达林配料 (DAR) 2026年第三季度业绩电话会议：重申22亿-23亿美元EBITDA指引

Darling Ingredients（纽约证券交易所代码：DAR）报告称，其2026年第三季度的收益和现金生成能力同比大幅增长。Diamond Green Diesel（DGD）强劲复苏，而削减债务和潜在的股东回报仍是核心主题。

核心要点

• 2026年第三季度净利润升至2.67亿美元，即摊薄后每股收益1.67美元，而2025年第三季度净利润为1900万美元，即摊薄后每股收益0.12美元。
• 综合调整后EBITDA达到5.14亿美元，其中包括来自全球原料业务的大约3.1亿美元和来自DGD的2.04亿美元。
• DGD销售了3.15亿加仑，平均利润率约为每加仑1.30美元，尽管受到了氢气供应中断、SAF发货延迟以及原料时点和对冲效应的影响。
• Darling在该季度净债务减少了约4.2亿美元，并回购了约7600万美元的股票。季度末杠杆率改善至约1.7倍，而2025年底为2.9倍。
• 管理层重申2026全年的综合调整后EBITDA指引为22亿至23亿美元，并预计到年底净债务将降至30亿美元或以下。
• 管理层预计第四季度DGD产量约为3.25亿加仑，并表示第三季度的时点和对冲逆风应在第四季度出现反转。

关键财务结果

业务与运营表现

全球原料与饲料

在运营改善和商业执行力的支撑下，饲料业务保持了稳定的利润率。管理层表示，蛋白质需求和价格保持强劲，而油脂价格预计将在第四季度走强。

报告的核心原料EBITDA受到向DGD销售原料所产生的约1500万美元递延利润以及另一项与库存相关的成本与市价孰低调整的影响。会计和库存影响合计约为3000万美元。管理层指出，基础核心原料EBITDA约为3.4亿美元。

加拿大和巴西的关税使贸易流向复杂化。管理层提及加拿大的关税为50%，巴西的关税为37.5%，这需要公司重新调整部分油脂和胶原蛋白的出货方向。

食品与胶原蛋白

食品部门的业绩受到了影响南美发货的关税压力，但中国市场强劲的胶原蛋白销售部分抵消了这一影响。管理层表示，水溶性胶原蛋白的需求继续保持接近两位数的增长率，尽管客户因关税而减少库存可能会干扰一个或多个季度的业绩。

Darling还推出了专为提升思维敏捷度和认知韧性而设计的靶向胶原蛋白产品NxCogni，以此扩大了其Nextida产品组合。在获得监管批准的前提下，公司的目标是在2027年第一季度完成与Tecendrelo合资企业的交割。

Diamond Green Diesel

DGD为Darling的EBITDA贡献了2.04亿美元，并向Darling派发了约1.71亿美元现金，其中包括约3300万美元的股息和1.38亿美元来自出售生产税收抵免的收益。

季度产量和利润率受到了路易斯安那湾第三方氢气供应中断、SAF发货延迟、进口原料时点、对冲亏损以及生产税收抵免捕获量减少的影响。氢气供应中断导致实际销量为3.15亿加仑，而此前指引约为3.35亿加仑。

管理层表示，随着原料的转化和燃料的销售，相关的对冲亏损和生产税收抵免影响应会在第四季度通过收益流回。DGD进入第四季度时，重置利润率已更接近更强劲的现货市场状况。

管理层业绩指引

• 2026全年综合调整后EBITDA指引重申为22亿至23亿美元。
• 管理层预计第四季度DGD产量约为3.25亿加仑。
• 第四季度核心原料业务调整后EBITDA预计约为3.2亿美元至3.4亿美元。
• 公司预计到2026年底净债务将达到30亿美元或更低。
• 管理层表示，到2027年第一季度净债务可能接近25亿美元，此后额外的现金可用于支持更多股票回购或潜在的股息分红。
• Darling预计2026全年的实际税率约为25%，且在今年剩余时间内现金税支出约为3500万美元。

风险与关注点

• 加拿大和巴西的关税仍是油脂、明胶和胶原蛋白贸易流向的短期障碍。
• DGD的季度业绩可能会出现波动，因为对冲亏损是在相关原料被转化和销售之前确认的。公司并未对这些头寸使用按市值计价的会计处理方式。
• 氢气供应中断、天气以及发货延迟可能会影响DGD的销量和利润率捕获。
• 可再生识别码（RIN）价值在第三季度有所下降，从约2.45美元降至2美元以下。管理层表示，具吸引力的重置利润率降低了刺激生产所需的RIN价格。
• 下一阶段可再生燃料配额（RVO）规则的时间和结构仍存在不确定性。管理层预计美国环保署（EPA）将在推进第三套（Set 3）规则前解决第二套（Set 2）补充裁决。

分析师问答环节点评

资本配置：管理层依然专注于将净债务降至30亿美元以下。一旦债务接近25亿美元，董事会预计将考虑规模更大的回购计划、派发股息或两者相结合。Darling在第二和第三季度共回购了约1.5亿美元的股票。

