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  "documentTitle": "Olam International (OLAM)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson C. Block",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2013-02-08 00:00:00",
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  "notes": "The slide uses a skeptical tone to challenge management's claims regarding project costs and financial reporting.",
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      "text": "The aforementioned quotation is perhaps the best criticism one could level at Olam's accounting practices.",
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      "text": "Olam sold and leased back 4,800 acres of land underneath its California almond orchards, booking proceeds of approximately S$68 million and an accounting profit net of taxes of S$18.1 million. The pre-tax gain was S$27.8 million. Olam touted this transaction as a positive for investors, showing how it can monetize some of its existing assets. Perhaps unsurprisingly, we take a different view.",
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      "text": "I can give you any IRR you want by changing urea prices by $5 or $10 or changing natural gas prices by a couple of cents to the dollar said Mr. Verghese at the results presentation in reference to the Gabon fertilizer project. This reality speaks to the speculative nature of the project for one. However, it emphasizes a more important truth about Olam - one that we discussed at length in our initial report. Olam's fair value gains and Level Three derivative valuations are the products of models. The aforementioned quotation is perhaps the best criticism one could level at Olam's accounting practices.",
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      "text": "Management stated that production costs at the facility once completed would be US$75 per ton, which would be the lowest in the world. We advise investors to give little credence to this prognostication.",
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      "text": "First, without the gain on the sale, Olam's PAT would have decreased 6.3% YOY. Second, because Olam realized an approximately 70% gain on the sale, we assume that the lease terms are fairly burdensome to Olam. When Olam sold the land, it also sold it with the lease. If the consideration Olam received for the land was so rich relative to Olam's allocation to the land cost, then it is likely due to Olam's tenancy. (Another possibility is that Olam under-allocated to land its purchase consideration for the ranches.) Regardless, Olam in effect took what was already a levered asset, and levered it even more. One could argue that this is really a case of expensive financing, rather than financial innovation.",
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      "text": "More to the point, we would applaud Olam if it walks away from this project. The Company seems not have a handle on the costs, and certainly has missed its estimate of the timeframe involved. It is a highly complex project that is well outside of Olam's core expertise. As we argued in our initial report, Olam's execution of far simpler projects is often flawed. We view Olam's inability to accurately forecast time and cost as a prelude of more problems to come if the project proceeds.",
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      "text": "I can give you any IRR you want by changing urea prices by $5 or $10 or changing natural gas prices by a couple of cents to the dollar — Mr. Verghese",
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      "kind": "source-note",
      "text": "15 Page 19 of http://olamonline.com/wp-content/uploads/2013/02/H1FY2013FinancialStatements.pdf\n16 Page 19 of http://olamonline.com/wp-content/uploads/2013/02/H1FY2013FinancialStatements.pdf",
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