SZYM - New article by Kevin Quon…



I think this may be important so I post the comments here about the accounting of the Moema Joint venture. It’s a bit deep into accounting for me but I thought it could, as one commentator says, create confusion in Wall Street, providing some volatility to the stock. This means more opportunities for 1. lower prices or 2. over shoot to the upside. Just something to watch for.

Another great article Kevin!

Could someone explain to be what consolidation of the Bunge joint venture is and what it means?

This is from a previous article: “Additionally, the financials neglect the consolidation of the Solazyme Bunge joint venture which should occur upon the start up of the Moema facility. This joint venture would another $184.5 million to the company’s total assets.”
31 May, 07:15 PMReply! Report AbuseLike0

Cabeza Howe , Contributor
Comments (224)

When SBJV is consolidated into SZYM’s financial statements, 100% of the JV’s revenue will be recognized in SZYM’s income statement. Similarly, the JV’s assets and liabilities and any retained earnings or losses will be reflected in SZYM’s balance sheet. (And, non-controlling interest will take care of the “right” share of earnings/losses.) Painter just mentioned on the Cowen conference that consolidation might occur either in 2H14 or 1Q15.

Consolidation or otherwise (current method of accounting is called “Equity Method”) should make no difference to any long-term investors. Really just accounting tricks. However, confusion might arise on Wall Street. Not sure how much consolidation the consensus estimates have assumed for each quarter and the entire year. That might potentially lead to “hits” or “misses” confusions. Guess management should handle it gracefully in particular toward year end if no consolidation occurs at all. They should ideally give a pro forma set of result with Moema consolidation. So you can still report say $50 million revenue for the whole year and still not trigger disappointment when you tell investors that, on a pro forma basis, the revenue would have been $100 million were Moema JV fully consolidated.

Cabeza Howe , Contributor
Comments (224)

Some clarification:

“non-controlling interest will take care of the “right” share of earnings/losses.” => Accounting for non-controlling interest takes care of correctly allocating share of earnings/losses.

“Not sure how much consolidation the consensus estimates have assumed for each quarter and the entire year.” =>
Of course, it’s either Consolidation or Equity Method of Accounting. Can’t have a mixture. Not sure how much contribution from Moema is thrown in each Q and Y. They obviously are working on consolidated basis and assume certain %ramp in each Q and Y.