DGD对冲：管理层表示，第三季度的对冲亏损主要反映了时点差异，而非标的燃料经济效益的恶化。在原料加工前确认的亏损，应会通过更高的燃料利润率或对冲现金回收而得以反弹。

生物燃料政策：管理层将2026年RIN供需平衡描述为平衡，将2027年描述为偏紧但可控。管理层预计第二套（Set 2）补充裁决将在2027年第一季度中期左右出台，随后是第三套（Set 3）程序，可能在2027年中期左右。讨论重点集中在两至三年的规则上，管理层倾向于三年。

蛋白质前景：受鱼粉价格高企以及美国家禽产量持续增长的支撑，管理层预计蛋白质价格强劲势头将延续至2027年。

SAF战略：由于欧洲销售需缴纳关税，DGD已将更多可持续航空燃料（SAF）销售转向美国。管理层表示，虽然DGD已接近其当前SAF的最大生产能力，但SAF产生的倒推净出厂价利润率高于可再生柴油。

长期业务组合：Darling目前不打算增加DGD的总产能。管理层预计，未来在油脂加工和胶原蛋白方面的再投资将随着时间推移提高核心原料业务在公司EBITDA中的占比。

业绩电话会议完整文字记录

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完整财报电话会议逐字稿

管理层陈述

Operator

Good morning, and welcome to the Darling Ingredients conference call to discuss the Third Quarter 2026 Financial Results. [Operator Instructions]. Today's call is being recorded. I would now like to turn the call over to Ms. Suann Guthrie, Senior Vice President of Investor Relations. Please go ahead.

Suann Guthrie

Thank you for joining the Darling Ingredients Third Quarter 2026 Earnings Call. Here with me today are Mr. Randall Stuewe, Chairman and Chief Executive Officer; and Mr. Bob Day, Chief Financial Officer. Our third quarter 2026 earnings news release and slide presentation are available on the Investor page of our corporate website, and it will be joined by a transcript of this call once it is available.

You can also find reconciliations and disclosures with respect to non-GAAP financial measures in our earnings news release and slide presentation. 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 today's press release and the comments made during this conference call 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. Now I will hand the call over to Randy.

Randall Stuewe

Thanks, Suann. Good morning, everyone, and thanks for joining us today. Our third quarter results showcase the capability, performance and resilience of our Global Ingredients business. Sequentially, our performance was slightly impacted by timing of sales accounting treatment of North American fat sales to Diamond Green Diesel and global compensation expense. Otherwise, it was another robust quarter.

This financial strength bolstered by substantial cash from Diamond Green Diesel has allowed us to continue to make significant progress toward achieving our debt targets and significantly strengthening our balance sheet. -- by reducing net debt by approximately $420 million in the quarter. Additionally, we continue to return capital to our shareholders via stock buybacks.

For the quarter, combined adjusted EBITDA was approximately $514 million, including about $310 million from our Global Ingredients business and $204 million from Diamond Green Diesel. Now turning to our Feed segment. We delivered a stable and solid margins during the quarter. This performance underscores the value of the operational improvements we have made and our team's focus on commercial execution.

Protein prices and demand remains strong, and we expect fat prices to strengthen in the fourth quarter. Canadian and Brazilian tariffs remain challenging, but we are working hard to develop alternative markets. While our results this quarter reflect the timing of some accounting and inventory adjustments that Bob will detail a little later, the underlying commercial momentum of this segment remains strong into the fourth quarter and next year.

In our Food segment, Brazilian tariffs continue to complicate some of our South American shipments. However, strong China collagen sales partially offset this temporary headwind. Our Nextida portfolio continues to gain momentum via repeat and new orders, and we've expanded it now with the recent launch of NxCogni, a targeted collagen designed to support mental clarity and cognitive resilience.

Additionally, our joint venture with Tecendrelo continues to progress through the regulatory process, and we are targeting a close, hopefully, in the first quarter of 2027. Now turning to our fuel segment. Diamond Green Diesel faced a series of temporary operational and logistical headwinds this quarter. We had a short-term third-party hydrogen outage in the Gulf that impacted our volumes alongside a delayed SAF shipment and imported feedstock timing and hedging impacts.

Once again, Bob will walk you through some more details in a moment. However, even in a slightly noisy quarter, DGD remains a massive cash engine. During the quarter, we received $171 million in cash distributions from Diamond Green Diesel from both dividends and PTC sales. For the fourth quarter, we expect DGD to produce approximately 325 million gallons. While we remain conservative in our full year modeling assumptions, the reality is that Q3 timing and hedging headwinds have reversed, and we are currently realizing DGD margins that are moving much closer to today's stronger spot market conditions.

Now with that, I'd like to turn the call over to Bob to take us through the financials, then I'll come back and discuss my thoughts on the fourth quarter and our full year outlook. Bob?

Robert Day

Thank you, Randy. Good morning, everyone. As Randy said, again, this quarter, we generated significant earnings and cash, and we substantially strengthened the balance sheet. Net income was $267 million or $1.67 per GAAP diluted share compared to $19 million or $0.12 per GAAP diluted share in the third quarter last year. For the first 9 months of 2026 net income was $789 million or $4.91 per GAAP diluted share compared to $6 million or $0.04 per GAAP diluted share a year ago.

