UPDATE 1-Moody's cuts Stora Enso rating outlook to negative

Wed Oct 24, 2012 4:53am EDT

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HELSINKI Oct 24 (Reuters) - Credit rating agency Moody's cut its rating outlook for Stora Enso on Wednesday to negative from stable as the forest group prepares large investments even as it struggles with weaker European paper and sawn timber markets.

The move comes a day after the Finland-based company announced its January-September operational profit fell 36 percent from a year ago due to weak demand and prices for paper, pulp and sawn timber.

"We caution ... that the outlook for the majority of the group's operations, in particular in its European stronghold, remains difficult," Moody's said. "Weak demand ... due to expected sluggish macroeconomic growth coupled with low pricing levels are likely to persist in the medium term."

Stora Enso, looking to shift focus away from the ailing European paper industry, has major pulp and paperboard investment projects in Uruguay, Poland and China.

Moody's confirmed Stora's "Ba2" ratings, saying the company was capable of more cost cutting if its profitability comes under more pressure. (Reporting by Jussi Rosendahl; Editing by Mark Potter)

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