? 

Anthony: [00:14:38] Yeah, and great question. And so at FireTrail, we are high conviction, concentrated investment portfolio managers. So every company that finds its way into one of our portfolios and you've you've met with Eleanor Swanson, for example, on the Small Caps Fund and for the Global Fund, which I work in, we conduct over 200 hours of fundamental research on these companies. So there's a huge plethora of information that our analysts that we have to go through. But ultimately, we focus on the one or two things that truly matter for the share price. So despite doing all the economic modelling, financial modelling, despite trusts, stress testing those models, despite talking to industry experts, employees, ex-employees, competitors, huge amount of research, what are the one or two things that truly matter? So we went through the process for Darling. It is a key holding within our global equity fund, the five Charles three Global Opportunities Fund today. So what matters? Okay, let's bring it back down to two, what the business is. And it's a very, very simple business, which is something that we like. So they separate fats from proteins. And the reason that they do that is they provide sustainable ingredients for the production of renewable fuels, whether that's biofuel or renewable diesel or renewable aviation fuel. So very, very simple business model. So what matters? Bringing it back to your economics? What I want is demand and supply. So in the market, demand for renewable energy sources is growing considerably. So in terms of renewable diesel capacity additions in the US, that's that's expected to increase six times within the next three years. So six times growth in renewable diesel capacity within the United States. So not only does Darling have a half share, 50% share in one of the largest renewable diesel plants in the United States. But it stands to benefit the most from regulations and the global market pushing to reduce emissions from fuel sources. So that's the demand. Demand is growing significantly. That's excellent. Well, what about the supply side? Well, on the supply side, in terms of the renewable oil field, the renewable sort, these simple ingredients, sustainable ingredients that go into the production of renewable energy sources, Darling is dominating and is increasing its dominance in this space. So what are the feedstocks used to produce renewable diesel, for example? Well, one used cooking oil, and I know your background. You've seen the traps. 

Alec: [00:17:30] Yeah, well.

Anthony: [00:17:30] Darling has relationships with 200,000 restaurants throughout North America to go in and extract the used cooking oil. And it shares the profits of the used cooking oil market with the suppliers. So these are typically feedstocks that would ordinarily find their way into a landfill and the resulting carbon emissions that you extract or that emits into the environment and the atmosphere. So the restaurant benefits monetarily, but also the grease traps. They're dirty, inconvenient, dangerous, time consuming, said Darling, has the infrastructure to go in and extract that used cooking oil. So these cooking oil is a small part of the renewable diesel feedstocks. The far larger part is the animal waste product site. So, for example, once you get the the steaks from a cow and you know what's fit for human consumption or what is used in the marketplace for human consumption, typically half of a cow carcase is thrown away and darling goes in, collects it from the abattoir, and it goes through the process of separating the fat from the protein. And then that waste product is used to produce renewable diesel. And again, the real advantage of renewable sources of energy like renewable diesel through the lifecycle of the product, it has a 95. A cent less carbon emission profile than fossil fuel, petrol, diesel and 60 to 90% less greenhouse gas emissions. So in terms of processing animal waste products or the offcuts from animals, for example, darling processors, 15% of the world's market in that. So a think about all the animals, you know, proteins that are used in daily consumption of diets, fat for human consumption. Darling actually processes 15% of the world's animal by-products on five continents around the world. So because they're working with their customers and they come to their customers benefit, for example, from rising prices for tallow, for example, animal fat, the customers benefit, darling benefits. And it's very much a win-win scenario. So yeah, they're the two things that matter. Demand is growing and in terms of supply. Will darling dominate, darling have the supply. 

Bryce: [00:20:02] So I guess that would form the basis for the bull case then, which is just that the demand for this product and wild demand for sustainable fuel is going to increase and darling and positioned as the market leader for the feedstock that goes into that. Is there any more that goes into building a bull case for darling ingredients? 

Anthony: [00:20:22] Yeah. So the regulatory environment is kind to darling and we've seen that in the United States. So in terms of a gallon of renewable diesel, Darling receives 4.40 in subsidies. For example. 

Alec: [00:20:36] What does a gallon of diesel? 

Anthony: [00:20:38] A renewable diesel? So there's around a $3, $3 above the traditional price of diesel, petrol, diesel. 

