Darling Ingredients Inc. (DAR) Earnings Call Transcript & Summary

All right. Darling has positioned itself as a global leader across rendering, biofuels and food ingredients as strategic acquisitions capacity expansions and its Diamond Green Diesel joint venture have transformed its business model over time. CEO, Randy Stuewe, has led Darling through that business transformation, and the business could be poised to demonstrate its improved earnings potential moving forward given evolving biofuels policy, ramping sustainable aviation fuel production and expansion into higher-margin ingredient categories. Really appreciate it, Randy, that you're here with us today. So thank you very much. Maybe I'll start on what I feel like is what we -- I've been spending the most time talking about, and that's the regulatory environment. We have guidance on 45Z, a preliminary RVO potentially coming here very soon. We've also seen kind of some pushback within Congress or portions of Congress to reinstate the BTC, another one to eliminate the IRA tax credits, which now we have some visibility against, so maybe that's not as much of a risk.

But how would you characterize the regulatory environment broadly under the current administration and kind of its view on decarbonization policies?

No. I think lot of broad topics there. I think it's -- we're very much in a transition moment at this time. For those that were following the House Ways and Means Committee just passed and has now sent the big beautiful bill on over. It contains a lot of great things in there for Darling and for many in the room. I think what I'd like to say is it's transitioning from climate change to support for the agriculture community. And ultimately, the things that are contained in it from the 45Z, which is you've got to go back to the history there. We've had a blenders tax credit since 2007, sometimes in place, sometimes retroactive, always a lot of unknown, but never really pulled. But at the end of the day, the PTC was enacted for '25, '26 and '27 as the House Ways and Means resolution or committee report suggests it's going to be extended out to '31, which is good. And ultimately, we've got what we want out there is agriculture. I think the piece you left out of there was, if you think of the industry, Darling has led the world in renewable fuel. Since 2013, we've had some wonderful incredible years. And then because of mandates that were too low, for 2024, we finally hit the blend wall, as you would call it, the renewable volume obligation, which we anticipate any day now, we will return that. And so the combination of 45Z as a producer's tax credit that made in America for America, that actually generated under Chuck Grassley about 10 years ago, but was shut down by a series of lobbyists at that time, is now back in place. Renewable volume obligation is now being proposed somewhere. We're hearing numbers $5.25 billion. That's very constructive to both Darling and constructive to my predecessors up here at ADM, and it's a very good thing for American Agriculture. If you think of the world that we're in today and we lived through the tariff moments and then Trump tariff on Mondays that were relaxed. At the end of the day, we've got what he was trying to target, and that was lower energy prices, natural gas. We've got ultimately pumped -- fuel pump prices. And now the only thing we don't have is we still got $10 soybeans and $4 corn. So we've not rewarded the farmer yet. And so Andrew, it's coming. And are there unintended consequences? And will there be some horse trading, no pun intended in that, that ultimately make this thing really work, but I think it is really excited, and this will return us to -- we had 6 record years in a row, a seventh year that I had a little challenging, and I'm expecting to return to that track again.

Can you -- you mentioned the 525 on the RVO. Can you frame what that means, relative to production capacity relative to feedstocks? Like how do you think about that number in the context of what the industry can produce and the implications for you guys?

Yes. Number one, I always have to wear 2 hats. And I wear the Darling hat, where for those in the room that know us, we process about 15% to 18% of the world's slaughtered animal byproducts into fats and proteins. And in a rising protein and fat market, we do really, really well. And 1 out of every 6 animals in the world goes through one of our factories. When I wear my hydrocarbon hat, we ultimately want to have a nice margin in there, which we had from 2013 to '18 and 2018 to '23 and then '24 became a bit of a challenge here. As we look at the RVO today, back in 2022, we told the EPA through various trade organizations. We said, "Hey, the margins in this business have been very good. There's capacity under construction. It's coming from capacity that may not understand why they're getting into the business, namely big oil. And -- but once they go, they're going to go. And so they built about 5.2 billion gallons of capacity. So there's nothing magic with the 5.2 billion. That was preached, delivered and now I hope will be recognized. So that's the first thing. So people say, where did that come from? The second piece of it is, is that good or bad? Well, the interesting thing with it is we've added a lot of crushing capacity. The ABCs and the Ds did and the co-ops did more processed at home or what's your alternative? You're reliant on China to buy your product, the beans, corn, the canola. So we've added a lot of capacity. So there's plenty of oil in this country or veg oil to fulfill most of it. Now the magnitude of the 525 is that's 1.9 billion gallons bigger than the '25 number today. And if it takes 7.5 pounds or 8 pounds, I'll do fuzzy math, let's call it, 14 billion pounds of new supply to fulfill that. There's production capacity to convert it but it's a very significant number. It's very constructive to veg oil prices. It's constructive to animal fat and waste cooking oil prices. So it's a big number that's out there. It's what agriculture needs. It will allow some additional expansion in the crushing side. It will allow our animal fats to receive the value they deserve. And we'll just see how it works. The challenge that's out there is, as you look at the world today, last year, why did margins go bad? Margins in the R&D business went bad because of cheap biofuel being diverted into this country and cheap feedstocks that were being coming out of the Asian countries, namely Chinese UCO. The way the legislation today now prohibits some of those feedstocks from coming in, that's even more friendly. But over time, you're going to have to allow additional feedstock into this country in order to meet that need, but people will figure that out. That's a down-the-road deal.

