Blair Nimmo and Tony Friar of KPMG LLP were appointed Joint Administrators of Tullis Russell Papermakers Limited on 27th April 2015, at the request of the company’s directors.
Based in Markinch, Fife the employee-owned company was founded in 1809 and produces high quality paper board for use in cards, covers and premium packaging.
The company has 474 employees, 471 of which are based at Markinch and three operating remotely throughout the UK.
In the year to 31 March 2014, the company sold 126,000 tonnes of paper and board. It recorded a turnover of £124.6 million, but suffered a pre-tax loss of £3.4 million. It 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.
The company’s market is in long term decline as media and other outlets move from paper to digitally-based products, resulting in worldwide oversupply and price competition. The company has also faced a number of specific challenges in recent years:
- A significant portion of the company’s sales are to Europe and the recent strengthening of Sterling against the Euro has had an impact on competitiveness
- 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
These factors have, in part, been offset by steps taken by the company to widen its product and customer base and improve the efficiency of its operations. In March 2014 a £200m biomass plant was opened on site in partnership with RWE Npower with the aim to reduce Tullis Russell’s energy costs.
Despite these efforts, the company remains significantly loss making and this is projected to continue, resulting in severe cashflow issues.
Recognising the structural changes in the industry and the need for consolidation, the directors took steps in October 2014 to seek a buyer for the business. This process continued until this month, but ultimately no party was found.
The directors therefore concluded that they must act in the best interests of the company’s creditors and take steps to appoint administrators.
Given the very difficult trading conditions and that a sale process to seek a buyer for the company had not been successful, the administrators have taken steps to significantly reduce the company’s cost base whilst all options are considered. Unfortunately, this has resulted in 325 employees being made redundant with immediate effect. The remaining 149 have been retained to complete some orders.
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.”
Tullis Russell Papermakers Limited is a wholly owned subsidiary of Tullis Russell Group Limited. The Group’s Coating business based in Bollington, Cheshire and its Image Transfer business based in Ansan, Korea are not affected by the administration and continue to trade as normal.
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff. The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.