Net sales in the third quarter were $1.8 billion compared to $1.6 billion for the third quarter of 2025 and $5.1 billion for the first 9 months of 2026 versus $4.4 billion for the same period a year ago. Third quarter combined adjusted EBITDA was $514 million compared to $245 million in third quarter 2025 for the first 9 months of 2026. Combined adjusted EBITDA exceeded $1.6 billion versus $690 million a year ago, reflecting strong contributions from both our core ingredients business and Diamond Green Diesel.

Meanwhile, the core ingredients EBITDA experienced a sequential decrease from the second to third quarter, which was primarily driven by 2 items. The first was an increase in long-term incentive accruals and indirect outcome of strong year-to-date results from both core ingredients and DGD and the second was driven by inventory adjustments that we expect to reverse in the fourth quarter.

To give more detail on the inventory items specific to the sequential decline in the Feed segment, approximately $15 million was associated with the accounting treatment of 2 items. The first was the deferral of half of the profit on Darling feedstock sold to Diamond Green Diesel because Darling owns 50% of the DGD JV, GAAP accounting rules require that we defer 50% of the margin earned on products sold until that product is processed and sold at DGD. This is purely a timing issue.

Once DGD processes and sells this fuel in the fourth quarter, this deferred profit will flow back to our bottom line. Additionally, late in the quarter, a lower of cost or market adjustment or LCM and in our Feed segment turned negative from what had been positive and finished much lower than expected. This was caused by an unusually high volume of product in transit at quarter end, the margins on which cannot be recognized until title has transferred.

Altogether, these items totaled approximately $30 million, which explains the difference in the core ingredients EBITDA reported versus what had been expected. Notwithstanding those items, core Ingredients EBITDA finished at the high end of last quarter's guidance at around $340 million. Moving to Diamond Green Diesel. By historical measures, DGD delivered a very strong quarter. Darling's share of DGD EBITDA was $204 million on 315 million gallons sold, an average margin of around $1.30 per gallon and a massive turnaround compared to negative $2.9 million in the third quarter of 2025.

Meanwhile, replacement margins during the quarter were higher than $1.30 per gallon, so I'd like to provide some color to help bridge the difference. Two items in particular hedging losses and production tax credit capture are expected to come back positively in the fourth quarter. Specifically for feedstock hedged in the third quarter that was not yet converted into fuel and sold during the third quarter, would have experienced a hedge loss that will either come back in the form of a higher RD or SAP sales price and margin or if futures prices drop, the hedge will return cash.

Either way, those hedge losses come back once the associated feedstocks are converted into fuel. Regarding production tax credit capture, late in the quarter, Ford Arthur experienced challenging weather forcing it to use a disproportionately high amount of foreign feedstocks, earning less production tax credit value than a normal feedstock mix. This had a double impact for Darling because while it lowered the average RD and SAP margin, it also caused DGD to hold a higher percentage of Darling domestic feedstocks than normal, contributing to the increased deferred profit accrual mentioned earlier.

In both cases, hedge losses and production tax credit value. Those will come back through the P&L in the fourth quarter. Other items that are more market-based were lowering RIN value during the quarter, starting at around 2.45 and dropping to below $2, contributed to a lower than replacement margin capture.

And the last item I want to mention is the short-term hydrogen outage that we experienced in Norco, which explains the difference between guided versus actual volumes. As we look to the fourth quarter, however, the setup is more stable with very strong replacement margins, a much lower RIN as part of that price structure, which means lower margin risk and higher diesel futures prices decreasing the likelihood of large hedge losses at quarter end.

All that said, the real story here is the incredible cash generation, debt paid and shares bought during the quarter. Darling received approximately $170 million in cash from DGD, roughly $33 million as dividends and $138 million from production tax credit sales and the core business generated over $300 million in cash. Coming from current earnings, the sale of the majority of our non-grease trap assets and the sale of our European casings business.

In total, we reduced net debt by around $420 million and bought back around $76 million in shares. As a result, our leverage ratio improved significantly to approximately 1.7x at quarter end compared to 2.9x at the end of last year. And finally, the company recorded $76.8 million of income tax expense for the third quarter, yielding an effective tax rate of 22.3%. The effective tax rate, excluding the impact of the production tax credit and discrete items was 24.2%.

The company also paid $22.7 million of income taxes in the third quarter and $71.7 million year-to-date. For 2026, we expect the effective tax rate to be about 25% and cash taxes of approximately $35 million for the remainder of the year. With that, I will turn the call back over to Randy.

Randall Stuewe

Thanks, Bob. To wrap up, the third quarter demonstrated the resilience and earnings power of our core business, even with the challenging geopolitical environment, all while Diamond Green Diesel once again provided significant cash.

Looking ahead to the fourth quarter, I want to leave you with 3 clear messages. First, our Global Ingredients business has strong momentum. Raw material volumes are stable, demand for proteins remains strong and global fat prices will most likely rebound as the RVO will require biofuel producers to run full in the fourth quarter and all next year.

