325 Workers Redundant As Tullis Russell Enters Administration

A total of 325 Tullis Russell employees have been made redundant today, while the remaining 149 will be kept on to complete outstanding orders. The company has ceased trading with immediate effect.

 

 

Three main factors have been given for the firm's demise. They are:

• The recent strengthening of Sterling against the Euro has had an impact on competitiveness, with a "significant portion" of the company’s sales to Europe.
   
• The cost of the company’s main raw material, wood pulp, is trading at consistently higher levels than historically experienced
   
• The loss of a major customer due to insolvency proceedings

The employee-owned company was founded in 1809 and produced high quality paper board for use in cards, covers and premium packaging.

In the financial year 2013-14 it recorded a turnover of £124.6 million, but suffered a pre-tax loss of £3.4 million, and has incurred cumulative losses of £18.5 million over the last five years, largely as a result of "weakening demand and pressure on its margins."

Blair Nimmo, Joint Administrator and Head of Restructuring for KPMG in Scotland, said is is "a sad day for the employees" of Tullis Russell.

He said they 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”, added Mr Nimmo.

Administrators also pointed to a long-term downward trend in  the market as media and other outlets move from paper to digitally-based products, resulting in worldwide oversupply and price competition.

Group CEO Chris Parr said it is "a terribly sad day" for employees and their families, the local community and everyone else associated with the business.

He said: "Since the global recession in 2008 demand across the traditional markets for papermaker’s products has fallen by 40%, our primary raw material, wood pulp, is now trading at consistently higher price levels than ever before and exchange rates have moved structurally against the business.

"The company has been able to generate new business within luxury packaging and certain digital applications over this time, however annual volume is currently 14% lower than 2008 levels and the profit margin achieved is substantially weaker.

"In 2009 we successfully negotiated a pioneering scheme with RWE Npower who built and since 2014 have operated a biomass plant on our site initially reducing our annual energy costs by 50%.

"We have also continued to improve year on year efficiencies and remove cost from our business. Despite these efforts there remains over supply in the global paper market and demand continues to fall.
 
Mr Parr said It has become clear to the board that the paper makers is "no longer a viable business."

"Recognising this situation the Group and Papermaking boards concluded that the best chance of protecting jobs would be through a trade sale of the papermaking company to a buyer capable of, and committed to developing the Markinch site.

The Group hired KPMG to run a comprehensive sales process and between October 2014 and March 2015 over 72 trade parties have considered and subsequently rejected the opportunity to acquire the business.

"This has unfortunately only confirmed that the  business is no longer viable", added Mr Parr.
 
The firm's difficult position finally became untenable when its third largest and most profitable customer entered insolvency process on Monday 1 April 2015.

The directors of our Papermaking business were therefore faced with no other option than to place the business into Administration.

'Tragic Day'

The company has also faced a number of specific challenges in recent years.

Independent MSP for Glenrothes said it is "a tragic day" for Markinch and Glenrothes.

 

Ms Marwick added: "Tullis Russell has been at the heart of our community for more than 200 years and there is hardly a family which has not had a relative or friend employed there. I am devastated by the news.

 

"I will be seeking an urgent meeting with ministers and Fife Council to discuss what support can be given to the workers who  face an uncertain future and to discuss what support can be given to help the town and the immediate area recover.

"The paper industry had a difficult time some years ago and we were so pleased that Tullis Russell survived through the worst of it. The provision of the Biomass plant to provide cheaper energy was to reduce their operating costs  and give the plant and the workers a secure future. It seems it has not been enough.

"The news today cannot have come at a worse time, following the recent loss of jobs at Velux in Glenrothes."

 

 

Grahame Smith, STUC General Secretary called it a "major blow" for the Fife economy and Scottish manufacturing. He said: "Tullis Russell, a  largely employee owned firm, has a track record of providing quality employment. It is essential that the Scottish and UK Governments work with management and trade union representatives to try to save the company as a going concern and to provide effective support to the 325 workers made redundant today”.