Fage headquarters shift may aid finances

PHOTOGRAPHER: Marc Schultz

Russell Evans, Director of Marketing talks in Incubation room at the Fage USA plant in Johnstown in January 2012.

A Greek yogurt company with its main U.S. manufacturing plant in Johnstown has relocated its corporate headquarters to Luxembourg from Greece and renamed itself Fage International S.A.

The corporate restructuring will limit Fage’s exposure to Greece’ crumbling economy, give it a better tax environment and allow it to access bank funding, according to Standard and Poor’s, an investor service that publishes financial research and analysis on stocks and bonds. Fage had for years operated under the name of Fage Dairy Industry S.A.

S&P said it views Fage’s corporate restructuring as positive from a credit standpoint. “We now believe that the risks linked to being a Greek incorporated company — including potential reduced access to capital markets, and legal uncertainties — have been addressed,” the S&P analysis said.

Fage is planning 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.

Fage has yet to start the projects and has not publicly explained delays. Fage officials were not available for comment. Local officials say they expect the projects to begin soon.

Seeking state funds

Fage used private financing to build the initial 220,000-square-foot facility at the site in 2008 and has not publicly asked for state and local financial assistance for the proposed expansions.

Fage’s expansion projects will require Gloversville and Johnstown to spend approximately $4.5 million to the upgrade the co-owned treatment plant, according to state documents. Local officials are seeking state funding to offset this cost. Fage’s increased production would generate millions of gallons of wastewater that the treatment plant could not handle at present.

Fage’s U.S. plant produces 80,000 tons annually of Greek-style yogurt in a state-of-art facility that employs 240 people in the Johnstown Industrial Park. The expansion would allow it to produce 160,000 tons annually.

The company wants to capitalize on growing U.S. demand for Greek-style yogurt. Fage currently controls more than 5 percent of the market in America, where it is the fourth largest producer of the specialty yogurt. Greek-style yogurt contains more protein, less sugar and is thicker than other yogurt.

S&P said Fage generates 50 percent of its revenues from assets located in Greece and that it generates about 30 percent of its sales there. It said the company’s financial picture could darken should Greece withdraw from the eurozone, which it pegged at a 33 percent possibility.

Based on this analysis, S&P has reaffirmed its negative outlook on the company’s long-term bonds, but has taken Fage off its CreditWatch alert. It placed Fage on CreditWatch in June.

“The negative outlook reflects our view that we could still lower the rating on Fage if Greece leaves the eurozone, which we believe could result in severe and prolonged disruptions of Fage’s activities in Greece, where about 50 percent of its assets are located,” according to S&P. “We thus believe a Greek exit could still lead to severe and prolonged disruptions of Fage’s Greek operations, which could require significant working capital.”