All said, our global footprint continues to deliver a predictable, high-margin cash flow. Second, Diamond Green Diesel is a cash generation machine. While there was noise this quarter around capture, feedstock timing and hedging, DGD structural competitive advantages have not changed. We operate at the lowest cost per gallon in the industry backed by world-class scale logistics unmatched low CI feedstock from Darling. The timing and hedging disconnects from Q3 are behind us, and we are entering Q4 realizing margins much closer to spot conditions.

Third, our cash flow out and balance sheet discipline are obvious. We are reaffirming our full year 2026 combined adjusted EBITDA guidance of $2.2 billion to $2.3 billion. With significant cash flow coming through the door in Q4, including ongoing PTC monetization we remain firmly on track to achieve our target of bringing net debt down to or below $3 billion by year-end. Our capital allocation priority is disciplined and focused. We are focused on driving organic growth, optimizing our portfolio and delivering long-term value to our shareholders. We have built a resilient and highly cash-generative business, and we are confident in our ability to execute our strategy and carry this strong momentum into and through 2027.

With that, I'll turn it over to the operator for Q&A.

Operator

[Operator Instructions] Your first question comes from the line of Derrick Whitfield with Texas Capital Bank.

分析师问答

Derrick Whitfield

Thanks for your time. Wanted to start with margin capture for DGD. Bob, certainly greatly appreciate your commentary on just margin capture for the quarter. When you guys think about the health of your balance sheet and the volatility of hoo spreads that are increasingly driven by diesel cracks more than bean oil, how are you thinking about managing hedge risk for the next couple of quarters when you're forced to hedge hitting on backwardation and the Iran conflict to continually will persist into 2027 -- are there any other hedges that you guys could employ that would mitigate your exposures?

Robert Day

Thanks, Derrick. This is Bob. We have lots of options as it relates to hedging, but I think when margins and replacement margins are as wide as they are typically hedging feedstock purchases with diesel or ULSD futures is an attractive opportunity. I think the thing that the market misses sometimes is there's so much that can move, especially with the business, the size of DGD, there's so much that can move from 1 quarter to another.

And it's important to look at the results over a longer period of time. We do not use mark-to-market accounting. And I think we see some of the comments out there, and it's interesting. I don't think that perspective as well understood. And so -- in a typical ag business and some energy businesses, you're going to value your inventories up to market and you represent that.

So quarter-to-quarter, you can see kind of how hedges are performing. But in a business like this, if we're hedging a product for 1 period, so let's say, in this case, the third quarter, that doesn't get converted into its final product until the next quarter. that hedge loss is realized in the immediate quarter. And then it comes back as a gain in the next quarter. In a business our size, when we have something like a slowdown because of a hydrogen outage and there's expensive feed that's just going to have a lag effect that's bigger than what most other companies experience.

And so we're not concerned at all with the hedging and our ability to limit risk we just think that there's a lack of understanding as to how these things can flow from one quarter to another.

Derrick Whitfield

Great. And appreciate it and understood. For my follow-up, I wanted to shift to policy. From a policy perspective, the Trump administration has been supportive of the former with nearly every decision during the second term with the view that some obligated parties will be challenged to meet the RVO this year. How do you think the EPA will handle deficit carryforwards? And what are you hearing on how the administration is viewing set through policy?

Robert Day

Yes. Look, I think if anything, the EPA has been proven correct, and its estimation about what the industry is capable of. when we look at our S&D -- our RIN S&D for 2026, from our perspective, it looks balanced. And as we go through the end of '27, it's tight. But it's not ridiculously underbalanced. And so I think -- the EPA has made it clear what it wants to do with SREs, what it wants to do with reallocations, whether those reallocations happen in 2026 or 2027, we don't think that has a significant impact overall on the RIN S&D and prices and not sure how they're going to handle that.

But like I said, we don't think that makes a big difference. They need to handle this supplemental ruling before they can get into SET3 and start talking about 2028 to 2030. But -- what we're really encouraged about is we understood what their goals were when they came in to Set 2, and they've largely achieved those goals. I think they're pretty happy with the outcome of the policy. And so we're very optimistic about what '28 beyond is going to look like.

Operator

Your next question comes from the line of Manav Gupta with UBS.

Manav Gupta

Randy and Bob, a question maybe more for Bob, but whoever wants to take it. The leverage is dropping. Your target was 2. Now it probably looks like 1.5%, honestly, 1.5% looks conservative. -- given you said you're realizing margins closer to spot. So I'm just trying to understand how much cash would you like to hold on the balance sheet, after which you could say, look, Darling probably could do better on the valuation side if it had a dividend.

So I'm just trying to understand at what point can Darling actually look at some kind of a dividend, maybe it's '27, but if you could talk about those dynamics?

Randall Stuewe

Yes. It's a great question, Manav. This is Randy. I mean, clearly, we said at Investor Day that we will be coming out and articulating the kind of the go-forward financial policy. I think the thing that's relevant in this quarter, a couple of things. One, we did have some headwinds out there and some volatility. But yet, we still paid down $420 million of debt, bringing our us down to, I think, net debt to [ 3,371 ] or something like that real close. And clearly, the PTC monetizations and really the strength that we see in fourth quarter here will put us $3 billion or below as we go into 2027.

