Greece’s economic crisis hurts Johnstown yogurt maker’s debt rating

PHOTOGRAPHER: Michael Lamendola

Moody’s Investors Service has downgraded Greek yogurt manufacturer Fage Dairy Industry’s rating outlook based on deteriorating sales in its native country of Greece, which is the midst of a severe economic crisis.

Fage’s rating went from stable to negative, reflecting declining sales of its product in Greece and fears that the company’s debt servicing capability could be affected should Greece default on international loans or exit the eurozone, according to Moody’s.

Moody’s tempered the outlook by saying Fage is expecting strong growth of sales in the U.S. market. Fage operates its only production plant in America that makes Greek yogurt in Fulton County.

The company opened the $200 million, 220,000-square-foot plant in 2008 in the Johnstown Industrial Park. It plans to spend another $120 million to construct an 188,000-square-foot addition to the plant, allowing it to double the plant’s capacity to 160,000 tons annually. The company is placing high hopes in the plant’s ability to meet growing demand for its product.

Fage is the fourth-largest producer of Greek yogurt in the United States, with a 5 percent share of the U.S. yogurt market and sales totaling $141.7 million as of Dec. 31, according to Specialty Food magazine.

Moody’s said Fage’s sales grew by 13.8 percent in 2011, but saw a decline of 9.4 percent in Greece. It said the “key driver of international sales growth” will be Fage’s U.S. business.

At the same time, Moody’s is warning that Fage faces exposure to its liquidity and cash flow due to the worsening economic situation in Greece and that both may be further constrained by its large capital expenditure for the expansion of its production plant in Fulton County.

Fage officials did not return a phone call for comment. Local economic development officials also were not available Friday.