We've seen a pretty significant increase in RIN values. And in some ways, it coincided with some of the policy actions or discussion. Do you think that, that's been the real driver? Is it simply the Boho spread? Is it more kind of the underproduction maybe that we've seen relative to the current mandate? With what we've seen so far, how do you think about what's been the driver of RINs?

Yes. So ultimately, what the renewables or the biomass-based diesel business experienced last year was the mandate blend wall. Ultimately, ethanol experienced it many years ago. But when you make 1 extra gallon, it's worth 0. And so ultimately, as big oil finally got to the party here, then ultimately, they overproduced with the imports coming in, still generating RINs. And ultimately, at the end of the day, we drove the margin to 0. That's why it has to go up now. So what's it going to take? I think the more relative question -- relevant question is, what does it take to restart the industry? So if you look at Jan, Feb, March, possibly April here in a few more days, RIN production is not large enough to meet the need this year. Yes, we're carrying over a surplus. And yes, it will get tighter towards the end of the year. And yes, you can roll your gallons forwards, et cetera, there's a lot of way to play the roulette game here in a sense. But at the end of the day, in order to create a RIN, you got to make a physical gallon. And in order for a physical gallon to be created, it's got to be marginally profitable, however you want to define that. We would tell you today, given where feedstock costs are, given where RINs are that the RIN has to come up at least another $0.60 to $0.80 a gallon in order to restart capacity to meet this year's requirement, not next year's. And so we've never been in a marketplace that's trying to trade the future like -- and really, at the end of the day, the RINs market is very thin, the physicals can be, if you will, shifted it out or diverted to another year. So this is a moment, like I said, it's an inflection point in the business. And I think as we're hearing, hopefully, the RVO will be released before Memorial Day. You'll have the details of it. Certainly, it will be out for public comment. And certainly, there'll be people that are really happy and there'll be people that aren't. You've already seen the 45Z announcement. You've seen the extension there. You've seen foreign feedstocks or -- like I said, this thing is really, really setting up very nice. And then I always ask myself when I convince myself that it's setting up really, really nice, what could go wrong? And I think it's fair. Under Trump 1.0 and under Scott Pruitt and under Carl Icahn, you had all the small refinery exemptions. There are exemptions still out there that came out of the courts now dating back to 2017. They may take a little bit of the edge off of it, but not going forward. And so at the end of the day, it's not material, last night at dinner with you. They said, "well, what if it's not 5.2? Well, and I said, well, what if it's 4.5? Let's take all $800 million of small refinery exemptions. That's still a 10 billion pound feedstock increase. I mean the numbers are there. Now when the market accepts it and realizes it, we'll see.

One of the -- I go through the same exercise. So when it sounds as positive as it could be, I think, about the risks. One of the things you did mention is imports. If the RINs go up that much, you mitigate kind of the impact of the tax credit. Do you think imports will come back in? And what's your concern about that, maybe also taking the edge off?

