Tullis Russell: Another paper tiger turns to ashes

A worker at Inveresk paper mill, which has closed down. Picture: Albert Jordan/TSPL
A worker at Inveresk paper mill, which has closed down. Picture: Albert Jordan/TSPL
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Tullis Russell was part of an industry that once employed about 17,000 people – but there is hope for a buyer, says Kristy Dorsey

WITH hundreds of jobs lost and more than 200 years of trading on the brink of extinction, the collapse of Tullis Russell has been a high-profile reminder of the challenges that have swept away swathes of what was once an extensive paper-making industry in Scotland.

The employee-owned plant at Markinch, in Fife, succumbed on Monday to a combination of ailments that wiped out many before it: high costs, falling demand, adverse exchange rates and intense pressure on profit margins. These lingering maladies were brought to a head by the loss of the company’s most profitable customer, itself a victim of insolvency.

With these structural changes taking place in the market, directors led by chief executive Chris Parr knew Tullis Russell would have to become part of a larger group. They spent six months from October onwards trying to find a buyer, but every one of the 72 parties approached passed on a deal.

Some of them, however, are now taking a second look.

It’s what administrator Blair Nimmo describes as the “slightly different dynamic” of buying a company out of insolvency. The price might be cheaper, but the big difference from purchasing a business as a going concern is the chance to ditch unwanted baggage such as debts, creditors and similar liabilities.

“We have had quite a few enquiries,” Nimmo says. These have ranged from requests about redundant stock and equipment right up to queries about taking on part or all of the operation.

“What we don’t know yet is if that interest is just someone having a little bit of a look, or if it is serious,” he adds. “I would think that in the next couple of weeks we will get a feel if there is any real interest.”

There are as yet no firm bids on the table, and no guarantees that any are forthcoming. Still, Nimmo and his colleagues at KPMG are for the moment giving priority to enquiries about taking on all or part of the business as a going concern, with requests for stock and equipment temporarily set to one side.

In the meantime, Tullis Russell remains in wind-down mode, with the factory’s remaining 149 workers finishing off various orders. As it’s an election year, politicians have been quick to jump into action, with the Scottish Government and Fife Council setting up a £6 million task force to assist the 325 workers who’ve been made redundant so far.

Alex Stewart-Clark, the Conservative candidate for Glenrothes, also waded into the fray with the public announcement that he has given KPMG details of a potential unnamed buyer. According to his press release, this is a “multi-million trade buyer in the paper industry” who wasn’t one of the 72 parties previously contacted by Tullis Russell.

One firm that did kick the tyres in recent months returned last week for a second look. PG Paper of Kilmacolm, owned by Puneet and Poonam Gupta, said on Wednesday it had expressed an interest in buying the company’s stock and “also potentially the facility itself as a going concern”. The couple specialise in trading redundant and surplus stock in 24 countries, with paper and stationery forming the “backbone” of the business. Sales are on target for £30m this year, with more than 90 per cent of total volumes exported to the Indian subcontinent, the Middle East and the Far East.

Poonam Gupta said her firm was still in the process of gathering information, as the position has changed since PG last had a look at Tullis Russell. However, she hopes to make a decision quickly on how to proceed.

Founded 206 years ago, Tullis Russell was part of an industry that employed an estimated 17,000 people by the mid-20th century. However, it has been under pressure for decades, with just a small rump of this formerly sprawling sector now remaining.

Names that have disappeared include International Paper of Inverurie, the Inveresk mills in Denny and Inverkeithing, the Davidson Mill in Aberdeen and the Corpach Paper Mill near Fort William. Apart from Tullis Russell, the main remaining players are the Caledonian Mill in Irvine and Stoneywood in Aberdeen.

Despite efforts to cut costs, Tullis Russell has been running in the red for some time, with cumulative losses of £18.5m during the last five years. Its latest set of acc­o­unts for the year to March 2014 show a pre-tax loss of £3.4m on sales of £124.6m.

As part of its cost-saving drive, the company had a heat and power deal with the nearby biomass plant run by RWE Innogy. The £200m joint venture, supported by an £8m grant from the Scottish Government, officially opened last month.

Whether that will sway any would-be buyers remains to be seen. Nimmo says he is “hopeful” and open to enquiries, but at the same time does not want to raise false hopes either among the workers or their management. “I have to say the local management team from Chris Parr on down have been excellent to work with,” Nimmo adds.

After so many have already said “No thanks”, the chances of Tullis Russell being saved in some form seem slim. The directors themselves have said it seems clear that it is “no longer a viable business”. But with potential suitors still in the offing, there is some hope for a better outcome.

“To make the plant operational, a buyer would have to re-employ quite a lot of the people that we have unfortunately had to make redundant,” Nimmo says.