Dec 29, 2005. /Lesprom Network/. Standard & Poor's Ratings Services revised its outlook on The Newark Group Inc. to negative from stable. At the same time, Standard & Poor's affirmed its ratings, including the 'B+' corporate credit rating, on the recycled paperboard producer. At October 31, 2005, Newark had $280 million in lease-adjusted debt. "The outlook change reflects Standard & Poor's concerns that Newark's weak credit measures could be further pressured by rising costs, which have outpaced price increases," said Standard & Poor's credit analyst Kenneth L. Farer. "In addition, recent price increases may not be fully realized or be sufficient to offset those cost increases," the analyst continued. Furthermore, leverage will remain very aggressive due to expectations of continued poor earnings and weak cash flow generation. The ratings on Newark reflect its participation in the oversupplied, cyclical, and mature recycled paperboard market; very aggressive financial profile; product substitution risks; some end-market concentration; and volatile raw material and energy costs. These factors overshadow the company's solid market positions in niche paperboard markets, its competitive level of vertical integration, and its diversified customer base. High energy and transportation costs, competitive pricing pressures, potential product substitution, and limited ability to increase finished product prices are likely to continue to pressure Newark's earnings and cash flow in the near term. Ratings could be lowered if Newark's credit measures do not improve due to sustained margin pressures, poor industry conditions, or reduced paperboard pricing. The outlook could be revised to stable if the company is able to realize higher prices from previously announced increases, cash flow is higher then currently expected, and market fundamentals do not deteriorate further. Cranford, New York-based Newark is one of the leading producers in this relatively concentrated paper segment, in which the top four companies represent more than 60% of total U.S. production. It is the third-largest U.S. producer of tubes and cores, which exposes it to the cyclical manufacturing sector, but it has a dominant share of the U.S. laminated graphicboard market, in which products are more consumer-oriented.