Well, and you know my personality. I'm trying not to offend too many people in the same day. But it's a very naive approach in the world to believe that you can build a wall. If you think around Europe, they built a wall. And it's very hard to move product in and out. In the U.S., if we do -- if this isn't done properly, you'll build a wall. And you can't be so naive to believe that those feedstocks that exist out in the world were the largest operator in Brazil and Europe, our Chinese operations, those feedstocks will find other conversion capacity offshore, most likely Nextida. They'll be discounted because they can't get here. And then they've created a renewable fuel that will be brought in here. And thus, they've taken away the demand that has been created by the new RVO. So we have to be careful on prohibiting feedstocks. If you wanted to say what's the ultimate win, the ultimate win would be to somehow either tariff imported renewable diesel or not let it generate a RIN. Then you've got that in the perfect environment in a sense. I'm not sure we'll get there. I think the Congress is pretty open to allowing feedstocks in here, where Chinese UCO fits into that. And for those that still think Chinese UCO is the devil, I mean, remember, there's 12.6 million restaurants in China. There's 700,000 in the U.S. Yes, they produce UCO. And so it can't go to animal feed in China, so it's got to go somewhere. So ultimately, it will find its way to the most efficient market in the world. It was European biodiesel, but now with SAF, and RD capacity come online, it's finding its way there.

Kind of just to round out the regulatory discussion, I wanted to get your perspective on LCFS and where that process stands now. How is that progressing? And do you have a sense on time line, how that will be implemented? What are your current thoughts?

Well, the -- what I am told, number one, we were very disappointed that it went back to basically CARB for administrative review 22 pages. Who knows the real reason behind that. It's political. We understand that the CARB has wrapped it up, and we understand that CARB will most likely deliver it here between May 18 or May 19, and people say, why is that a critical date? Well, that allows then OAL under a statutory review, the Office of Administrative law to relook at it in 30 days and hand it off to Governor Newsom. If they do that before July 1, it by definition, has a January 1 implementation date of 2025. So we're hoping that happens. We're told we are. I think many of you in the room watch the news and the media out of California every day, and where Governor Newsom is. This is his program, but he's all over the political map today.

SAF. That's obviously one of the growth engines for Darling through DGD. Production is online. It came online last year. Where is that in the ramp? How did it contribute to the first quarter? And maybe how should we think about the progression of that through the balance of the year?

Yes. SAF, and as we like to talk to people, when we went into the renewable diesel business and plant came online in I think 2013, ultimately, the first-mover advantage and the first machine in the world that could convert low-cost feedstocks into a hydrocarbon. We started looking at SAF. The market wasn't really defined, but we said if big oil brings on this R&D capacity, why not have the optionality to play in both markets? And then we said, "well, what's that cost? And is that worth the risk? And do we believe that SAF will develop? And the answer was yes to all of them. So plant came online early in November starting up last year. It's at or near capacity today. The sales ledger is really developing at the margins that we'd expected. And so at the end of the day, we've got the physicals market, which is voluntary in the U.S. You've seen many of our announcements out there. There are a few gallons here, a few gallons there. You're seeing Europe -- Europe's obligation doesn't really initiate until the end of the year. So Europe is being a little slow. They're trying to figure out the rules to bring it in and how it -- and it's turned into a very complicated feedstock issue because if you think about it, and this is kind of the learning in the room because when somebody says I'm going to make SAF, great. That's -- those are easy words. When you're physically going to make it, it takes technology that can split the molecule and give you a freeze point that you need for the standard, but you're going to make about half R&D and you're going to make half SAF. Well, in January 20, what the world tell you under 45Z, they told you which feedstocks qualify. So even though we could bring in Chinese UCO that's CORSIA certified, make SAF and ship it back to Europe and claim a duty drawback. At the end of the day, the other 50% of R&D wouldn't get duty drawback or the PTC. So it's a very complicated trade right now is what I would tell you. The team has figured it out. Port Arthur is now really just -- is a UCO animal fat plant that is doing quite well and meeting all of our expectations. The sales ledger, on one side of the ledger, you've got the voluntary, you've got the mandated. And really, there's a min/maxes on there. There's lots of flexibility on these contracts. And it feels like we're building out to a full book for '25 and '26 sales are coming. The other piece that's developing out there is really what we would call the book and claim market. And the book and claim market is -- we kind of -- we'd like to just without giving names of who is there, the technology companies that are really focused on AI and are going to be huge energy consumers want to remain or try to be back to energy or carbon neutral. And they're willing to buy a credit. And so that is in the early development stages. If you ask me to handicap it, we may be making Jet A and selling book and claim credits as we go forward. I mean how -- you're watching the airlines in the U.S. all talk about lower summer travel and challenges. I mean, without that credit being able to be marketed, which is what some of the airlines are doing, it's really kind of without a mandate, at least in the U.S., it's physically and economically challenging.

