S&P raises Greece’s Fage Dairy outlook to ‘positive’

Standard & Poor’s has revised its outlook on Greece’s Fage Dairy Industry S.A. from ‘stable’ to ‘positive’ and affirmed its 'B-' long-term corporate credit rating on the company.
In a statement released on Friday, the ratings agency said that Fage's solid operating performance in the U.S. will continue to more than offset the decline in its domestic operations.
“The positive outlook reflects our belief that Fage should be able to return to positive free operating cash flow generation in 2011, on the back of continued solid performance in the U.S.,” it said.
For the 12 months ended September 30, 2010, leverage remained high, as demonstrated through a Standard & Poor's-adjusted debt-to-EBITDA ratio of 6x, up from 5.2x for full-year 2009. This was due to the company's debt issuance at the beginning of 2010, the proceeds of which it used to repay existing debt and finance investments. In 2011, S&P believes that leverage will likely decline to below 5x, and that the company will return to positive–though modest–FOCF generation. This improvement will result from a better operating performance on the back of favourable economic prospects and strong demand for Mediterranean products in the U.S., and a stabilization of the Greek dairy market.
As regards risk, S&P assesses Fage's business profile as "weak," owing to the company's narrow product and brand portfolio, and the Greek dairy market's small size and high competition.