S&P may cut Esselte Group

Standard & Poor's said it placed its ratings on Esselte Group Holdings AB on CreditWatch with negative implications, including its BB- corporate credit rating on the company and its B subordinated debt rating.

S&P said the CreditWatch listing reflects Esselte's announcement of second-quarter 2004 operating results that were below expectations. The company is faced with price erosion, particularly in Europe, where private-label products are gaining market share. Meanwhile, consolidating retailers in the United States have required price concessions.

To defend its position, Esselte was forced to spend more on marketing and advertising, and this further eroded profitability. Selling expenses for the first six months of 2004 rose 34% from 2003. In addition, rising raw material costs for steel and plastic reduced profits.

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