Do you -- you guys have talked -- or you have talked about a potential second SAF plant at some point. So I'd love to know your thinking about that. But I guess as I think longer term, if we don't have a mandate around SAF specifically, some of those challenges, do you foresee the margin premiums compressing or at least being some pushback or pressure on that? I guess I'm just curious, over time, how you think about sustaining that.

Well, number one, we continue to finish engineering on SAF 2, where there's multiple options. Clearly, the feedstock challenges have made how you engineer and where you put it, whether it's Port Arthur or whether it's in Norco, more challenging. And then the phase out of the 45Z is it really going to step down even if we put a spade in the ground today, you're talking 27 until #2 is up. Now we're extremely bullish on SAF around the world and think that it's going to move forward. And the margin structure is such that I don't see it really changing because I don't see new capital going into it.

Okay. That's pretty clear. Shifting gears a bit to the Feed segment. How do you -- look, it's been a bit of a cycle here. How do you think about the earnings potential of that piece of the business over a multiyear period over the next couple of years. You've improved that business in a number of ways. You've made acquisitions, integrated those, so what's kind of the right framework to think about the earnings potential of that piece of the business?

Yes. I -- it's always -- it's interesting you guys always talk to the Feed segment. I talk the whole business because we kind of really just make fats and proteins across the spectrum, what the application is the segment, feed segment by far because we pick up most inedible product is by far the largest. The margin structure in that business is driven by how you buy the raw material and more importantly, what's the value of the fat, the waste fat that comes off of it. Clearly, the resurgence and the RVO is making fats worth more. Decarbonization drove it for the last couple of years, and then we kind of hit the lower end here. And now it feels like it's coming back. As we came out of Q1, we started to see fats move back into the 50s now, which we haven't seen for a lot of years. So you'd have to go back. I've kind of forward casted for the segment for the year, 950. I hope I'm low. I've been punished the last couple of years in a -- And this is a business that I say is fairly easy to forward look as long as prices are stable, tonnage is stable. And that's what we're kind of looking at, and we think prices are actually going to move up. So I think we're going to be on the low end there as we go forward.

Maybe to that point, narrowing in on the quarter you just reported, the first quarter feed numbers were a bit lighter than we would have -- our forward look was maybe not as good as it should have been. What were the dynamics kind of that drove that? Was there anything unusual in there that we should keep in mind?

Yes. We've always operated in one of our core values is transparency. Q4 is always our biggest quarter because that's when we clean up everything around the world in a sense. And we took in some insurance settlements that we probably should have kind of revealed that we had 2 fires over the years and then Eucalyptus forest in Brazil and a flood in Brazil. And that was part of it. And then part of it was there were massive significant, I think let me me use massive inventory holdbacks for both DGD and for the rising prices. And so when you normalize it, it made sense. January is always our most difficult month. February, we were hit by tornadoes, floods and freezing everywhere and then March just really came roaring back to where we thought it would be. So December might have been optically a little better to you and my learning from it is, I'm going to be more transparent on that in the future. And -- but I can tell you, March and April are where we need to be and it should only improve.

Okay. So starting in 2Q and beyond, that's kind of the right way to think about...

Yes.

Okay. Okay. That makes sense. You talked about $0.10 or $0.01 move in fat prices, rule of thumb is to the profitability of the Feed segment. Protein prices have been pretty depressed. Is there a rule of thumb on that side of the business?

There is, but not really. It's not material. Typically, the biggest challenge on the protein side. So each penny globally or $20 a short ton, $12 million, maybe $15 million depending on where you're at. And in the protein side, the value-added proteins, if you think that, that would be pet foods and then aquaculture grade material got heavily tariffed into the destinations China. So ultimately, if those tariffs roll back, then those proteins should come back. Mixed specie animal byproduct meal or meat and bone meal now has very limited homes, but most of it is in the poultry regions of the Asia Pacific area. And that just got kind of confused here. So typically, clearly, we're crushing a lot more beans. Soybean meal has got a 300 in it. We'd like to have a 300 in it again on our base product. And I think it will come back there.

Okay. That makes sense. You guys threw me a curveball this week. I had all my questions nicely prepared and then you announced the JV in the Food segment. Can you talk about the rationale of that -- of forming that JV and kind of what you're trying to achieve over the longer term with that?