By Q1, we should be pretty close to $2.5 billion. And we've kind of magically have always said around the Board table, the $2.5 billion is kind of where we want to be. And then that cash from there would then either be distributed via buybacks or a potential dividend. And that's clearly in the discussion at the board room right now. And we feel confident about what's going forward.

We look back, we're about 1 year, 1.5 years behind where we wanted to be. And that came off of the consternation and the delay of the RVO of delevering from our -- the 3 big acquisitions that we did. And so really, as we move forward, the message Bob and I are trying to deliver is -- this is -- we have transformed the company. It's a cash generation machine globally now. It's balanced. And ultimately, we have options in '27 that we've not had in prior years.

Manav Gupta

Randy, I'll turn it over.

Operator

Your next question comes from the line of Tom Palmer with JPMorgan.

Thomas Palmer

In recent quarters, Randy, you've provided a view of what you think base business EBITDA might look like for the following quarter. It was helpful to get the full year EBITDA outlook, but I wondered if kind of a view of how that base ingredients business might look like in 4Q?

Randall Stuewe

Yes. Tom, it's Ryan. And we thought, obviously, this quarter was challenging in the sense, not of the operating side, but with Valero releasing on the 22nd, and that's not being able to match them given our accounting cutoffs. And so ultimately, we decided that instead of -- we have visibility to the end of the year. And we knew that once the $418 or $408 number went out on DGD that people are going to question what is the true run rate for the balance of the year. And so we decided to put it out in the 2.2% to 2.3%. And I think consensus might have been 2.2%, 3.7% or whatever it was or whatever the number is out there.

We're confident in being able to deliver that. And that's a combination of the core business that really around $1 to $2.50 plus or minus 10 there. And then really DGD operating in that range of capture between $1.50 and $2 a gallon on 1.2 billion gallons. And that's how we did the math. And we traditionally and don't like to try to guide DGD from the standpoint of everything Bob just said that there's so many moving parts, but we do have visibility to the end of the year now. And it's consistent with what we've said all year and really in Bob's modeling during Investor Day.

So that's where the numbers are coming from. Certainly, we hope it's conservative. It feels like it's conservative at this time. But we've got midterms and all kinds of stuff that's still out there right now.

Robert Day

Yes. And I just want to add a little color to that as well because I think it's important we got a lot of feedback over the last several quarters and request to only guide the core ingredients business. And so we did that. when we got to this quarter, however, what we found is that the core ingredients business EBITDA was impacted by things that largely were happening at DGD. And so didn't serve the purpose that it normally would.

Specifically, I think when we talk about long-term incentives, DGD is a big part of that. DGD is having an extremely positive year. That's certainly going to have an impact on those things and those accruals come out of what we report in the core ingredients business. And then the other things that I talked about in the opening, DGD deferred profit, lower cost to market accrual in the Feed segment in the core business.

Those are things that really backed up into Darling because of events that occurred at DGD. And so -- we like to -- we got the feedback. We guided about the core. But when the core is influenced by DGD, then it makes it more difficult. And I think we got to the end of the year, and Randy looked at me and said, I think we've got better line of sight into how the corporate -- corporation is going to perform overall than what just the core because of the accounting volatility that can happen at the end of the year, and so that's where that conservative guide comes from.

Thomas Palmer

Okay. One more, I guess, just on the guide. Randy, you noted in the prepared remarks the view that fat prices will move higher and noted some of the supply-demand aspects around the RVO as justification I wanted to kind of clarify. One, is that embedded in the outlook if we see kind of fat prices start to move higher or more think about that as a potential upside driver?

And then just hand-in-hand with that, because you do, I think, maybe you have insights into the supply-demand dynamics that may not always be evident right away in pricing. Are you starting to see any firming in kind of that demand pull?

Randall Stuewe

Yes. No, that's a good question, Tom. And no, it's not really embedded in the outlook. I think we're going to pick up momentum as we go through November and December, getting some downtime that's over. You got some seasonality in the business. The tariffs are making life a bit challenging around the world as we tried to outline in our in our earlier comments.

And so ultimately, it's going to make U.S. fats move on up. We're seeing European fats starting to strengthen. There's some pretty significant downtime in the processors there in Europe. And then ultimately, that should carry forward with a bigger RVO than in 2028. And -- so we're seeing -- as I looked at the veg oil market, you're off a little bit this morning again. But $0.65 to $0.70 seems to be a really fair value for fast going forward. And that's for this year and then next year.

Operator

Your next question comes from the line of Conor Fitzpatrick with Bank of America.

Conor Fitzpatrick

Appreciate all the color earlier on accounting treatment of all different segments. I wanted to turn attention to kind of next -- medium term, next few years demand impact of low carbon fuel standards, all across North America. It looks like if you add them up between the U.S. states and the Canadian clean fuel regulation, you get about 0.5 billion gallons per year of demand growth each year through 2030 on average.

Maybe a bit less if Canada implements some of its protection is to rule change that is considering. So I was wondering, obviously, bullish for renewable diesel, bullish for feedstocks. I was wondering how you think profit would be allocated and settle out between the feed and the fuel side from growing LCFS demand over the medium term?

