FAGE Dairy announces Greek exit as financial crisis deepens

10-Oct-2012 - Last updated on 11-Oct-2012 at 15:04 GMT

Greek dairy giant FAGE has announced that it is transferring its headquarters from Athens to Luxembourg – a move that some consider an attempt to reduce its exposure to the Greek financial crisis.

Earlier this month, the firm completed an internal restructure which saw it change its domicile to Luxembourg. FAGE will manage its international operation from the country under the company name, FAGE International S.A.

Meanwhile, the company’s operations in Greece will continue to be controlled by its Greek subsidiary, FAGE Dairy Industry S.A. – the group’s former parent company.

In recent years, economic out in the country has slumped significantly and unemployment has recently hit a record high of more than 25%. Concerns are also growing in the country that it may leave the Eurozone.

DairyReporter.com approached FAGE concerning its reasons for the move, but no reply was forthcoming before publication.

“Increasing global nature”

Announcing its decision, FAGE claimed that the internal restructuring was aimed at enhancing the “efficiency of the Group’s corporate structure and better reflect the increasingly global nature of the Group’s business.”

FAGE generates more than two-thirds of its revenue outside of Greece. It has a manufacturing presence in Greece and the US and exports its product portfolio, which includes yogurts, dairy desserts, milk and cheese, to an additional 29 countries including the UK and Italy.

“We are pleased to announce this corporate restructuring, which builds on our Greek heritage while positioning us to compete even more effectively in the global marketplace,” said FAGE CEO, Athanassios Filippou following its announcement.

"The worldwide demand for our products continues to grow and we are poised to take advantage of market developments in Europe, North America and wherever else they may arise.”

Eurozone exit

According to US financial services company Standard & Poor’s (S&P), FAGE has addressed many of the risks associated with remaining a Greek incorporated company through its decision, including “reduced access to capital markets, and legal uncertainties.”

In a note published on its website, S&P described FAGE’s change in domicile status as “positive from a credit standpoint.”

It added, however, that the firm’s remaining reliance on domestic sales revenue could still pose a problem for the company if Greece decides to leave the Eurozone.

“The affirmation reflects our view that FAGE’s new corporate structure and its growing US business has reduced the group’s exposure to Greece – FAGE now generates more than two-thirds of its revenues outside Greece,” said the P&S note.

“Nonetheless, we still believe there are risks to the company’s business should Greece leave the Eurozone, and we continue to estimate there is at least a one in three chance of a Greek exit. We understand that about 50% of FAGE’s revenues are generated by assets located in Greece, and thus believe a Greek exit could still lead to severe and prolonged disruptions of FAGE’s Greek operations, which could require significant working capital,” it added.