Greek survival story

16 November 2012 09:27  [Source: ICB]

Amid the wreckage of the Greek economy, one company has taken drastic action to ensure survival. This tale will resonate with many struggling in a poor macroeconomic environment


Armodios Yannidis vice president, Vitex-Yannidis Group

The Greek economy is in a mess, with conditions more akin to a depression than a recession. GDP has fallen by 20% in five years with corporate investment falling almost to zero. Unemployment has leapt to 25% and inflation has grown since 2008, leaving people with much lower spending power.

Many foreign-owned companies have already fled the country, including high-profile groups such as Coca-Cola and some in the chemical industry, such as German distributor Brenntag. Getting out would not be an easy or desirable option, however, for companies with their headquarters and manufacturing base in Greece.

Such a company is one of Greece's largest, and longest-established coatings manufacturers, Vitex-Yannidis Group, which has taken action to ensure its long-term viability. The family-owned group has turned to toll manufacturing - producing for another company - with the aim of boosting production and profitability at its plant near Athens. In the heady days of 2004/5 before the financial crisis, the company invested heavily in a new facility outside Athens. No-one at the company, of course, could have foreseen the disastrous economic collapse that would follow.

Now operating rates have plummeted, with production 40% below the pre-crisis peak. Sales fell from €60m ($76m) in 2007 to €40m in 2011 when the company experienced the first financial loss in its 80-year history. A healthy operating profit is swamped by repayments and depreciation on its new facility. It also expects to report a loss in 2012.

In a candid interview with ICIS, Armodios Yannidis, (pictured) one of three vice-presidents who run the company, said the decision to boost toll manufacturing is part of a wider re-think of the business strategy to ensure the company's survival in the "brutal" business conditions the company has endured.

"We have divested non-core businesses, cut the workforce from 430 to 240, and cut expenses, including marketing and consumer advertising. We also implemented a voluntary pay cut of 5-20% for middle and top management."

Other challenges include maintaining relationships with suppliers and customers in this stressed financial environment. The survival story of the Vitex-Yannidis Group, immersed in the struggling Greek economy, will resonate with many companies affected by sluggish post-crisis economic growth.

By: Will Beacham
+44 20 8652 3214

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