Randall Stuewe

Yes. Thanks, Conor. I think 2 things I would want to say to that. So today, we're at a point where the RVO is slightly bigger than the cumulative some of the LCFS programs in the United States. So the RVO is really carrying the day. But I think you bring up a really a really good point for, let's say, Darling shareholders to understand, and that is LCFS programs and their growth over time, it provides a safety net against let's say, a disappointing Set 3. We don't think SETI is going to be disappointing, but it provides that safety net.

If the RVO were to be smaller than what would likely happen is LCFS premiums would be large and then that stacks on the margin and the margin would be secured as a result of that. So -- what we expect is going to happen is we will have a robust RVO Set 3, LCFS premiums will layer on top of that, but they'll be supportive, but they won't necessarily make the margin kind of like it did back in 2021 and 2022. But it is a safety net out there, and we're very optimistic as far as how that looks.

As far as how that sort of relates to Darling segments, and we talked about now through 2030, we've said before we've largely made the investment in DGD we need to make. We're not intending to add to total capacity. There could be a time when we add more SaaS capabilities to the existing capacity. But by far and large, the cash investment in DGD has largely been made. And so we expect DGD to continue to perform at a high level. But as we take cash generated and invest it back in the core ingredients business, we anticipate rendering collagen, those businesses will get bigger, we'll generate more EBITDA, and they will represent over time, a bigger percentage of Darling's EBITDA then the DGD renewable deal sustainable aviation fuel wall.

Operator

Your next question comes from the line of Heather Jones from Heather Jones Research LLC.

Heather Jones

Good morning. Thanks for the question. I wanted to ask about legacy DAR into Q4 again. Randy, your comment about 1.225 that would apply roughly to 3 to 3.10 for the legacy piece for the quarter. And I assume you'll get the $30 million that you all referenced for Q3 back in Q4. So it implies a larger-than-normal sequential deterioration there. And so just wondering, is that conservatism? Or how would you frame that for us?

Randall Stuewe

So let me clarify that. 1.250, that assumes a $320 million to $340 million Q4.

Robert Day

Yes. And I just want to clarify the flow-through. So the accrual for long-term incentive -- that won't come back. That's just a fact of great performance in the business and that there is an additional cost item. We don't think that's going to flow back. The other $15 million DGD deferred profit, lower customer market, that could flow back depending on where market prices end at the end of the year.

Heather Jones

Okay. I'm glad I asked. And then on SaaS pricing, so you mentioned veg oils being weak and all. It seems like there's probably some managed money movement on that. If I look at cash pricing into the Gulf for feedstocks, I mean they're not going crazy about any stretch, but they do seem like they've started to turn across multiple fats.

And so just wondering, are you seeing these big producers start to work through the large inventories they have built up going out of Q3 because of disruptions, et cetera. And just if you could help me understand that because it is -- they are ticking up like $0.01, $0.005, they're finally moving in the right direction?

Robert Day

I mean, we can't speak for other renewable fuel producers and what their inventory situations are. I think what we do see though is a very attractive replacement margin for renewable diesel, biodiesel, sustainable aviation fuel. And what's also, I think, encouraging about that is we have a high replacement margin, while RINs are lower than they had been.

So structurally, that suggests that there's lower risk to that margin as well. This is incentivizing everyone in the industry to just maximize their production. And if they had big inventories, they have the incentive to chew through those inventories and buy new and maybe cheaper inventories and widen those margins. So I can speak for Diamond Green Diesel and say that we're maximizing our ability to produce, and I think the same is going on across the industry.

Operator

Your next question comes from the line of Pooran Sharma with Stephens.

Pooran Sharma

Thanks for the question here. I wanted to maybe dive into the feed business here and asked about protein, that has seen an uplift over the last several months, I think it's due to El Nino-related complications. But wanted to get your read on -- as you sit here today and look to 2027, do you expect this portion of your feed business to be kind of structurally higher -- or do you -- are you expecting conditions to kind of normalize and protein to kind of come back to where it had been over the past few years?

Randall Stuewe

Yes. Pooran, this is Randy. Clearly, you highlighted 1 of the key drivers. And I kind of reflect back here. Two years ago, if you would have told me all this soy crushing capacity was coming online in the U.S., I would have -- I fundamentally believe they were going to have a hard time placing all of all of the soybean meal. And that really hasn't materialized.

In fact, it's gone the exact opposite. So my crystal ball was pretty wrong there. What we've seen now, though, with the El Nino is the fish meal. And if you think of aquaculture in the world, it's a much bigger piece of the global diet than it's been in the past and with the warming of the waters, the fish has gone further offshore and deeper.

And so ultimately, we've got fish meal prices very, very elevated. There's nothing out there that says next year that, that's going to change much, at least at this time. So it looks like we'll continue with very strong protein prices as we go forward for '27. Bob, do you see any different or?

Robert Day

I don't see it different. The other thing is really what another thing providing underlying support has been the massive growth in the poultry sector in the United States. -- chickens eat soybean meal, cows don't really -- so we've seen a decrease in the Calvert increase in poultry -- we believe that poultry demand and production is here to stay and continue growing.