Yes. And try not to be a bit cliche, we're not -- clearly, we've built something special there. And just find it for the audience, I mean when an animal goes to slaughter, part of it can go to food-grade materials. Obviously, the cut out of the meat does, but there's other byproducts that can. And those are bones and skins that we make collagen and gelatin out of edible animal fats. We've got a very significant edible fat business in Europe and then ultimately, a casings business and a heparin business. And that rolls into the Food segment. If you can't feed it to a human, but it hasn't been essentially condemned, that's the feed segment. The formation of the stool or the platform was really by segmentation of animal back in 2015. And the belief was, well, we could dump it all and just call it global rendering and just really confuseDarling the hell out of everybody or we could say food, feed and fuel. And food because these are specialty ingredients should get a higher multiple and feed, we're probably like big ag out there, we should get their multiple, and our small little fuel is an annuity business before Diamond Green Diesel. And we knew it to get a lower multiple, but the game was to try to blend it to around 11 or 12. And the only thing I got rewarded with was a renewable fuel multiple at 6.5. And so experiment failed. And so we've taken the collagen business. We're the one of the largest, if not the largest in the world. We're 150,000 tons before the joint venture and we have built a product line that probably many of you touched you this morning in the what's called hydrolyzed, collagen peptides. That's us. We're not retail, we're business to business. And we've taken a business that used to make $90 million, and it makes $250 million to $300 million now off of product line expansion. We're in 2.0 of that business now, which is concentrated or isolated collagen peptides that have a specific health wellness and nutrition application. We've launched one now for GLP-1, where it fits in the profile of weight management and appetite suppression. It's really just in its early stages. We've got about a dozen more of them out there that are in the launch form right now over the next 3 to 5 years. The joint venture came out of a relationship with not only a competitor, but a friend of 10-plus years, and he called me and said, "Hey, I have 5 children. He says, my -- this business does not fit what the 5 -- the top 5 want to do. And would you think of letting us form a new company? PV Liner is an absolutely stellar player. They have brand recognition. They have products we don't have. They have plants in geographies we don't have, the access to raw materials that is superior in some cases to us. And so we started down the path of saying, what would a new company look like because our challenge is as we go forward with the Nextida product line, we were either going to have to acquire or construct capacity and the deal we were capable of negotiating here made this a more favorable decision. Typically, you don't announce an MOU. Unfortunately, under Belgian public company law that triggers union notifications and stock exchange, so you have to. We'll head to definitive agreement as quickly as we can here, and then we'll hand it off to the attorneys in the antitrust world of Europe, China, South America and the U.S. to get approval. The concept here is as we look at the Food segment, we've said this basically represents about 77% of our revenue in there, but in the high 80s of our earnings. There are some smaller businesses there that can be moved back over into the -- I'm going to call it, the global rendering segment. You call it the Feed segment. And then we'll have the global rendering. We'll have -- we like the word ag energy because Trump doesn't like the word renewables, so we'll stay away from renewables. And then we'll have Nextida as a freestanding company that you will have complete transparency to of its performance, its growth and its dreams at which time it either will bring to me and us the multiple and valuation that we deserve or we'll take it public. And it's just that simple. And yes, that's a longer time frame than most people in the room always want to hear, but that's the reality of how it works.

The JV is Nextida, the product is also Nextida. Can you talk about the product and your enthusiasm for the product? And I think you officially launched 6 months ago, roughly, what's the receptivity been? Kind of how do we think about the glide path for that?

Yes. It's -- essentially, we're -- as you go into these products, they operate in the supplement world, which is a bit of the wild, wild west of regulation or lack of regulation. But when your customers are large health and wellness companies, and you know who I'm talking about here, they're requiring a more sophisticated level of clinical trials. We completed many of them, smaller groups on our GLP-1 alternative showed a 42% drop in glucose spikes. That's right there with the big pharma numbers. Maybe it doesn't have the appetite suppression side, but maybe it's the alternative when you come off of the pharma. And it's about $68 a jar for a month. So very affordable. So we're in secondary and very significant clinicals on that, which should accelerate the growth. We've got brain health one now dementia treatment potentially and then women's health, hair, nail, skin, there's many of them. If -- and I said -- I know that it sounds like a lot. When I go back, 2015 is when we backstopped a little company in Chicago called vital proteins. And the founder had -- he was an avid runner. As we all get older, we know that the lubricity in our joints lessens. He had done his research and said, "Can I have collagen?" And so we made him the first shipment out of Amparo, Brazil. And needless to say that product line globally has grown to about 30% of our product line. What's unique about it in comparative is it took 10 years to get there. So the Nextida platform is being launched. It has a library of products. It has great assets in the world. And we see just really a strong trajectory of growth, which is more common to being able as a health and wellness company to talk about a 3- to 5-year outlook without injecting the word commodity in there.

