Moody’s reviews FAGE dairy

Moody’s Investors Service yesterday placed the B1 ratings of FAGE Dairy Industry SA on review for possible downgrade, following the announcement of its results for the third quarter of 2007. For the third quarter, the company reported a 6 percent drop in revenues and a -2.1 million loss from operations, in contrast to a -5.9 million profit in the same period of 2006. Moody’s notes that the company’s short-term liquidity appears adequate, with only -7.2 million of debt falling due within 12 months and -39.2 million of cash on the balance sheet. However, the company still faces a committed additional investment of -19.6 million related to the production facility it is building in the US, while headroom under the incurrence test of the indenture of the company’s senior notes is shrinking. Moody’s review will therefore mainly focus on: (i) FAGE’s expected market share evolution, in light of increasing competition in its local market; (ii) the company’s prospects for an improvement in profitability, in a market environment in which rising raw material prices, a higher level of competition in its home market and foreign currency exposure are likely to continue affecting the company’s results; and iii) the availability of funding to sustain its committed investments, working capital requirements and ongoing capital expenditures. For the nine months ended September 30 2007, FAGE reported consolidated net sales of -253.2 million, operating profit of -6.2 million and total debt of around -181.8 million.