And so that provides underlying support for protein that -- so even if fish meal supplies return to the world market, we're still pretty optimistic about where protein prices are going to be over the next several years.

Pooran Sharma

And just on the follow-up here, wanted to dive into the -- the third-party hydrogen outage that impacted production. I was wondering if we could just get some incremental detail on kind of the nature of that disruption -- was it an isolated supplier issue? Or is there a broader vulnerability in the Gulf Coast hydrogen sourcing that puts a risk in future quarters potentially?

Randall Stuewe

Yes. And look, I think -- so the hydrogen outage affected everyone in the Louisiana Gulf. I think what's encouraging is it didn't affect our business for a very long time. Obviously, we guided -- I think it was 335 million gallons, and we came out with 315, so there was a difference in 20 million gallons.

I would say that, that difference is certainly associated with the hydrogen outage. When you think about that event and how unlikely that is and the lack of frequency with which things like that happen, that isn't a huge impact on the business. And so that's the way that we look at it is even when events like this occur, our operation is able to get back up and running in a relatively short period of time.

When you look at the history of DGD's operations, we just haven't had these things result in a material impact to the business, and we don't think that's going to change.

Operator

Your next question comes from the line of Andrew Strelzik with BMO Capital Markets.

Andrew Strelzik

My first one, obviously, on the Food segment, you sound very confident about the longer-term outlook there, but I wanted to better understand some of the pressure that you realized there this quarter. And whether we should assume that, that continues for the time being with tariff policy or if there's anything you can do internally in terms of mix or trade flows or anything else to improve that?

Randall Stuewe

Yes. And I appreciate the question, Andrew. I think the tariffs do have a short-term impact on the Food segment. These are long lead supply chains. The product that's the most in demand in the United States is water soluble collagen. That's a beef high produced product. And -- and the beef, even though while we sought our towers in the United States, we don't have tanneries.

And so the raw material that's used to make beef gelatin and collagen isn't available in the United States. And so it's in places like Brazil or other countries, which means that there's a long lead supply chain that is also affected by tariffs. But ultimately, the demand for those products is real and it's very consistent. And so when we have tariffs come up, what typically will happen is buyers will draw down inventories instead of buying new volume. And suppliers like ourselves will have to build up a little bit of inventory or we slow down our sales.

It has a short-term negative impact on a quarter or a couple of quarters. But then eventually, if tariffs stay for packaged prices on the shelves adjust to those realities and then the demand returns and the supply chain starts to function again. And so -- we have seen some of that disruption as a result of the tariffs. I think you saw a slightly lower result from the Food segment this quarter. That's really the explanation behind that.

But overall, fundamentally, the demand for those products remain strong. Water soluble collagen demand continues to grow at near double-digit rates. And so we're very confident in the -- what that business is going to be looking like over the next several quarters.

Andrew Strelzik

Okay. Okay. That makes sense. And then for my follow-up, I wanted to ask about the, I guess, the implied 4Q guidance and kind of revisit maybe what you're assuming at the high end of the range versus the low end of the range and in particular, kind of from a recapture perspective, you kind of touched on some of that with respect to the base business, but there's a number of moving pieces there. So what are you including in the guidance in terms of what you would expect to recapture? And kind of what are the rest of the moving pieces versus the high end of the low end?

Randall Stuewe

Yes. I think the word is consistent we guided into Q3 $3.25 to $3.40. Coming off, if you take the $3.50, $2.5 billion in the core business in Q2, you take off the $18 million the IEEPA tariff refunds, we really operated at 334. And Bob and I felt we'd operate at that $3.20, $3.40 range and ultimately, between the impacts that DGD had on deferred profits and then the true-up of the annual compensation expense, we operated at that level.

At the guided level. We just see that very consistent going forward here. As I said, raw material volumes are stable around the world. We're having to make lots of adjustments in the world. And you think this just isn't a U.S.A. rendering business. We got hit in September with 50% tariffs in Canada. So those fats have to find a new way to come into the marketplace. You've got a 37.5% tariff in Brazil right now. That not only impacts collagen, but it impacts fats moving up to the Gulf here.

So there's a lot of moving parts here right now, as you said. But really, at the end of the day, we see a pretty consistent quarter coming on finish out the year around $1.250 we could probably range at $1.25 to $1.50, but it feels like it's on the higher end of the range right now.

Operator

Your next question comes from the line of Matthew Blair with TPH. Please go ahead.

Matthew Blair

Could you provide an update on the SaaS market or SaaS versus R&D spreads trending? Is DGD at Max staff rates or something much less? And are there opportunities to explore that? Or does most of your staff stay in the U.S.?

Robert Day

Yes. Thanks, Matthew, this is Bob. We -- our sales of SAP have definitely shifted more towards the U.S. than Europe. I mean I think as everyone knows, we pay a duty when we go into Europe, so we do have some disadvantages into that market. Meanwhile, the U.S. market, the voluntary market for SAP continues to grow. And the structure of that is very positive for Diamond Green Diesel because essentially, you take a renewable diesel price and then add to that when you sell staff.

