szym news release

Investment Analysis Clubs Saul’s Investing Discussions
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http://investors.solazyme.com/releasedetail.cfm?ReleaseID=87…

As I speculated in a previous post, SYZM has been experiencing some difficulties in Moema ramp-up (emphasis mine) -

Solazyme’s core fermentation technology is performing well at Moema, with ongoing successful large-scale fermentations of two different products in multiple full-scale production vessels. Although the key downstream unit operations are functional all the way to oil production, and modest quantities of finished product continue to be produced and shipped, downstream processes at Moema require further optimization and are not yet operating on a fully integrated basis. This is an area of significant focus and ongoing improvement.

IMHO, this does change the long-term thesis but it does pushes back production schedule. All together I think the Moema plant is about 2 - 3 quarters behind the original plan.

The first part of the release is interesting.

Solazyme, Inc. (NASDAQ:SZYM) announced today that after successfully completing the build out of a series of important operating capabilities, President David Cole is transitioning from an executive operational role back to the advisory role he occupied prior to January 2014. His advisory responsibilities will be broadened to include leadership of the Company’s strategic advisory boards. Mr. Cole will be stepping down from the Board of Directors as part of the transition.

Mr. Cole was appointed to handle the capacity biuld-out – the plants. Now he is going back to the advisory role. Does that mean the Moema problem is more or less fixed and he has done his job or does it mean he is kicked out because of the Moema problem?

But they are also making some nice progress. Emphasis mine.

The Company continues to make progress in its commercial ramp-up, with three production facilities now in various stages of operations. The Company is consistently producing and shipping product from Peoria for its AlgaVia™ food business. It is also consistently producing and shipping product from Clinton/Galva where there has been continued customer growth, with sales of different oils and products to more than thirty customers.

If I remember correctly, they were shipping to 15 customers at the end of Q2.

-M

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Great find…agree it does not change the thesis. What would concern me is if they would not start adding customers even with limited production or if their large name partners would start bailing out. For me this is a buying opportunity.

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Thanks Mark. SZYM has 2 fully operational plants including one industrial size production facility. This tells me that there is no technology risk with the Moema plant. It’s all about implementation and execution. This will eventually me successful and the timing is not that critical to the long term prospects of the company. The main worry that is still unresolved is whether SZYM can create enough demand for the capacity that they are generating. Until we see continued orders/contracts for high margin and large quantities this concern will will remain unaddressed and remain part of the “potential” and the “story”. For this reason, I agree with Saul and am not adding to my position.

Chris

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Until we see continued orders/contracts for high margin and large quantities this concern will will remain unaddressed and remain part of the “potential” and the “story”

Agreed. Technology is only part of the equation. To establish a reputation as a consistent and reliable supplier is critically important in winning business from large customers. But those are operational problems and are fixable. I assume the technology platform Solazyme has is scalable.

-M