Got it. Okay. And if I think about what the opportunity looks like for that business overall, can you help us understand, and I understand it takes some time to develop. But I think you made the comment that you think that business can be more valuable than the global rendering business, I think is what you said, maybe I misunderstood that. But how do you think about the...

Was I drinking last night?

Cannot confirm or deny. How do you frame that?

You look at the margins, the gross margin there, 25% to 30% last quarter, I think, 29%. You take $1.5 billion revenue, you got $450 million before the Nextida product line of potential EBITDA. And that's really bringing the PV plants and product mixes and moving around and synergies over time after close. And then the question is, when you start to say, when you go out and start finding health and wellness ingredient comparisons out there, you're 12 to 16x. And so we've got a market cap today at a little under $6 billion before I got up here. Hopefully, it doesn't go down after I get up here. But -- and ultimately, that's what that company would be worth today.

Got it. Okay. Thinking about this year, I believe the first quarter was weaker than you might have expected. It was weaker than we expected. But you reiterated the guidance, maybe frame how it compared to your expectations? And then kind of what were the moving pieces that hold the guidance? What did you include versus what you weren't including? How do I just kind of think about the expectation?

Yes. The March run rate divided by 5x 40. and that gave us basically a $9.50 run rate without fat prices moving up anymore. The Diamond Green Diesel, we're looking at that and just saying, something's got to give. And what we mean by that is margins have to improve or RINs are really going to jump here, and that will really be a back half of the year. And it doesn't take much. The first 5 years, we ran $1.26 a gallon, the next 5 years is almost $2.20 a gallon, and then it kind of fell off last year. The investment case was around $0.80 a gallon. We still believe that's our competitive advantage before SAF and to restart the biodiesel industry and some of these off players, it's going to take a significant margin improvement and we're there.

We started the discussion, my intro, we talked about the transformation of the business over a number of years. If I think about the next kind of 3 to 5 years, and how you think about growing the business, we talked about SAF. We talked about Nextida. What are the other kind of ways in which you think about evolving the business, growing the business over the next handful of years?

Yes. When I still look at the world, and I still -- fundamentally, as we've always said, with population, even though somewhat flat or decline in some places, you still got population growth. You got wealth creation, still people are eating better and wanting protein. At the end of the day, the preference is still animal-based protein. And so we continue to see continued growth in South America. I've got 4 plants down there today that are in need of additional capacity as we go forward. We continue to -- I fundamentally believe Brazil and one day Argentina will help really feed China. I don't think we haven't waived off of that one. Clearly, the Nextida is really exciting for us in the SAF project. So organic growth in the rendering business, new products in the collagen business and aviation fuel as we go forward.

Does M&A become more a part of that as a driver, certainly not with SAF and Nextida, but I think maybe for the core business? Or is that something that you would do more organically?

Well, M&A will be opportunistic as it comes. The challenge in this business today has been, over the last 3 to 5 years, the cost to build a plant has tripled. And that changes the M&A, what you kind of acquire a brownfield for and ultimately retrofit. So yes, there's players out there that clearly -- there are 3 of them for sale in Brazil today. We're -- I've still declared an M&A holiday. I want to get the balance sheet more in a better shape. Ultimately, in Nextida, once we close, do we move some debt over there. Those are all things. So in no hurry to do anything other than to deliver on what's available to us today.

And so when I think about delivering on what's available to you today, and I think we closed with this last year as well, but I want to ask it again. When you look at Darling's asset base as it sits today. And I get kind of the ups and downs of the cycles and some of those disruptions. What do you think this business should earn from an EBITDA perspective? Certainly, not guidance, but just how do you think about what kind of the right level of earnings for this asset base is?

I mean pre any future growth in Nextida today, we look at -- when we put the Diamond Green Diesel machine on top of this, it was really thought of as a hedge. If we had low fat prices, we'd have higher earnings in DGD. If we get the RVO, which we fundamentally do believe we will get a significant increase that goes back into play here. So easily, as we've said, the core business is $100 million a month business, $1.2 billion. And DGD, the investment case was right at $0.80 a gallon on 1.3 billion gallons. So you're somewhere between $1.8 billion and $2 billion in the current form that it's at today.

Before Nextida.

Before Nextida.

Got it. We're right on time. So we'll end it there. Thank you very much. Really appreciate it.

Thank you.