Standard & Poor's, the credit ratings agency, has cut its long-term corporate credit rating on Waterford Wedgwood due to the company's recent weak performance and challenging market conditions.

However, it said the outlook for the company's rating was stable and noted the group had an adequate liquidity position for the near term. The agency has cut its rating to "B" from "B+" and removed the rating from CreditWatch, where it was placed following publication of weak results for the 2004 fiscal year. These showed a pre-tax loss of €45 million.

"The downgrade reflects the decline in Waterford Wedgwood's earnings in fiscal year ended March 31st, 2004 due to adverse exchange rate movements and the continuing underperformance of the group's crystal and ceramics division," S&P credit analyst Sunita Kara said.

"The downgrade also reflects the group's reduced business diversity as a result of the likely disposal of All-Clad, its US cookware division."

Last month, the luxury goods group announced plans to sell All-Clad for €205 million to French group SEB and partly use the proceeds to pay down its debt.

S&P said that while the group's cost position had improved, it believed the company could be challenged "to overcome the weak demand for its classic and niche style of products".

On the upside, S&P said the outlook for Waterford Wedgwood's credit rating was stable and the group had an adequate liquidity position for the near term.

To sustain its current "B" rating, the company needed to stabilise its earnings in the current year and execute its working capital management programme successfully. This would result in at least a neutral free cash flow position for the group, S&P said.

"The ratings and outlook would come under pressure if Waterford Wedgwood's operational underperformance were to continue," Ms Kara said.

Shares in Waterford Wedgwood closed at €0.16 last night, up 1.9 per cent.