Tullis Russell Papermakers Ltd, a wholly owned subsidiary of Tullis Russell Group Ltd, has become the UK’s second paper mill to enter administration this year, with 325 of its employees being made immediately redundant.

The Fife-based company, founded in 1809, produces high-quality paper board for use in cards, covers and premium packaging.

Administrators KPMG were brought in yesterday (27 April), ‘at the request of the company’s directors’, after the company suffered ‘severe cashflow issues’ and had failed to find a buyer.

According to the accountancy company, the company recorded a turnover of £124.6 million in the year to 31 March 2014, but incurred cumulative losses of £18.5 million over the last five years, largely as a result of weakening demand due to the move from paper to digital products.

The rise of digital media, as well as ‘significant overcapacity in the newsprint market’, has placed increasing pressure on the paper markets, and led to Kent-based recycled newspaper manufacturer, Aylesford Newsprint, entering administration in February of this year.

Other contributors to Tullis Russell’s decline included:

• the strength of the sterling against the euro, which ‘had an impact on competitiveness’;
• the loss of a ‘major customer’ due to insolvency proceedings; and
• the cost of the company’s main raw material, wood pulp (which is trading at consistently higher levels than historically experienced).

The company has 474 employees, 471 of which are based at Markinch in Fife, and three operating remotely throughout the UK. To reduce the company’s cost base, the administrators have made 325 employees redundant (effective immediately), while the remaining 149 have been retained to complete outstanding orders.

‘A sad day for the employees of Tullis Russell Papermakers’

Blair Nimmo, Joint Administrator and Head of Restructuring for KPMG in Scotland, said: “This is a sad day for the employees of Tullis Russell Papermakers, who have worked hard against the significant headwinds facing the global papermaking sector.

“Whilst we will be exploring whether a sale of all or part of the business and asset of the company can be achieved, we have had to take steps to significantly reduce the company’s overheads. Unfortunately, with trading effectively ceasing, we have had no option but to reduce the size of the workforce. We will be working with government agencies to minimise the impact on employees.

“We would encourage any party with an interest in acquiring all, or parts, of the business to make contact with us as soon as possible.”

RWE Innology biomass plant

Tullis Russell had been one of the major customers of RWE Innology’s biomass facility in Fife, which officially opened last month.

The 65-megawatt combined heat and power (CHP) plant, which runs mainly on recovered wood waste from the construction industry, replaced the coal and gas-fired CHP power station on the Tullis Russell site. The plant covered all of the paper manufacturer’s electricity and steam requirements, and it was hoped that it would safeguard the nearly 500 jobs at Tullis Russell. It also provides electricity to around 45,000 nearby homes.

The energy company said in a statement that it was "genuinely very sorry to hear of the announcement" and will work with KPMG LLP during the administration process. It added, however, that the power plant could run independently of Tullis Russell, and would continue to operate in ‘power only mode’. "The power station will therefore continue to operate at full capacity, purchasing and consuming the same volumes of fuel as originally planned", RWE Innology stated.

Find out more about Tullis Russell, the demise of Aylesford Newsprint, or learn more about the Markinch biomass CHP plant.