Fitch: Sappi outlook negative

Fitch Ratings said it changed Sappi Ltd.'s national long-term outlook to negative from stable. At the same time, the agency has affirmed the national ratings at long-term AA- (zaf) and short-term F1+ (zaf).

Fitch said the new outlook reflects continued difficult trading conditions, notably paper prices, currency volatility, import parity pressure, over-capacity and generally depressed markets.

The first quarter of fiscal 2004 was disappointing in the United States as strong GDP growth did not materialize into a demand recovery for coated paper. Furthermore, the second quarter is not expected to show an improvement, as coated woodfree paper markets tend to lag price increases of other commodities.

In Europe, the situation looks more positive as consumption of coated fine paper increased by 13% during the first quarter of fiscal 2004, though prices remain weak. Furthermore, the price increases announced by Sappi with effect from April 2004, have been mirrored by competitors.

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