Tullis Russell Papermakers in Markinch, Fife, a wholly owned subsidiary of Tullis Russell Group was put into administration on 27 April, with 325 employees made redundant immediately.
The Group’s Coating business based in Bollington, Cheshire and its Image Transfer business based in Ansan, Korea, are not in administration and continue to trade as normal.
Chris Parr, chief executive of Tullis Russell Group – a £158.6m-turnover company before the administration – laid the blame on demand for the company’s traditional products dropping by 40% since 2008, wood pulp trading at higher prices than ever before and unfavourable exchange rates. However, it was Britain’s biggest paper merchant’s spectacular collapse on 1 April, which tipped Papermakers over the edge.
Both the administrators and the company remain tight-lipped on how much Paperlinx and other debtors owed Tullis Russell Papermakers but Parr said the firm’s “difficult position finally became untenable with the papermaking company’s third largest and most profitable customer entering into an insolvency process on Monday 1 April 2015”, in the company’s only statement following the administration.
“It was due to a number of different factors but Paperlinx was the straw that broke the camel’s back,” says the director general of the Confederation of Paper Industries (CPI) David Workman. “I’m not aware of any other implications of the Paperlinx closure. The link between Tullis Russell and Paperlinx was a strong one.”
He said conditions were tough for papermakers in the UK, with British manufacturers facing sharp competition from less-regulated countries and the UK being one of the biggest importers of paper in the world.
The shutdown of papermaking at Markinch is the third serious loss of capacity in six months. In November UPM Shotton announced the closure of one of its two machines as part of a plan to cut a further 800,000 tonnes of European publication paper capacity, with the loss of 130 UK jobs.
In February PrintWeek reported that Aylesford Newsprint was to go into administration, with the loss of 300 jobs.
Despite this, other areas of the market are growing, says Workman, with demand for packaging grades and those used in the hygiene sector on the increase.
But, as always, investment in new kit is key. When Tullis Russell Papermakers closed the Markinch plant it was running five machines which, according to sources, were producing the same amount of paper as one modern machine.
“It’s not all bad in the paper industry. It’s been boosted by major investment over the past few years,” Workman adds, citing Palm Paper’s operation in Norfolk and Saica’s Manchester mill. “These are brand new plants – they are efficient.”
According to the CPI, UK paper production was 4.4m tonnes in 2014, but consumption ran at 9.3m tonnes, down from £13m 10 years ago.
Paper industry analyst Iwan le Moine of EMGE & Co says that in the European market Tullis Russell Papermakers was “quite small and competing against some very big global players”.
“Their unit costs were too high,” said one paper merchant. “Every time I got them to quote on anything it was too expensive.”
Some industry sources also raise questions about high staff costs and the difficulty of cutting staff from an employee-owned company during tough trading conditions.
The 2013/14 accounts reveal that Tullis Russell Group had a wage bill of £27.8m with 692 employees – down from 738 in the year to end March 2013.
But according to le Moine: “Tullis Russell is a good mill that’s survived for many, many years through thick and thin; if the current team can’t make it work, I don’t really know who can.”
The company’s focus on high-quality and specialist papers appeared to make sense in its niche market.
The papermaker, established in 1809 has a long history of good employee relations, culminating in it becoming 70% employee owned in 1997. The remaining shares are owned by the charitable Russell Group Trust.
Union activity is strong with 75% of the workforce members of the Unite union, according to representative Dougie Maguire, who is sitting on the Fife Taskforce, set up by the Scottish Government and Fife Council following the administration announcement. It was due to meet for the first time as PrintWeek went to press (30 April). The Scottish government has announced a £6m fund partly to retrain the 325 workers who have lost their jobs and is also working with administrators to identify a buyer for the business or its assets.
A spokesman for KPMG said there has been interest but so far no bids.
Employee members are among those sitting on the board, according to Maguire.
But he said the decision to call in the administrators was one not shared with the employee-owners.
Tullis Russell Group’s expansion into the coating and converting market has been successful. The specialist and coating company turned over £43.5m in the last available accounts, with a £3m profit.
This was wiped out by Tullis Russell Papermakers’ loss of £4.2m though, against a turnover of £124.6m.
“Paper is a very tough business. They were very respected and loved. People are shocked and they are going to miss them. The products were good,” one industry insider said.
