Paper firm Tullis Russell in biomass deal as energy costs push it into red

TULLIS Russell, the employee-owned paper maker, has warned that tough market conditions are likely to continue next year after rising raw material costs and energy bills pushed the firm into the red.

In a bid to reduce its fuel bill, the Fife-based group has signed a 20-year deal with Npower parent company RWE, which is building a 50-megawatt biomass plant at its Markinch site.

The facility, which is due to become operational early next year, will provide Tullis Russell with all its electricity needs, along with steam for use in the paper-drying process.

Accounts filed with Companies House show that Tullis Russell, headed by chief executive Chris Parr, racked up a pre-tax loss of £4 million for the year to 31 March, compared with a £2.4m profit the previous year, following a 6.5 per cent dip in turnover to £166m.

As a result of higher costs and lower volumes, the group was forced into cutting jobs at its paper-making division – it ended the year with 530 manufacturing and production employees, down from 577 a year earlier.

The firm said the trading environment is expected to remain challenging in 2013, but it remained committed to working with its customers to deliver high-quality products. Along with paper and packaging, the group produces speciality products such as record labels and paper for postage stamps.

Writing in the annual report, the directors said: “Through our strategic review process we have identified the market areas we need to develop and key to this is the energy strategy for the Markinch site.”

The accounts show that the highest-paid director received £332,000, up from £236,000, though the latest total includes £96,000 for performance-related pay for the previous year.