Alec: [00:20:46] And let's test your knowledge. What's gallon of petrol? Diesel costs those.

Anthony: [00:20:50] So 4.50 7.50 a gallon for renewable diesel. 

Alec: [00:20:55] Okay. And they receive for RS 40. 

Anthony: [00:20:57] In subsidies to produce it. So that's why there's so much supply cow capacity being built at the moment to benefit from those subsidies. So that were reconfirmed in the passing of the US Inflation Reduction Act, for example. So in terms of the growing demand for feedstock, again, this is where Darling has a moat in that they own the renewable oil field. So it's like if you want to make this product renewable diesel, you have to go essentially to darling and pay them for the the sustainable ingredients that are used to produce renewable fuel. Now, what's really important is that when these feedstocks are produced via that meat processing process in an abattoir, for example, the rendering plant has to be located essentially in very, very close proximity to the abattoir. The reason for that is that the fat only has a five hour life shelf. 

Alec: [00:21:57] Oh, well, yeah. 

Anthony: [00:21:59] So. And guess who has the rendering plants that sit next to the abattoirs? The major rendering plants throughout North America, darling. Right. So even if you want to pay more for tallow and pay more for the animal by-products, you need a rendering plant in close proximity. And obviously if you want to start to develop that capability, that's a huge amount of CapEx and that's something that our Darling has been doing for the last 15 years, for example. So they this is how it's very, very difficult to usurp them in the supply of those feedstocks that go into the production of renewable diesel and renewable aviation fuel in terms of the animal fat and cooking oil side. Well, what about. 

Bryce: [00:22:45] The other 85% of the market that suddenly have 15% of feedstock supply? Yep. So where what's going on with the remaining 85? 

Anthony: [00:22:56] Yeah, that's one in six animals globally typically find the most would find their way into a landfill unfortunately and decompose and emit carbon in that way essentially. You know, I don't want to get bearish on people, but we can't mate a scenario where the globe doesn't warm by one and a half degrees by 2050. We're just not going to make it. However, we think that we will see a huge push to try and mitigate warming beyond that, whether it's two or two and a half degrees. So unless the largest one of the largest contributors to carbon dioxide emissions, CO2 emissions is aviation. And we can see that there are technologies being developed to reduce the carbon profile of concrete, for example, or steel, for example. But on the aviation side, unless there are huge advancements in technology, it's simply physically according to physics, you cannot fly an aeroplane without the sort of hydrocarbon. Or hydrocarbon profile of petrol, petroleum or diesel. So that's why they're a huge focus on renewable aviation fuel. That's the real leg of growth for Darling. And they're going to try and make renewable aviation fuel out of absolutely every feedstock that they can, whether that's plant based oils, animal by-products or used cooking oil, for example. So darling, that's the next step. Capture a greater percentage of the other 85% and in that sense more recently they've acquired Brazil's largest rendering plant. Have you guys been to Brazil? 

Alec: [00:24:37] No, never. 

Anthony: [00:24:38] I ate a lot of meat. 

Bryce: [00:24:39] Your favourite. Brazilian restaurant. 

Anthony: [00:24:43] So Brazilian barbecue, I'd say they've just acquired of about four or five months ago Brazil's largest meat rendering plant as well for half 1,000,000,000 USD. So they're expanding that international presence. So not only in the emerging markets, but also in Europe as well. 

Alec: [00:25:00] So I guess there's two sides to two questions that come out of that. Let's start with the aviation question. Are the like where are we at in that aviation adoption journey and what does air travel look like or how does it change using renewable diesel rather than standard diesel? 

Anthony: [00:25:18] We're at the infancy stage of airlines running their aeroplanes on renewable aviation fuel that's been produced via, say, soybean oil. So there was a Boeing plane flying between wash, I think it was Washington and New York earlier this year. And when they when I say flown, one engine was flown on renewable aviation fuel and all. 

Alec: [00:25:43] The others had traditional.

Anthony: [00:25:45] Exactly. Yeah. So only on in the very, very early stages of that path. 

Bryce: [00:25:51] And because it's untested or. 

Anthony: [00:25:53] Yeah, untested. Exactly. And I guess it's a bit like nuclear energy. You know, people don't want to be the first to go in a noise. 

Alec: [00:26:00] There'll be a few empty flights after this. 