So all of our SaaS sales are made at a higher netback margin to DGD than RD sales. As far as the volumes I think they've been relatively consistent but slightly growing. And so we're pretty encouraged. We think we'll continue to slightly increase volumes. But we don't have a lot more we can make. I mean we're getting near our MAX production.

Matthew Blair

Great. And then on the D4 RIN market, given the short, could you talk about why deforming prices have sold off this quarter? Is that just a function of actual petroleum diesel prices moving up and offsetting that D4 price dynamic?

Randall Stuewe

Yes. I mean I think what we need to start with is the RVO, what is the mandate, what margin needs to exist in order to stimulate and incentivize the appropriate amount of biofuel production. We have that today. I mean if you look at replacement margins, they're very attractive and very wide. We have relatively high diesel prices and more important, the bean oil heating oil spread is continues to be more favorable for the biofuel segment.

And so the RIN just simply doesn't have to be higher than it is today. in order to create that replacement margin for renewable diesel and biodiesel to incentivize the production that's needed. So that's really what's behind it. I don't think -- if the RIN went back to where it was, let's say, 4 months ago, we would have a replacement margin of $3.50 a gallon or something. And that would be great, but that isn't necessary in order to stimulate the production needed to meet the mandate. So the RIN is appropriately valued when considering all those other inputs.

Operator

Your next question comes from the line of Jason Gabelman with Cowen.

Jason Gabelman

I wanted to ask on capital allocation. The multiple on the stock on the $2.2 billion to $2.3 billion that you've guided is certainly lower than where it's historically been. And so as the balance sheet gets to your targeted levels, would you consider supporting the stock a bit more than you had the past couple of quarters? And maybe if you could talk more broadly about what your capital allocation decisions look like after or your priorities look like, excuse me, after you get to that net debt target?

Randall Stuewe

Yes. Thanks, Jason. This is Randy. Yes, absolutely. I mean -- we said the last couple of quarters, we were laser-focused on getting to that $3 billion mark of total net debt. I can see the finish line now, and I feel very confident about that. And so ultimately, it's kind of a new world here for us. And the decisions that are going to have to be debated in the boardroom is once we hit that $2.5 billion mark, and we're building cash on the balance sheet. Do we put a dividend underneath this or do we do a more robust buyback program opportunistically.

And we said we would absolutely come back to you here towards the end of the year. And let you know what the final decision is there. But these are high-class problems that we've been waiting for to deal with. But clearly, Bob and I have been with more guidance opportunistically buying back shares in Q3. It's on the program for Q4. And ultimately, we'll go into the year carrying the same momentum we had this year.

And hopefully, it's just as I sit in the chair, the multiple that we're trading at with a trailing 12-month $2 billion combined adjusted EBITDA appears to be way, way too low. But I'm sure I'm the first CEO that's ever said that on the stock valuation. But at the end of the day, I think I was debating with the team the other day, and I said, the marketplace doesn't have visibility to what we have yet and doesn't carry the confidence that we carry.

And we carry confidence into '27 right now that should mirror what we've had here in 2026.

Robert Day

Yes. And I'll just add, I think the -- if you look at the last 5 years, the typical enterprise value EBITDA multiple has been about 9.2x. And as you point out, Jason, when you look at our guidance and you look at just analyst expectations for Darling's end of year EBITDA we're effectively trading below 6x, which doesn't make a lot of sense.

As Randy said, our goal is -- and very clearly stated goal to get our debt down to $3 billion and below. Meanwhile, we have been buying shares, I think, in the second and third quarter combined, we bought around $150 million in shares. As we get this debt paid down and we're generating cash at the level that we are that does give us a lot more flexibility to be more aggressive about buying shares or a dividend is possible. So I think that is likely to occur as we move forward.

Jason Gabelman

Great. And my follow-up is kind of related to the trading levels. One explanation is lack of confidence on where the RVO goes once this set rule expires at the end of next year. So can you just remind us the time line for approving the next set rule here in the U.S.? And any expectation if that's going to be 1, 2 or 3 years because we've kind of seen all those time lines in the past 5 or 6 years.

Randall Stuewe

Yes. So I think our understanding is it's likely that they will complete the supplemental ruling on SET 2 and the reallocation of SREs before they before they really get into the process around SET 3. So we think that we're probably looking at mid first quarter before the supplemental ruling gets completely resolved and is done. And then at that time, they'll move into the process for Set 3.

It's anyone's guess. But I think the message we've gotten from the EPA is that they are motivated to get this done and do it before we get into 2028. We've lived through a couple of years more recently where this thing was very delayed in its implementation, and they appear to be very committed to not let that happen this time. So sometime midyear next year is probably what we would expect. As far as how long of a RVO.

The discussion has really revolved around 2 to 3 years and leaning towards 3 years, and we've certainly given the feedback that longer is better to create certainty in the market, and bring more capital investment into the market if that's what they're looking to accomplish.

Operator

There are no further questions at this time. I will now turn the call back to Randall Stuewe for closing remarks.

Randall Stuewe

Thank you. Thanks, everybody, for all the questions today, and -- as always, if you have additional questions, reach out to Suann, Bob or I stay safe, have a great holiday, and we'll talk to you here shortly.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.