S&P puts Sappi on negative watch

Standard & Poor's said it placed South Africa-based Sappi Ltd.'s BBB-/A-3 corporate credit ratings on CreditWatch with negative implications, reflecting the company's continued weak operating and financial performance and increased uncertainties about the pace and strength of improvements. Financially, the company is significantly underperforming compared with the requirements for the current rating level, mainly as a consequence of weak cash flows owing to continued margin pressure.

The agency said that while there are prospects for a financial recovery in the short to medium term, the magnitude of cash flow improvement will be dependent on factors over which there is uncertainty; in particular, the development of demand, prices and input costs, foreign exchange rates, as well as the success of Sappi's efforts to reduce costs and improve working capital.

At March 31, Sappi had net debt of about $2.17 billion.

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