The collapse appeared to come suddenly. The last available accounts, filed at Companies House on 11 November 2014, revealed Parr’s total package rose from £270,000 in 2013/14 to £372,000 in 2013/14 thanks to £98,000 performance-related pay. Parr expected “another challenging year” but said he expected the business to return to profit. By this time directors had already engaged KPMG to look for a buyer for the papermakers business – incredibly more than 72 were approached unsuccessfully.
The group accounts also reveal £43.3m in shareholders funds. It would seem that the interests of the Tullis Russell Group as a whole have been secured – at the expense of the loss-making Papermakers company.
Opinion: High cost of doing business in the UK must be addressed
David Workman, director general Confederation of Paper Industries
This is very sad news particularly for the 500 or so people whose jobs are now at risk. There have been a series of unwelcome announcements recently – Aylesford, Tullis Russell and the UPM machine combined produced 900,000 tonnes of paper. It does raise serious questions as to whether or not our industry is able to compete efficiently and it is something that the incoming government is going to have to look at very seriously. The fact of the matter is they found that they couldn’t compete. That in part must be down to government policy and to energy costs. The cost of operating is an issue that goes wider than just paper – it’s symptomatic of lots of things that are happening in manufacturing generally. The cumultative costs of energy and climate change legislation are high. These costs are not applied in many countries with which we are competing, such as Russia or Canada. Most of the legislation that we have here originates in Brussels, but in the UK climate change targets are enshrined in law.
We’ve got to hope that this is the last piece of bad news that we’re going to get. We will be lobbying very hard when the new government comes in. We need an industry strategy, especially for energy-intensive industries and there has been a lack of focus across both this government and the previous government in developing a coherent policy. With the Confederation of European Paper Industries (CEPI) we have produced a roadmap to a low carbon bio-economy, Unfold the Future, we are hoping the new government will base their strategy on that.
I wouldn’t want anybody to think that the paper industry in general is suffering in terms of demand. The packaging and tissue/hygiene sectors are growing just as the print area is contracting. We really do need to look at the cost of business in the UK compared with other countries around the world.
We need to create an environment where people want to invest.
Reader reaction
Managing director of Solways Tim Solway was a customer of Tullis Russell’s Trucard product range.
It’s dreadful news – they have some very good products. I said there was going to be ripple from Paperlinx. My own view is that the Paperlinx demise is going to change the paper market forever – it’s going to be a maelstrom. I expected a printer or two to go – I didn’t expect this.”
Tangent, another Trucard user, has had to rejig supply as a result.
Kevin Cameron runs the Newcastle site, he says his company had contingency plans in place to cope with the loss of Paperlinx as a supplier.
I’m very sad to hear the news about Tullis Russell, I think everybody was. Thankfully, I think we will find suitable alternatives but I can imagine for some of the greetings cards printers it could be quite a significant issue.”
Tullis Russell timeline
1809 Robert Tullis founds paper manufacturer R Tullis & Co
1906 The name of the company changes to Tullis Russell & Co
1912 Work starts on a power station at Markinch in Fife, Scotland. This project is completed in 1914 and the building is enlarged in 1921
1947 The Russell Trust is established and membership of trade unions is permitted
1979 Auchmuty No 5 machine is opened. David Russell devises a method of continuous working to avoid closing down at weekends and saves 70 tonnes of coal. Manchester warehouse opens at Trafford Park
1984 Coated Papers in Cheddleton is acquired and moves to Bollington in 1989
1987 The first Employee Benefits Trust established
1989 The Cast Coating Mill opens at Markinch and the Lustrulux brand is introduced. The Southfield Warehouse opens at Glenrothes with 4,000 tonnnes of stock moved in
1990 Acquires Revolutionary Adhesive Materials in Gateshead to continue the development of the specialist coatings business
1994 Tullis Russell becomes a majority employee-owned company following an MBO
1998 The Advocate brand is launched
1999 £3.5m acquisition of the Kwang Duck company, Ansan, Korea, which is renamed Asia Pacific Speciality Coaters. The company becomes Tullis Russell Coaters Korea in 2001
2003 First recycled pulps used at the mill
2005 Tullis Russell acquires the Gemini brand from Inveresk to strengthen the cartonboard portfolio. The Markinch site achieves FSC certification
2008 A deal is struck with RWE Npower Cogen to enter the final development stage of a £200m biomass plant
2009 Princess Anne visits Tullis Russell for the 200th anniversary of the company
2014 Biomass plant goes live
Source: Tullis Russell