Anthony: [00:26:03] This flight had 100 passengers on it. 

Alec: [00:26:04] Right. Okay. 

Anthony: [00:26:06] But, yeah, so the testing process is going and obviously you have to ensure that the safety standards are met. But, you know, the beautiful thing about a product like renewable diesel, it's a 100% chemical replacement essentially for petroleum diesel. Yeah. 

Alec: [00:26:22] So that's what I was going to ask. So it won't mean like slower flights or shorter flights or anything like that. 

Bryce: [00:26:27] Like it. 

Anthony: [00:26:29] So the reason, for example, that the price of tallow has appreciated by around 250% since the depths of COVID and the oil price has also risen. But it's recently fallen from around $114 a barrel to $80 a barrel. The price of two are extremely correlated, animal fat and oil very correlated. But tallow has remained elevated and oil has fallen by around $30 a barrel because supply of oil can come on stream relatively quickly, depending upon the machinations of OPEC. Whereas tallow, production in that animal supply is a lot more difficult to bring on stream in a large capacity. So the price of tallow has been relatively insulated from the decline in oil prices, even though the two are closely correlated. And that's why we like, you know, in our strategy, which has that sustainable element for a global equity portfolio. We don't have to own the traditional fossil fuel extract that emit a huge amount of carbon to develop their product of oil or petroleum. We can own a company like Darling which is a very, very important producing a very, very important transition fuel, one that we think the airline industry will have to depend upon if it seeks to reduce the carbon profile of its emissions. 

Alec: [00:27:49] The second follow up question I had was just around what Bryce said about the supply and you know, the 15% Darling has of Animal Baucus's by-products and you know, the 85%, a lot of it is wasted. Would the abattoirs be looking at this as a you know, I take your point around, you know, building the CapEx required to build a rendering plant near an abattoir, but could the abattoirs extend their businesses and challenge Darling and try and sell to the diesel fuel to the renewable diesel producers directly? 

Anthony: [00:28:27] Yeah, so definitely so I mean, darling has first mover advantage, which they've developed over a number of years, but abattoirs absolutely have the ability to go onto the open market and receive the best price for their for their tallow, which is the animal fat. So it's not only cows, it's fish, you know, pigs, chickens, etc.. The great thing is Darling shares the benefits of the high tallow price with the abattoirs, you know, up to 70% of the final price. Yeah. 

Alec: [00:28:58] So you've got to build a business case on that remaining. 

Anthony: [00:29:01] So you need to find someone that's going to pay you more than darling and darling, I think. As I said, it's a win win for both. So it's unlikely that these customer relationships that been built up over many years. Of course, the customer's afraid to try and get a better price if they want to. But who's going to pay them a better price than the dominant player in the market, which is darling? 

Bryce: [00:29:20] So then let's turn to the bear case. What are you most concerned about, or what do you consider when investing in darling? I imagine that surely the big oil companies or diesel companies are looking at this and saying, how, where do we fit? Yeah, how do we get involved? 

Alec: [00:29:38] Or how do we or. 

Bryce: [00:29:40] How do we. How do we crush it? We have capacity. We have CapEx. 

Anthony: [00:29:44] Yes. So yeah, yeah. Bryce, one of the biggest clients of the renewable diesel space is Big Oil. So they actually use the product to blend with their own petroleum based oil to reduce the carbon footprint of that product. So, I mean, it's a bit fanciful to think that you can go out and fill your car with renewable diesel oil. With renewable diesel today, typically it doesn't reach the retail market. The institutional market actually buy most of the renewable diesel that is produced. The big the big risk. So typically, as I mentioned, you know, those subsidies regulation is on the side of renewable energy sources. Today, there is a huge amount of regulation and that's what we spend a lot of time doing as analysts, is understanding the heavily nuanced and understanding the investment implications of regulations that are coming out, like the US Inflation Reduction Act, for example. So the subsidy side, it's unlikely. Even throughout the Donald Trump years, the subsidies have been in place starting in 2009. Whether it's the federal subsidy or subsidies in low carbon markets like California and Oregon is starting to do this as well, and other states are likely to continue or likely to adopt subsidy policies as well for the production of renewable energy sources. But if the subsidies, for example, were removed, that would be obviously a key risk for Darling. The other thing is, within the production of renewable diesel, I think it's very important that governments consider the implications for the end consumer, and we're seeing that right now, particularly in places like Europe. So it's well and good to want to have a product that's lower carbon profile. But will the end consumer be willing to pay a higher price for that product, particularly today when the cost of living is increasing materially? Right. So that's one thing that politicians and governments have to consider. The other thing is in terms of food versus fuel debate. So again, you may see regulations come out. We saw this with corn and ethanol, for example. Even soybeans to an extent, the price of soybean oil, parts of soybeans and soybeans are a very important ingredient for soybean meal, so to feed agricultural herds. But the food versus fuel debate is a vital one, particularly in emerging markets. So if you have two competing forces, one is human consumption and the other is the production of biodiesel. Typically, you know, people are finding it hard to pay for corn. You might see regulations on that side. And we've seen that that darling is relatively insulated from that because the stuff that they're using to or the stuff that they have that they are selling into the marketplace, those feedstocks, they're unfit for human consumption. You know, use cooking oil and animal by-products. But the regulations may come out and not see that nuance, for example.

