S&P: Markets pressure Europe forest product companies

Standard & Poor's said in a report continued relatively weak markets pressuring the credit quality of rated European forest product companies is one of the factors behind recent rating actions.

In October, the agency noted the outlook on Stora Enso Oyj (BBB+/A-2) was revised to negative, while the outlook on Sappi Ltd. (BBB-/A-3) was also revised to negative in November.

In addition, the rating on the combined Smurfit Kappa entity, following the merger between Jefferson Smurfit Group and Kappa Packaging, was assigned a negative outlook (JSG Packaging Ltd., B+/negative).

"The growing share of negative outlooks among rated companies indicates that further negative rating actions are possible if prices do not recover from their current low levels," said S&P credit analyst Alf Stenqvist.

Nevertheless, the agency said continued good demand and limited recent new capacity additions in newsprint and magazine papers increases the prospects for price increases in 2006.

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