The comments were made by Malcolm Sinclair, Tullis' sales and marketing director, who added: "To add to weaker demand, distributors have been de-stocking in response to the changed market conditions.

"On top of this, the lack of available credit insurance has made it very difficult to satisfy the demand that is out there."

The Scotland-based company said that volumes were down across the industry and that Tullis hadn't escaped the effects of the economic downturn.

However, the paper manufacturer, which finished its financial year with no net debt, added that it has faith in its long-term strategy and intends to hold its nerve and continue to look forward during this "incredibly challenging time".

For the remainder of 2009, the company said volumes would be kept as strong as possible by it gaining new business, protecting what it has and maintaining or improving price levels.

Sinclair added: "It goes without saying that costs have to be controlled more closely than ever, although all this may not be enough to improve our profitability in the current economic and market conditions. However, it will ensure we come through these times in a strong position to take advantage of the upturn when it comes."

According to Sinclair, Tullis plans to unveil innovations in the area of security and brand protection in the near future and it will continue to differentiate itself through its environmental credentials.

The company, which is celebrating its bicentenary this year, will start construction work soon on its biomass power project, which Sinclair said would transform it into a "genuine low-carbon producer".

See also

Tullis biomass plant to meet 6% of Scottish renewable targets

Tullis Russell improves efficiency with £800,000 Marquip cutter buy