Fage plant project still anticipated by Johnstown officials

PHOTOGRAPHER: Michael Lamendola

Local officials remain optimistic Fage USA Dairy Industry will break ground for two major projects tied to the expansion of its only Greek yogurt manufacturing facility in the United States.

This despite a worldwide investor service’s concerns about the company’s finances because of economic turmoil in Greece, where Fage is based.

Bruce Heberer, who handles code enforcement in Johnstown, said Fage’s engineer told him two weeks ago that construction plans would soon be forwarded to his office for review.

Michael Reese, president and chief executive officer for the Fulton County Center for Regional Growth, said he has heard Fage will start the projects once agreements have been signed regarding long-term access to city of Johnstown water and disposal of whey waste through the Gloversville-Johnstown Wastewater Treatment Facility.

“My understanding is the projects will begin once those agreements are signed,” Reese said.

Both the Johnstown Common Council and the board of the treatment facility have signed off on the agreements and indicate memorandums of understanding are being finalized.

Fage wants to build a $100 million, 180,000-square-foot addition to its main plant in the Johnstown Industrial Park and construct a $15 million whey pretreatment facility near the Gloversville-Johnstown Wastewater Treatment Facility. The company wants to double the plant’s capacity to 160,000 tons annually to meet growing demand for its product, adding another 150 workers to the 240 there. Fage opened the 220,000-square-foot Johnstown facility in 2008.

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, up 66.3 percent as of Dec. 31, according to Specialty Food magazine.

Fage spokesman Russell Evans has not returned phone calls for comment.

Heberer said his department will promptly review Fage’s construction plans. “I do not think they are behind schedule,” he said. “A project that big would have plenty of time to get going, especially if we have the same kind of winter as last year.”

Heberer said the company’s representatives are keeping the city “in the loop” on the project’s status.

The Johnstown expansion is crucial to Fage’s financial health, according to several credit analysis reports issued by Standard and Poor’s. S&P said 68 percent of Fage’s total sales in the first half of 2012 came from outside of Greece.

“We anticipate that this percentage will continue to increase, primarily due to the company’s U.S. operations, which will likely continue to deliver solid growth and more than offset the decline in the group’s domestic sales, as consumer sentiment further decreases in Greece,” S&P said.

Greece’s deteriorating financial condition, however, prompted S&P on Aug. 23 to keep Fage’s ‘B’ long-term corporate credit rating on CreditWatch negative. A rating of ‘B’ means the company’s ability to meet its debt obligations is significantly speculative.

Fage has about $230 million in total debt outstanding, according to S&P. S&P said it will review Fage’s credit rating in 90 days and may upgrade it or downgrade it, depending on whether Greece has exited the European Economic and Monetary Union, also known as the eurozone.

“Fage’s business risk profile is ‘weak,’ in our view, constrained by the company’s narrow product and brand diversification, and by its participation in the small, mature and highly competitive Greek market, in our opinion,” according to the S&P analysis. “These factors are tempered by Fage’s rapidly growing operations in the United States, now contributing more than half of total sales, and by the good growth prospects of the global dairy industry, which will further support Fage’s future organic growth.”