{ "docId": "019dd923-622c-750b-8b96-874267abd326", "docSlug": "82a540401996", "documentTitle": "China Huishan Dairy Holdings (6863.HK)", "authorId": "51_Muddy_Waters", "authorName": "Carson C. Block", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2016-12-19 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 6, "pageCount": 13, "prevPage": 5, "nextPage": 7, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "dense", "nDataPoints": 0, "notes": "The slide uses expert interviews to undermine the company's credibility regarding farm quality.", "elementsJson": [ "paragraph", "footnote" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b96-874267abd326/6", "deckHref": "/decks/019dd923-622c-750b-8b96-874267abd326", "deckJsonHref": "/decks/019dd923-622c-750b-8b96-874267abd326.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b96-874267abd326#slide-6", "components": [ { "bbox": { "h": 0.095, "w": 0.764, "x": 0.118, "y": 0.268 }, "kind": "paragraph", "text": "They pointed out that it is common knowledge in their industry that the design and construction of cow sheds and related facilities and proper management of the environment and living conditions of the herd \"enhances animal performance, comfort and well-being.\" Huishan's abundant sloganeering with such messages indicates that they know this too; however, they do not seem to take it to heart.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "36858fda-bb08-4557-b0c5-c174a05b6986", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.085, "w": 0.764, "x": 0.118, "y": 0.638 }, "kind": "paragraph", "text": "Dairy Expert A, with significant experience overseeing the development of large-scale farms that supply raw milk to large publicly-traded foreign and Chinese dairy farms, provided specific comments on the shortcomings of the design and construction of Huishan's farms. His comments fell into two major categories: 1.) design issues that impact production, and 2.) overall construction quality.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "3ca3afbe-f26c-4786-8132-89c364f11844", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.145, "w": 0.764, "x": 0.118, "y": 0.113 }, "kind": "paragraph", "text": "Our experts assed that the pre-IPO farms are of poor quality. We asked two China dairy experts to provide independent assessments of the quality of the farm design and construction. Their general responses indicated that these farms are typical Chinese barn designs, were \"built cheap\" with \"poor airflow\" and \"not built to last.\" Moreover, they explained that these cost savings come with a cost to production and yield.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "cdf99a40-a2b8-4841-b73b-a4e40cb8b0c4", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.255, "w": 0.764, "x": 0.118, "y": 0.373 }, "kind": "paragraph", "text": "The experts explained that poor design features seriously undermine the ability of cows to achieve and sustain high yields throughout their lactation period. Poor airflow results in discomfort in the heat of summer and cold of winter (known as heat/cold stress) leading to declining yields, reduced fertility, among other undesirable conditions. Good air flow helps flush air born viruses and pathogens out of the sheds which normally house hundreds of head of cattle and is therefore an important for maintaining the health of the herd. Without proper ventilation moisture and ammonia (from the cow urine) will also build up in the air posing health risks and also exacerbating corrosion in the building's structural framing, roof, and other steel fixtures such as headlocks and cow pen loops. Excessive mud, excrement and urine pose not only health risks, but increase the risk of slips and falls that could injure the cows. Certain injuries would require these animals be culled prematurely.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f52be90f-4467-4642-805b-a786b28d1ce0", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "Their general responses indicated that these farms are typical Chinese barn designs, were \"built cheap\" with \"poor airflow\" and \"not built to last.\" — Two China dairy experts", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-14d8-75c0-8c91-a0419f64e3a5", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.185, "w": 0.764, "x": 0.118, "y": 0.745 }, "kind": "source-note", "text": "Footnotes 5-9 detailing sources and external links for farm comparisons and industry standards.", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "3bc9a844-630d-4481-9712-d70ee5c5f382", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "ceo-quote-contradiction", "slug": null, "matchId": "d415bd0e-5511-4a9e-bdb1-59cb5c8be0cc", "evidence": "Contrasts Huishan's 'abundant sloganeering' with expert assessment of poor farm quality.", "confidence": 0.85 } ], "arcBeats": [ { "to": 9, "from": 5, "beatId": "ce0b00f3-2713-4943-93fb-71c49cdf7894", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "The Struggle", "beatSlug": "overcoming-monster-the-struggle", "evidence": "The document presents photos and descriptions of poor quality construction and design issues at Huishan's farms", "position": 1, "confidence": 0.8, "parentBeatName": "Development", "parentBeatSlug": "development" } ], "loops": [ { "to": 9, "from": 5, "name": "Iceberg", "slug": "10-iceberg", "bestFor": "Consulting, complex problem solving, organizational change", "matchId": "036b2acd-267e-4cdb-a19f-f5632c8a8f56", "evidence": "The document presents photos and descriptions of poor quality construction and design issues at Huishan's farms", "position": 1, "objective": "Reveal underlying issues with Huishan's operations", "structure": "The Symptom (Visible) -> The System (Hidden) -> The Root Cause", "confidence": 0.6, "description": "Reveal that the visible problem is merely a symptom of a deeper root cause" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }