The following lists rank the global portfolio of forest and paper product companies rated by S&P Global Ratings, from strongest to weakest. We rank companies by rating, outlook, stand-alone credit profile (SACP), business and financial risk profile, as well as liquidity assessment. Investment-grade companies are ranked by (i) business risk profile and (ii) financial risk profile. Speculative-grade companies are ordered by (i) financial risk profile and (ii) business risk profile. Companies are then listed in alphabetical order, if not distinguished by these factors.

In line with our corporate rating methodology, the final rating may differ from the SACP, where group, government, or rating above the sovereign considerations apply. The SACP differs from the anchor for more than 43% of the ratings due to the impact of modifiers (such as liquidity). In this document we indicate the anchor and active modifiers of each company for informational purposes only. For a more detailed analysis, please refer to our company-specific publications on RatingsDirect via the hyperlinks below.

As shown in the charts at the end of this report, most of our business risk assessments are closely correlated with the corresponding competitive positions.

Out of the 32 rated entities:

• 14 are based in Europe, the Middle East, and Africa (EMEA)--mostly paper producers.
• 14 are based in North America--mostly timber producers, in addition to three real estate investment trusts (REITs).
• Four are based in South America--all pulp producers with some diversification to value added products.

For our sector outlooks and analysis, as well as environmental, social, and governance credit-relevant comments, please refer to the commentaries listed under Related Research at the end of this article.

Ranking Tables

The tables and charts in this publication provide an overview of the 32 entities that we rate in this industry. Of these, 13 entities are rated investment grade ('BBB-' and above) and 19 entities speculative grade ('BB+' and below).

Table 1

Among our rated issuers, 41% (13) are on investment-grade ratings.

• Five (16%) are large publicly listed EMEA-based paper producers. Four have satisfactory business risk profiles, since their operations are well diversified, often ranging from forest operations to pulp, energy, wood, and paper production. These companies have relatively strong credit metrics, which are supported by conservative financial policies.
• Three (9%) are large South American-based pulp producers. Their satisfactory business risk profiles reflect vertical integration into forest operations and that their activities span from pulp to a variety of value-added products such as paper, tissue, personal care, and wood products.

Five (16%) of these issuers are based in North America.

• Three are large, publicly listed timberland owners that we assess as REITs. One of these REITs only has real estate operations, while the other two are diversified into the manufacture of wood products, real estate operations, as well as the production of energy and natural resources.
• The two other issuers include large, diversified players with lumber, paper, and other operations.

Table 2

Among our issuers, 59% (19) are rated speculative grade. This is because:

• Seven (22%) issuers are owned by financial sponsors, resulting in highly leveraged financial risk profiles and financial policies, which we view as aggressive.
• Five (16%) of our ratings are constrained by both the groups' financial risk profiles (aggressive or highly leveraged) and business risk profiles (fair or weak). These companies are not sponsor-owned.
• Six (19%) of our speculative-grade rated issuers have intermediate or significant financial risk profiles, and the rating is primarily constrained by weak or fair business risk profiles.
• One (3%) issuer has a significant financial risk profile and a satisfactory business risk profile. The ratings are constrained by a modifier.

Chart 1

Chart 2

More than three-quarters (78%) of the outlooks on the ratings in the sector are stable (see chart 2). Five names (16% of rated issuers) are either on a positive outlook or CreditWatch. This largely reflects that the industry benefitted from very favorable pricing conditions in 2022, due to supply shortages and the post-pandemic recovery in demand. This allowed the pass through of cost increases to customers and--in many cases--supported improved credit metrics. In two cases, our outlook or and CreditWatch reflects the potential effects of a merger and acquisition transaction.

Chart 3

Of our rated issuers, 12 (38%) have satisfactory (11) or strong (1) business risk profiles. These tend to be large players with market-leading positions in several areas. They also generally have multiple product ranges (such as pulp, paper, and energy), geographical diversity (both in terms of sales and manufacturing sites), as well as cost-efficient operations. In addition, they are usually somewhat vertically integrated into pulp or energy.

In EMEA, most of our rated issuers with fair or weaker business risk profiles are smaller businesses, or private equity or family owned. They are often very reliant on a single geography and a limited range of products, some of which are commoditized.

In South America, our four rated issuers have satisfactory business risk profiles, reflecting that they are among the world's largest pulp producers, with very efficient operations. South American pulp producers benefit from favorable climate conditions that ensure the shortest harvest cycles for radiate pine and eucalyptus in the world. Additionally, these companies are vertically integrated from forest base ownership to pulp production and diversification into value-added products, such as paper, tissue, personal care, and wood products.

Chart 4

Among our rated issuers, 21 (about 66%) have very low (38%) or low (28%) country risk assessments. This reflects that either most of their revenues are generated in lower risk countries or most of their assets are based in lower risk countries (see chart 5). Eight (25%) of our rated issuers have intermediate country risk assessments and three issuers (about 9%) have moderately high country risk assessments, mostly reflecting high exposures to developing countries.

Chart 5

The most common financial risk profile assessment in the sector is significant at 38% or 12 issuers (see chart 6). Half of these issuers are U.S.-based and one-third in South America.

Moreover, 34% of our issuers have highly leveraged financial risk profiles; more than half of which are financial-sponsor-owned companies.

A further 19% have minimal or modest financial risk profiles. These are mostly large, EMEA-based pulp and paper producers.

At this point in the cycle, our financial risk profile assessments typically reflect both the companies' underlying metrics and some leeway to accommodate moderately higher leverage in a cyclical downturn.

Chart 6

Among our rated issuers, 50% have liquidity scores that are strong (44%) or exceptional (6%), largely reflecting the high portion of large, investment-grade players (see chart 7). Similarly, 44% of our rated issuers have adequate liquidity profiles, including most sponsor-owned companies. Only two issuers, both on 'CCC+' issuer credit ratings, have less than adequate liquidity scores.

The ratings and scores in this document are as of Feb. 14, 2023, and will not be updated. To keep them concise, the lists only disclose scores for the main rated entities of larger corporate groups. We may omit certain entities, such as subsidiaries or holding companies where the ratings are linked to those on their parent companies, issuers that have defaulted, and those on preliminary ratings.

Chart 7

Related Criteria

• General Criteria: Group Rating Methodology, July 1, 2019
• Rating Government-Related Entities: Methodology And Assumptions, March 25, 2015
• Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014
• Ratings Above The Sovereign--Corporate And Government Ratings: Methodology And Assumptions, Nov. 19, 2013
• Corporate Methodology, Nov. 19, 2013
• Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 1, 2012

Related Research

• ESG Materiality Map: Paper And Forest Products, Oct. 19, 2022
• ESG Credit Indicator Report Card: Paper & Forest Products, Packaging & Containers, Dec. 17, 2021