Alec: [00:32:48] Yeah, they might just be. 

Anthony: [00:32:49] Like feedstocks. 

Alec: [00:32:50] As biodiesel. Yeah. 

Anthony: [00:32:52] So this is something we keep a very, very close eye on. And, you know, we spend a lot of time on the regulatory side of things understanding the implications of the like I just said, you know, the passing of the US Inflation Reduction Act, which has subsidies up to a dollar a gallon for renewable diesel, a dollar 60 a gallon for renewable aviation fuel embedded within it that Congress has just passed about three months ago. 

Alec: [00:33:13] So that's the we've touched on the bull case. We've touched on the bear case. Where we like to finish these episodes is really thinking long term about the company. And if the company is successful in its ambitions, if it's able to execute on what it's telling the market, what is darling ingredients look like in ten years? Yeah. 

Anthony: [00:33:33] So it's a $10 billion company today. US dollars trades on a pay of 12.3 times the really big opportunity we've spoken a lot about. One that is only in its infancy is aviation. As I mentioned, other sectors are working hard, whether it's, you know, a lot of greenhouse gas emissions come out of households and commercial buildings. A lot come out from concrete. A lot comes out from steel. But aviation. We are going to make. We are going to use everything we can to produce renewable aviation fuel as a society, and darling stands to benefit from that. So that's the huge opportunity for Darling. The CEO describes Sun. I don't know if this is true, but they do. He describes Darling as the greenest company in the world, you know, producing the sustainable ingredients. Right. Okay. Yeah.

Bryce: [00:34:23] That's always a good character. 

Anthony: [00:34:25] Yeah, he's a great character. So it's worth definitely looking at some of the YouTube videos that Darling has and listening to some of the interviews that he gives. But he's been the CEO since 2004 and really been the driver of this journey that darling ingredients have been on. So as I mentioned, unless we see some sort of advancement in technology within the next five years in terms of technology, a huge breakthrough on batteries, batteries or hydrogen, the answer will be sustainable aviation fuel. And this is going to be made from waste products use cooking oils, plant based oils, even forest residues. They're all possible renewable resources that can be used to produce this very, very vital fuel source that will assist the world in meeting its decarbonisation ambitions and hopefully reduce the possibility of a warming scenario beyond one and a half degrees Celsius by 2050. Yeah. So yeah, you know, it's monetising the opportunity in sustainability so you don't have to own, you know, the traditional oil extracting companies within your global equity portfolio.

Bryce: [00:35:38] Well, Darling is listed on the New York Stock Exchange. The ticker is D.R. But the FireTrail S3 Global Opportunities Fund is also listed on the ASX. The ticker is S3GO. S3GO 

Anthony: [00:35:52] Yes.

Bryce: [00:35:54] Yes, three. Go and Darling is one of the holdings in the fund that Anthony is involved in. So if you want to download the Sharesies app or visit sharesies.com.au To learn more you can buy. Anthony, a massive thank you always a pleasure to get you in the studio to to chat stocks. We really appreciate it. 

Anthony: [00:36:14] It. Thanks for having me, gents. Thank you. 

Alec: [00:36:16] Thanks, Anthony. Can't wait till the fifth time. Yeah. 

Anthony: [00:36:20] Excellent.