Olam Int’l

Olam Int’l has strongly rejected “baseless and unsubstantiated assertions" made by short seller Carson Block and his hedge fund firm Muddy Waters. The commodities supplier pointed to its sound financial position, which has been subjected to annual audits by Ernst & Young. The company had on Wed sued Block and Muddy Waters for libel and slander about Olam's "unsustainable" business model, "highly leveraged" financial position and "aggressive" accounting practices made by Mr. Block at the Ira Sohn Investment Conference on Mon. E&Y has written a letter to Olam that it stands by the audit opinion on the financial statements of the company and reaffirmed that Olam's financial and accounting policies strictly follow the S’pore Financial Reporting Standards. Olam said its debt-to-equity ratio, a commonly used measure of indebtedness, is expected to be around 2.5x, where a large part of working capital is used to fund hedged inventories and secured receivables that are regarded as near cash. For the 1QFY13, the group’s debt-to-equity ratio was 2.03, which is comfortable for the company to continue on its growth path. It has no current plans to raise fresh equity. On specific accounting related issues raised by Muddy Waters on valuation of its biological assets such as orchards and dairy farms, Olam said they were in accordance with S’pore rules that prescribe how such assets need to be recognized and presented.