SZYM and Palm Oil

Palm oil is used in many consumer products include many foods and consumer products. Apparently, the destruction of peat forests in Indonesia to plant oil palms has grabbed the attention of environmentalists because peat forests store so much carbon. A few days ago, I watched a new documentary series on Showtime called Years of Living Dangerously. In the first 2 episodes, Harrison Ford visited Indonesia to see the destruction and meet with head of forestry and the President. When Ford returned to California he visited a Unilever facility to discuss the problem. Unilever is a huge user of palm oil in many of its products. The company seems interested in doing “the right thing” environmentally. After seeing the post on the SZYM/Unilever deal, I wonder if SZYM algae oil can replace palm oil. I wonder if 1) the algae oil can meet the products’ specifications, 2) the algae oil can meet Unilever’s cost requirements, and 3) SZYM can produce enough oil to replace palm oil. If the answer to the first question is yes, that’s a good start. The answers to 2 and 3 may be linked given economies of scale of production. Anyway, it would be good to know the answers.

Chris

4 Likes

…Unilever is a huge user of palm oil in many of its products. The company seems interested in doing “the right thing” environmentally. After seeing the post on the SZYM/Unilever deal, I wonder if SZYM algae oil can replace palm oil. I wonder if 1) the algae oil can meet the products’ specifications, 2) the algae oil can meet Unilever’s cost requirements, and 3) SZYM can produce enough oil to replace palm oil. If the answer to the first question is yes, that’s a good start. The answers to 2 and 3 may be linked given economies of scale of production. Anyway, it would be good to know the answers.

Hey Chris,

Here’s the last paragraph of the Unilever/Solazyme joint press release.

Unilever and Solazyme have been collaborating for five years on multiple projects, culminating in a supply agreement covering the first of Solazyme and Unilever’s jointly developed tailored oils with an initial supply of at least 10,000 metric tons. The vast majority of the oil for the soap products will be produced in the new renewable oils facility in Moema, Brazil. Unilever expects to purchase the full volume within twelve to eighteen months.

So after 5 years of collaboration, they entered into a supply agreement with “at least” 10,000 metric tons" (this sounds like a lot to me)…and later in the statement, “…vast majority of the oil…in Moema” and finally, “all 10,000 MT will be purchased within 12 to 18 months”. Earlier in the announcement Unilever said they can make the product in 2-3 days, so it looks to me to be a done deal, unless Lord Chaos steps in.

Arguably I gloss over a lot of details you guys stop and think about and so that is why this board is so important to me, but haven’t your 3 questions been answered above? The joint releases are very carefully worded and I surely appreciate someone who can read them carefully, (that leaves me out) so thanks for the review.

I bought 5 calls on SZYM with Sept expiration and my break even would be $12.12/share. I decided this was the most conservative way to go based upon the information at hand. I intend to share with you guys, my ignorance or brilliance when September rolls around but from this vantage point, it looks like a no brainer to me.
Mykie
PS I did read the message incorrectly at first. When they said the product is “on the shelf in Brazil”, they were referring to the residue of trial products they have just completed(successfully) of their LUX brand soap to consumers in Brazil. I took that to mean it was on the shelf in the Moema factory…I do need a leash and appreciate the gentle application of same. You guys are the best.

1 Like

So after 5 years of collaboration, they entered into a supply agreement with “at least” 10,000 metric tons" (this sounds like a lot to me)…

Mykie,

It has to be at least 10,001 metric tons before it can be considered a lot. :slight_smile:

Thanksks for giving me a chuckle and thanks for all of your diligence on SZYM!

Jason

1 Like

Here is a SA article on SZYM’s oil as an alternative for palm oil:

http://seekingalpha.com/article/2127973-solazymes-algal-oil-…

1 Like

Here is a SA article on SZYM’s oil as an alternative for palm oil:

Gaucho Chris,

Great article and thanks for providing it. There were many just as informative and interesting offshoot articles that kept me up past my bedtime but hey, in for a dollar, in for the duration…or some such saying.
Mykie
PS No option plays on this stock come to your fertile mind?

PS No option plays on this stock come to your fertile mind?

Yes. Yesterday, I sold to open SZYM May14 $12.50 puts for $2.05.

Guacho Chris,

Are you familiar with Steely Dan? There’s a song about Guacho amigo (I’m bad with titles on songs but in the song the lyrics are, “Who is that goucho amigo?” Well Steely Dan is one of my favorite bands and whenever I see your name, I warm up.

So buddy, tell me

Yes. Yesterday, I sold to open SZYM May14 $12.50 puts for $2.05.

Nice Premium for what…2 weeks work? OK, I went deep in the money at $10 strike price and I went out to September with a purchased call (remember, I have a good sized position with this company and am a bit hesitant to add to it, though I do believe in the short term, we will catch a rally). Plus, I chose this expiration because this company has been at the plate for quite a while now with no balls nor strikes passed, and I don’t feel secure about the time component. Time delay seems to be in there DNA.

Can you tell me why you chose what you chose, different strike and different expiration date, and a Put over a call? This is a learning experience for me par excellence!

Mykie

Can you tell me why you chose what you chose, different strike and different expiration date, and a Put over a call?

Sure. Over the past week I opened a 3% position at around $10.70. These are in shares. The put I chose to sell are equivalent to buying another 1% position at a slight discount. I could have bought another 1% in shares. Reason #1 is that I wanted to keep my cash (I’m low on cash). Reason #2: Earnings come out tomorrow (May 5) and I think there’s a better change for the stock to go up in which case I may be able to make a quick return. It is a little speculative but worst case I will own 4% rather than 3% (in which case I’ll probably sell something else to pay for my assigned shares). Note: that my. Notice of selling the SZYM May 14 $12.50 puts was specific to my situation and the mix of my portfolio so it may not be appropriate for you.

I very rarely buy options because I don’t like paying for time value (I like getting premiums, not paying them). Also, in general, I don’t believe that I can time the market. In most cases where I’ve bought call, I’ve lost money. I view buying calls as speculative since you are not just betting on the company but also the timing.

Chris