Squeezed export industries planning exit strategies

The majority of export-reliant Greek industries is adopting a defensive stance for 2012 after struggling to survive the economic hardships of 2011.

Transferring their headquarters to other Balkan countries or to Cyprus as of this month, opening accounts with foreign banks in order to have guarantee letters that will be accepted abroad, and prepaying in cash for raw materials that will be needed through the first half of 2012 are just a few of the exit strategies being put into place by Greek export industries.

Enterprises with a capitalization in excess of 500 million euros expect 2012 to be a difficult year that will redraw the business map of the crisis-hit country, while hundreds of other firms that struggled to ride out 2011 have already laid down plans to make it through next year as best they can.

A number of companies — whose main priority is to secure raw materials for the first six months of the year by paying in cash or submitting letters of guarantee from foreign banks — have already transferred capital to subsidiaries abroad, while also informing employees of impending sales of commercial networks and a freeze on investments.

Other industries have focused their efforts on boosting subsidiaries abroad that have shown healthy growth. Examples of this strategy are Mytilineos Group subsidiary METKA in Iraq and the broader Middle East region, as well as the expansion of SIDENOR, of the Viohalco Group, to Albania.

One chief executive officer of a listed group involved in metals explained that Greek industries are exploring all their options but are feeling the pressure of time as the priority is to maintain economic health. He added that moving companies to neighboring countries is a serious consideration that no longer has to do just with the cost of labor.

The chairman of a listed services company noted that no one wants to make hasty decisions, ?but the economic choke-hold and the intransigence of our banks are forcing us to explore other possibilities, even moving, or at least increasing our production abroad to boost revenues.?

The biggest problems faced by Greek industrial firms mainly concern their relationships with foreign suppliers, most of whom no longer accept letters of guarantee from Greek banks and have reduced the period of time in which merchandise can be paid for or even ask for the money to paid in advance.

The wholesale and consumer goods sector has posted a drop in turnover exceeding 15 percent. Electronics are down by 10 percent, furniture by 20 percent, shoes and apparel by 20 percent, and the car industry?s decline is above 50 percent on a yearly basis.

Overall, the average decline in profits for listed companies came to 40-50 percent in 2011 compared to 2010.

For the vast majority of Greek companies, the main objective is to drastically reduce operational costs, meaning that they may have to resort to painful measures such as closing down subsidiaries that are posting losses or laying off staff.

As far as borrowing is concerned, listed companies have turned to more long-term forms of funding (bond purchases plus long-term bank loans), as short-term borrowing has shown a significant decline. However, most businesses are working on a strategy of keeping borrowing down as much as possible and maintaining the level of their cash flows in order to meet their obligations, such as paying for raw materials, wages and other standard operational costs.

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