Major drinks bottling company, dairy group to leave Greece

CCHBF

Two of the biggest companies by market value in Greece, drinks bottler Coca Cola Hellenic (PINK:CCHBF) a subsidiary of the American enterprise, and dairy group FAGE are leaving Athens for low-tax safe havens across Europe.

The surprise announcements made on Thursday came as the country struggles to restore credibility and counter the debt crisis which threatens it with a chaotic default and potential exit from the Eurozone.

CCH, Coca Cola’s 2nd-ranked bottler worldwide, and top firm by market value in Greece, will establish a new firm in Switzerland with a London primary stock market listing by early Y 2013, its chief executive Dimitris Lois said.

“The move will better reflect the international character of our business activities,” he said, noting that 95% of CCH’s business activities, as well as shareholders, are outside Greece.

With more than 40,000 employees, the firm operates in 28 countries in 3 continents. With 6-B Euros (US$7.8-B) of capital and some 330-M Euros (US$427-M) net sales profit in Y 2011, CCH is one of the largest companies in the country.

Due to deep recession in Greece, CCH recorded a 13% drop in net profits in Q-2 of Y 2012 with a negative outlook, and complained about increasing taxes introduced by the Greek government over the past 2 yrs as part of efforts to counter the crisis.

The lack of a business-friendly environment and the volatility of Greece’s ailing economy were the reasons behind the move, according to the firm and local analysts.

With the transfer to Switzerland and London, CCH hopes to get better access to capital markets and a stable taxation and regulatory environment.

The drinks bottler stressed it would not desert Greece and that their production plants in the country would continue operations.

The blow to the Greek economy will be significant. Financially, the Greek state will suffer losses since revenues on sales to other countries will be taxed in Switzerland in the future, noted Yorgos Manetas, an analyst at Greek financial daily Imerissia.

The move fuels doubts over the prospects of Greece’s economy in a critical period, as the country negotiates the release of fresh loans from international lenders in November to stay afloat.

Shortly before CCH, Greek dairy manufacturer FAGE became the 1st major Greek company to move abroad without prior notification and with a similar rationale.

FAGE is transferring its headquarters to Luxemburg to benefit from its business-friendly environment, better access to bank funding and to reduce its exposure to the Greek debt crisis.

“The move better reflects the global character of our activities,” said a statement issued by FAGE, adding that it remained committed to Greece.

With 3 production plants in Greece and one in the US since Y 2008, FAGE (the word means “eat” in Greek) is considered as 1 of the leading dairy industries in Greece with exports in 29 countries across the world.

Starting from a small dairy and pastry shop in central Athens, FAGE grew bigger and bigger, run by the same family which today generates more than 67% of its revenues from the sales of a wide range of dairy products outside Greece.

In a recent tour around its HQ’s in Athens, representatives of the firm said that FAGE views extraversion and expansion to international markets as key to counter the current challenges.

The local dairy market has experienced a decrease of 5.6% in volume and 3.6% in value in Q-1 of Y 2012 compared to the same period last year, according to surveys. FAGE’s sales in volume in the domestic market fell by 23.8%, but increased by 41% in exports and international sales.

According to Greek media reports, other major companies could follow in the steps of FAGE and CCH, further deteriorating Greece’s image.

The French group Carrefour, Europe’s largest retailer, in June sold its supermarket business in the country to its local partner.

“I cannot dictate to any company its strategy,” Development and Competitiveness Minister Costis Hatzidakis told local media.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.

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